UPDATE 1-Denmark cuts leading interest rate by 50 bps
Reuters
Published Dec 19, 2008 04:26AM ET
(Adds details, quotes)
COPENHAGEN, Dec 19 (Reuters) - Denmark's central bank lowered its key one-week certificate of deposit and lending interest rate by 50 basis points on Friday to 3.75 percent.
The less important discount rate was left unchanged at 3.50 percent.
Nationalbanken has no inflation or money supply target but adjusts rates and intervenes in the currency market for the sole purpose of keeping the crown stable against the euro.
"The interest-rate reduction is a consequence of the developments in the foreign-exchange market, where Denmark's Nationalbank during a period has purchased foreign exchange," the central bank said in a statement.
The crown is pegged to the euro in a 2.25 percent band
around a central rate of 7.46038
"The rate cut comes as a surprise, both in its timing and size," said Christian Heinig, senior economist at Sydbank. "We didn't expect to see this until January."
Usually, the bank changes its interest rates the same day and by the same margin as the European Central Bank, although it has raised rates unilaterally twice in recent months to defend the crown.
The spread to the equivalent ECB rate has now shrunk to 1.25 percentage points from 1.75 percentage points, but is wider than the 35 basis points at the start of October.
Denmark's inclusion in ERM-2 includes a commitment to unlimited intervention credit between the ECB and the Danish central bank. (Reporting by Gelu Sulugiuc; editing by Mike Peacock)
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Written By: Reuters
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