Analyses focus on current issues of particular relevance to Danmarks Nationalbank’s objectives. The analyses may also contain Danmarks Nationalbank’s recommendations. They include our projections for the Danish economy and our assessment of financial stability. Analyses are targeted at people with a broad interest in economic and financial matters.

Monetary policy
No. 5

Effects of increases in monetary policy rates

Since 2022, monetary policy rates have been increased significantly in a number of countries. Interest rate increases cool economic activity, and there are no indications that the effect on inflation and unemployment differs significantly between Denmark and the euro area. Danish households’ and businesses’ net interest payments rise after an interest rate increase, and higher interest payments seem to have contributed to reducing household consumption growth.

Key messages

Why is it important?

Danmarks Nationalbank is the monetary policy authority in Denmark and therefore sets monetary policy rates. As a result of the fixed exchange rate policy, this is done in order to maintain a fixed exchange rate of the krone against the euro. However, monetary policy rates have a significant impact on interest rates faced by households and businesses, and a change in monetary policy rates will therefore affect, for example, household consumption and business investment. Against this background, this analysis highlights how monetary policy affects the economy. Where possible, these effects are compared with the corresponding effects in the euro area. Danmarks Nationalbank’s assessment of economic developments and its recommendations for economic policy depend on the effect of monetary policy in Denmark, as well as in the euro area.

Main chart

Consumption growth has been weakest in municipalities where quarterly interest payments have increased the most


The chart is a scatter plot of the year-on-year change in the average amount per capita for card spending and after-tax interest payments for a specific municipality in each quarter from Q2 2022 to Q3 2023. All data points are divided into 100 equal-sized bins based on the change in interest payments, so that there are approximately the same number of observations in each bin. Adjustments are made for quarterly seasonal fluctuations within the year.


Danmarks Nationalbank and Danske Bank.

The analysis consists of a Danish and English version. In case of doubt as to the correctness of the translation, the Danish version will prevail.

Editing completed on 15 March 2024