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Denmark cut its key interest rate back to its historical low, mirroring an earlier move by the European Central Bank as it seeks to defend the currency peg.
The cut brings the nation’s deposit rate to minus 0.75%. It ends the longest period of unchanged rates in Denmark -- 3 1/2 years -- since the krone was anchored to the euro, in 1999.
“The interest rate reduction is a consequence of the reduction by the European Central Bank of its monetary policy rates by 0.10 percentage point,” the central bank said in a statement.
The decision was anticipated by four of the five economists surveyed by Bloomberg and follows the ECB’s decision to cut interest rates further below zero and start open-ended bond purchases.
The Danish central bank’s purpose in life is to peg its currency to the euro, keeping it within a 2.25% band of an exchange rate set at 7.46038 kroner per euro. It doesn’t hold scheduled meetings, but tends to follow the ECB’s every move to avoid currency swings.
Denmark has had negative rates almost uninterruptedly since the summer of 2012 -- longer than anywhere else. The rising prospect of many more years below zero has created an outcry in the finance sector, where the blow dealt to traditional revenue streams has forced the industry to rethink its business model.
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