(Bloomberg) -- After eight years of negative interest rates, Denmark says there's no reason to expect they'll rise anytime soon.
“There's nothing in the data to indicate that we're facing a rate increase,” Lars Rohde, the governor of Denmark's central bank, said in an interview on Wednesday.
Denmark has had negative rates longer than anyone else. Outside the country, the policy remains controversial, and a number of central bankers flatly reject it. Sweden abandoned life below zero last year, and it's viewed with suspicion in the U.S. But in the U.K., the Bank of England has warmed to the idea as it tries to tackle both the pandemic and Brexit.
Denmark's central bank, which uses monetary policy to defend the krone's peg to the euro, has devoted a lot of time to researching the long-term impact of negative rates, and Rohde says they're an effective tool to help support economies.
“First and foremost, they stimulate the economy and create more jobs,” he said. And creating jobs “in itself creates equality.”
The Danish central bank, which first drove its policy rate below zero in 2012, has seen consistent declines in joblessness since then. Unemployment was 3% just before the pandemic hit, but even with the Covid crisis, it's still around 4%. Meanwhile, inflation has remained well below 2% since early 2013.
“There have obviously been structural changes to the economy over the past decade,” Rohde said. “Even with high employment and low unemployment, inflation has remained low.”
Though not an issue in the context of Danish monetary policy, which targets a fixed exchange rate, the loss of the traditional link between employment and inflation is a “challenge” for other central bankers, he said.
©2020 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
