Accept cookies Danmarks Nationalbank uses cookies to monitor traffic on our website. This allows us to improve our website and make it more accessible to users. Therefore, we would like you to accept cookies on Danmarks Nationalbank's website. You can delete our cookies at any time.   More about cookies

About us Tasks Notes and coins Euro Monetary policy Market info Statistics Government debt
<< Home / Monetary policy / Introduction to monetary and foreignexchange policy
News service Site map Dansk   Search Log on
Financial stability Press room Publications Rules
Back to the frontpage

Introduction to monetary and foreign-exchange policy

Monetary policy

Foreign-exchange policy / ERM II

Monetary-policy instruments

Foreign-exchange reserve

Danmarks Nationalbank | | |QR code for mobile units

Introduction to monetary and foreign-exchange policy

Danmarks Nationalbank is responsible for monetary policy in Denmark. Danmarks Nationalbank conducts monetary policy by setting the monetary-policy interest rates, i.e. the discount rate, the current-account rate, the lending rate and the rate of interest on certificates of deposit. The interest rates are determined by the Board of Governors of Danmarks Nationalbank, and can be changed as required at any time. Danmarks Nationalbank's interest rates guide the short-term interest rates in the Danish money market, as well as the deposit and lending rates that the banks offer customers.

Denmark maintains a fixed-exchange-rate policy vis-Ó-vis the euro area. This means that the aim of monetary and foreign-exchange policy is to keep the krone stable vis-Ó-vis the euro. The main objective of the monetary policy in the euro area is to maintain price stability, i.e. to avoid inflation. By keeping the krone stable vis-Ó-vis the euro, a basis for low inflation is also created in Denmark.

Danmarks Nationalbank can influence the krone rate by adjusting its monetary-policy interest rates. When Danmarks Nationalbank increases its interest rates relative to the interest rates of the European Central Bank (ECB), the krone will have a tendency to strengthen. When, on the other hand, Danmarks Nationalbank lowers its interest rates relative to the interest rates of the ECB, the krone will have a tendency to weaken.

In the short term Danmarks Nationalbank can stabilise the krone by buying and selling foreign currency in the market. When Danmarks Nationalbank sells foreign currency (and buys kroner), the krone will have a tendency to strengthen. When Danmarks Nationalbank buys foreign currency (and sells kroner), the krone will have a tendency to weaken.

When the foreign-exchange market is calm, the fixed-exchange-rate policy means that Danmarks Nationalbank adjusts its interest rates in step with the ECB's adjustments. In a situation with upward or downward pressure on the krone or a sustained inflow or outflow of foreign currency, Danmarks Nationalbank unilaterally changes its interest rates in order to stabilise the krone.

There is a clear distribution of responsibility for economic policy. The monetary policy of Danmarks Nationalbank is aimed solely at ensuring that the krone remains stable vis-Ó-vis the euro. The government conducts its fiscal policy and economic policy in general so as to achieve stable economic development and in accordance with a fixed exchange rate.

Last update: 02/14/2014

More information
Read by others

Danmarks Nationalbank
Havnegade 5
DK - 1093
Copenhagen K
Contact us Disclaimer