"The interest rate increase is a consequence of the increase by the European Central Bank of its main monetary policy rate," the central bank said in a statement.
The move was Denmark's sixth rate hike since July last year, closely tracking the ECB and other central banks across the globe that are tightening monetary policy to combat rampant inflation. Earlier on Thursday, the ECB raised its key deposit rate by 50 basis points to 3%, the highest level since late 2008, as it predicted inflation to overshoot its 2% target through 2025. That means the monetary policy spread between the crown and the euro remains unchanged. Twice in its last six rate changes has the Danish central bank increased rates less than the ECB, with the aim of weakening the crown. "Even though the crown is generally on the strong side, it is not strong enough to require a larger spread between the interest rate in the eurozone and the interest rate in Denmark," Sydbank economist Soren Kristensen said in a note.
Denmark's benchmark current account interest rate and the certificate of deposit rate were each raised by 50 basis points to 2.6% from 2.1%, while the so-called lending rate was raised by 50 basis points to 2.75% from 2.25%. (Reporting by Nikolaj Skydsgaard, editing by Terje Solsvik)
