{"id":1325659,"date":"2022-02-22T08:04:08","date_gmt":"2022-02-22T13:04:08","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1325659"},"modified":"2022-02-22T08:07:45","modified_gmt":"2022-02-22T13:07:45","slug":"european-central-bank-may-end-longest-experiment-in-negative-interest-rates","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/european-central-bank-may-end-longest-experiment-in-negative-interest-rates\/","title":{"rendered":"European Central Bank May End Longest Experiment in Negative Interest Rates"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">22<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Feuropean-central-bank-may-end-longest-experiment-in-negative-interest-rates%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1325659&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><div><img decoding=\"async\" src=\"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2022\/02\/22080738\/11a9f4cea405534701c8644e6a60518e\" class=\"ff-og-image-inserted\" alt=\"image\" \/><\/div>\n<p>(Bloomberg) &#8212; Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.<\/p>\n<p>Most Read from Bloomberg<\/p>\n<p>The world\u2019s longest experiment in negative interest rates may be coming to an end, as officials in Denmark prepare to follow possible increases in borrowing costs in the neighboring euro zone.<\/p>\n<p>With European Central Bank officials abruptly signaling a shift toward a more hawkish policy this month, economists now expect Nationalbanken in Copenhagen to raise interest rates in lockstep with their counterparts in Frankfurt through 2023. Benchmark borrowing costs could then turn positive for the first time since 2014.<\/p>\n<p>That would draw to a close an era that saw Danes pioneer a cutting-edge approach subsequently followed from the euro region to Japan.<\/p>\n<p>Asset prices responded, with Denmark\u2019s benchmark stocks index outperforming Europe\u2019s Stoxx 600 in eight out of the past 10 years, and house values rising 40% higher between 2014 and 2021. At one point, mortgage rates even turned negative.<\/p>\n<p>Much like elsewhere, the policy left citizens divided over the impact. Banks, whose profits came increasingly under pressure, said in 2019 they may no longer shield individual depositors from negative deposit rates. That prompted clients to slow saving and invest, sometimes in riskier assets, raising concerns about households\u2019 exposure to market shocks.<\/p>\n<p>\u201cFor many, the negative rates have been an abnormality and I\u2019m sure that especially the banks will be happy to see them go away,\u201d Frederik Engholm, chief strategist at Nykredit, said. Still, \u201cwhen we see rates going positive again, there\u2019s a risk that some homeowners might get squeezed,\u201d he said.<\/p>\n<p>In Denmark\u2019s unusual mortgage market, lenders operate as brokers and make money collecting fees that have steadily increased over the years. That\u2019s one reason central bank Governor Lars Rohde has said he\u2019s not worried about lenders\u2019 ability to cope with subzero policy.<\/p>\n<p>Nationalbanken, which doesn\u2019t make forecasts about its own path for borrowing costs, declined to comment.<\/p>\n<p>Officials, though, have said that negative rates function more or less the same way as very low ones and that it hasn\u2019t yet discovered a floor for how deep it can cut.<\/p>\n<p>The central bank, whose monetary policy focuses on stability in the krone, first delved below zero in 2012. It took a brief interlude in positive territory in 2014 before then moving down again as the ECB went negative. The Swiss National Bank, Sweden\u2019s Riksbank and the Bank of Japan also adopted the policy.<\/p>\n<p>Rohde faced the most dramatic period during the subzero experiment in early 2015, when investors attacked the krone\u2019s peg, betting it would break. The central bank fought back by cutting its rate to minus 0.75% and dumping about 275 billion kroner ($42 billion) on the currency market.<\/p>\n<p>Denmark\u2019s Peg<\/p>\n<p>Nationalbanken\u2019s key mandate is to defend a 2.25% band around an exchange rate of 7.46038 against the euro. In practice, it has only tolerated moves within 0.1%. It uses currency interventions and changes its policy rate to steer the krone. The central bank doesn\u2019t have an inflation target, although one of its other mandates is to \u201ccontribute to the stability of the financial system.\u201d<\/p>\n<p>Looking back at the whole policy, Jan Storup Nielsen, chief analyst at Nordea Markets in Copenhagen, reckons its scope and duration has shown just how determined Denmark is to keep its currency stable.<\/p>\n<p>\u201cThe Danish central bank has underlined its willingness to go very far and further than most expected to defend the peg,\u201d he said. \u201cYou might have expected Danes to turn against the peg with the consequences of negative interest rates, but we haven\u2019t seen that at all.\u201d<\/p>\n<p>Most Read from Bloomberg Businessweek<\/p>\n<p>\u00a92022 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>(Bloomberg) &#8212; Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.Most Read from BloombergThe world\u2019s longest experiment in negative interest rates may be &#8230;<\/p>\n","protected":false},"author":1,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1325659","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1325659","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1325659"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1325659\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1325659"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1325659"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1325659"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}