Denmark Tries Negative Rates (CNBC)

Danish central bank cuts its deposit rate to negative 0.2%

In July, Denmark’s central bank, Nationalbanken, cut the rate it pays on deposits from banks to negative 0.2%, in effect charging banks for holding their money. The Danish experiment with rates is being watched worldwide, according to a Financial Times story posted on CNBC.

Denmark is not a member of the euro zone, and Nationalbanken was striving to maintain the Danish kroner’s peg to the euro as skittish investors looking for a safe haven moved money to Denmark. The negative yield could also encourage banks to lend more, rather than paying up to hold funds at the central bank.

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