Denmark Reduces Interest Rate

Major financial institutions worldwide are responding to the global financial crisis by cutting interest rates. This is seen as a good move by many people who believe that governments should find ways to help people cope up with the economic downturn.

Denmark also reduced its key interest rate by 0.25 percentage point on April 2. The central bank in Denmark, Nationalbanken, further lowered its interest rate to two percent. The move came just hours after the European Central Bank (ECB) decided to lower its main interest rate by a quarter percentage point from 1.5 percent to 1.25 percent.

Other rates that recently experienced a reduction include the discount rate and the current account rate from 2.75 percent to 1.75 percent. These rates took effect on March 6. Denmark’s central bank followed the move of the ECB which lowered the rate of its refinancing operations by 0.50 percent to 1.5 percent.

A month earlier, Denmark cut its lending rate and interest rate on certificates by 0.75 percent to 2.25 percent as well as its lending rate. Financial reports say the Nationalbanken strives to maintain its currency level against the euro. The central bank usually buys and sell foreign exchange and modifies its interest rates from time to time to achieve this goal.

Denmark is a member of the European Union (EU) but does not use the euro currency unlike the other 15 members of the European System of Central Banks (ESCB). It has a fixed exchange rate policy with the euro and normally follows the changes made the ECB on its rates. The country’s major currency is the krone.

King Frederick VI of Denmark established the Nationalbanken way back on August 1, 1818. It was granted a 90-year monopoly on currency issue until 1938. It was in 1936 when the bank became a separate institution from the government.

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