(Bloomberg) -- Denmark’s central bank slashed its inflation forecasts for this year and the next, suggesting that the Nordic country will avoid a wage-price spiral.
The 2024 consumer price inflation rate is forecast to be 1.3% compared with a March prediction of 2.2%, according to a statement on Wednesday. The central bank also cut its estimate for the 2025 rate to 2.1% from 2.6%.
“There is a good chance that wage increases will slow down over the next few years, due to less pressure on the labor market,” the bank said.
Still, the bank warned that the employment market is still tight and that monetary and fiscal policy therefore should avoid boosting activity to tip the balance again. Therefore, the Danish government’s proposal of a 2025 budget, which is set to stimulate gross domestic product, is poorly timed, Governor Christian Kettel Thomsen said in Wednesday’s statement.
“This may therefore not be a good time to relax fiscal policy,” the governor said.
Danmarks Nationalbank doesn’t have its own inflation goal but manages prices increases indirectly via the European Central Bank’s target because it pegs the krone to the euro. Earlier this month, it tracked the ECB by lowering its key rate to 3.10% from 3.35%, its second reduction this year.
Note: Forecast from March in brackets
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