ECB’s new target not expected to influence Denmark’s policy

The European Central Bank’s new inflation target will not affect the monetary policy of the National Bank of Denmark, the Danish central bank said in a statement.

On July 8, the ECB adopted a symmetric 2% inflation target, as it unveiled the results of its strategy review.

“The ECB’s adjustment of its inflation target will not impact the way in which Danmarks Nationalbank pursues its fixed exchange rate policy. A stable krone rate vis-à-vis the euro is in Denmark’s best interest,” said governor Lars Rohde.

Nonetheless, the central bank will study how the ECB’s new policy framework may impact the Danish economy.

In March, the National Bank of Denmark modified its policy framework. It introduced a single deposit rate and a single rate for monetary policy loans. It also narrowed the differential between the deposit rate and lending rate with the aim of reducing the effect of excess liquidity on money market rates.

Last week, the ECB also published an action plan to add climate change considerations to monetary policy and banking supervision. The Danish central bank “agrees that climate change and the transition to a green economy may affect price and financial stability”.