Friday marks exactly one year since the European Central Bank (ECB) cut interest rates for the first time after a long period of sky-high inflation.
Since then, there have been seven more interest rate cuts, the latest of which came on Thursday. The ECB said in a press release. The ECB's deposit rate was cut by 0.25 percentage points on Thursday, so it now stands at two percent.
The central bank justifies its decision to cut interest rates, among other things, by the fact that inflation has reached a level of around two percent. This is also a development that Allan Sørensen, chief economist at the Confederation of Danish Industries, has noted.
- Declining inflation and worryingly low growth have given the ECB a lot of room to maneuver to lower interest rates, says Allan Sørensen.
- Even though it is Father's Day, the interest rate cut is a gift to all Danish homeowners.
The central bank's deposit rate peaked in the fall of 2023, when it was four percent. It reached this level in the wake of an energy crisis, which helped push inflation to its highest level in several decades.
Believe in further cuts
Frederik Engholm, chief strategist at Nykredit, writes in a comment that a deposit rate of two percent is considered to be a "neutral level".
- This means that the interest rate at that level neither slows down nor pushes growth upwards, he writes.
Both Nykredit and the Confederation of Danish Industry consider it likely that further interest rate cuts will come. Nykredit believes that it can fall to 1.5 percent before the end of the year, and that it may possibly fall even further next year.
If the Nationalbank follows suit with an interest rate cut later on Thursday, as expected, this could benefit many Danish homeowners.
/ritzau/
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