Free Trial

Orr: Inflation Is No One’s Friend


China Repo Rates Rise on Wednesday


Core FI Under Modest Pressure Post-RBNZ


Link To Watch Orr


Aggressive NZGB Repricing After RBNZ

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access
By Luke Heighton
     FRANKFURT(MNI) - Eurozone interest rates are likely to stay low for several
years, a senior National Bank of Denmark official told MNI, in an interview in
which he also said it was unclear whether coronavirus would hit Danish exports
and that the central bank would intervene again in foreign exchange markets if
necessary to maintain the krone's peg to the euro.
     "There are structural factors that have been putting downward pressures on
real interest rates on an international basis in the past decades," Per
Callesen, who sits on Danmarks Nationalbank's three-member Board of Governors,
said in an emailed response to questions. "While we cannot predict future
interest rate development, some of these factors are likely to continue to keep
interest rates low in the coming years."
     Ageing populations, high levels of saving in emerging market economies,
especially China, and lower productivity growth are all contributing to lower
real rates of interest globally, Callesen said, in remarks that echoed Dutch
central bank chief Klaas Knot's recent assertion that interest rate levels are
unlikely to become "fundamentally different" any time soon.
     Assessing the negative effects of negative rates will be "at the top of our
agenda" despite little evidence any have materialised thus far, Callesen said.
There are no visible bubbles in financial or housing markets, credit growth is
moderate, with "strong" pass-through to market rates, and bank profits remain
high despite a decrease in net interest income, he said.
     The Danish central bank stands ready to intervene again if necessary to
keep the crown pegged to the euro, Callesen said, with the level of FX
intervention dependent on the "given situation and developments in the FX
     Denmark's foreign exchange reserves fell by more than 4 billion krone in
December, the central bank's largest FX intervention since October 2019, and the
third time in three months it has moved to keep the currency within +/-2.25% of
the euro. In September, the interest rate on central bank deposits was lowered
by 10bps to -0.75%, following the ECB's announcement that it was cutting its
deposit rate to -0.5%.
     The Danish economy has remained resilient to the global downturn in trade,
Callesen indicated, adding that, beyond a slight slowing in export growth, the
bank's outlook had not changed much since September 2019, when it said it
expected GDP to rise by 1.5% per year in 2020 and 2021, following growth of 1.8%
in 2019.
     So far, any drop in exports to Germany and Europe had been "more than
outweighed" by growth in exports beyond Europe, particularly of pharmaceuticals
and wind turbines. With the effects of coronavirus still unclear clear, Callesen
said it was not yet obvious whether Danish exports to China will suffer
     Import prices and wage growth remain modest, he added, while domestic price
pressures are expected to increase only slightly this year. Tobacco tax hikes
coming into force in April this year and January next year should add 0.4
percentage point to inflation in 2020 and 0.2 percentage point in 2021.
     With climate change set to form a key aspect of the ECB's strategic
monetary policy review announced last week, Callesen pointed to a Nationalbank
study exploring the share of mortgaged assets at risk of flooding and the impact
for credit institutions.
     "These efforts mainly address climate change adaptation," he said, "but
they may also have indirect mitigating effects if they contribute to a better
pricing of climate related risks in the market."
--MNI London Bureau; +44 203 865 3829; email:
[TOPICS: MT$$$$,MX$$$$]

To read the full story

Why Subscribe to

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.