No Exit in Sight for the World Record Holder in Negative Rates

(Bloomberg) -- Danes aren't likely to experience positive interest rates any time soon.

The central bank in Copenhagen just clocked in a 12th consecutive month without currency-market interventions, meaning interest-rate changes aren't imminent.

The long drought in currency interventions “draws a thick line under” the notion that “rate changes are a long way away for Denmark,” said Las Olsen, chief economist at Danske Bank.

The Danish central bank, which uses monetary policy to defend the krone's peg to the euro, first drove its main rate below zero in mid-2012, and some economists don't expect rates to go positive until 2020. Rate changes in Denmark have traditionally only come after sizable adjustments to foreign reserves.

The prospect of extremely low rates for longer is fanning gains in the Danish housing market. A report on Thursday showed house prices reached an all-time high in January, surpassing the 2007 record that preceded a property market collapse.

Meanwhile, Danish government deposits with the central bank rose to 207 billion kroner ($34 billion), which is close to a three-year high. The increase spells short-term pain for krone liquidity, Danske Bank said in a separate note. For the rest of 2018, the build-up may affect bond issuance, with the government targeting savings of just 75-100 billion kroner by the end of the year, Danske said.

To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net.

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Jonas Bergman

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