Technical adjustments of the monetary policy instruments

Authors Danmarks Nationalbank
Subject Press releases from Danmarks Nationalbank
Type Press Releases  
Year 2021
Published 11 March 2021
Abstract icon ​Danmarks Nationalbank carries out a technical adjustment of the monetary policy instruments. The purpose is to reduce fluctuations in the Danish money market rates resulting from changes in the size and composition of the banks' deposits and lending at Danmarks Nationalbank.

11 March 2021

Danmarks Nationalbank carries out a technical adjustment of the monetary policy instruments. The purpose is to reduce fluctuations in the Danish money market rates resulting from changes in the size and composition of the banks' deposits and lending at Danmarks Nationalbank.

The adjustment is not intended to influence the level of the money market rates or the Danish krone but solely to ensure more stable money market rates and thus a more predictable effect on the Danish krone.

The adjustments simplify the composition of monetary policy rates by introducing one single deposit rate and one single rate for monetary policy loans. Concurrently, the differential between the deposit rate and lending rate is narrowed.

With effect from 19 March 2021, the following changes will be carried out:

  • The current-account rate is reduced to -0.50 per cent p.a. from 0.0 per cent p.a.
  • The rate on certificates of deposit is increased to -0.50 per cent p.a. from -0.60 per cent p.a.
  • The lending rate is reduced to -0.35 per cent p.a. from 0.05 per cent p.a.
  • 1-week extraordinary loans are no longer offered.
  • 3-month extraordinary loans are maintained but will follow the lending rate instead of the rate on 1-week extraordinary loans.
  • The cap on current-account deposits is removed by suspending the current-account limits.
  • Daily market operations in certificates of deposit end 30 April 2021.

The change in the current-account rate implies that the banking sector's deposits at Danmarks Nationalbank are no longer partly exempt from negative rates. However, at the same time, the rate on the majority of the banking sector's deposits are increased to -0.50 percent p.a. from -0.60 per cent p.a. Overall, the adjustments do not give rise to a significant change in the interest cost for the banking sector.

By removing the current-account limit, the banks now have the option to deposit all holdings on their current account. Consequently, there is no need on a daily basis to sell or buy certificates of deposit in order to accommodate daily liquidity flows.

The daily publication of the net position will from 19 March 2021 take place on the following banking day at 8:00 instead of the same day at 17:00.

The background for the adjustments is elaborated in the analysis "Technical adjustment of the monetary policy instruments", which was published today. In addition, a Q&A has been published on the website.

Technical questions will be addressed on 12 March 2021 at 14:00-14:30 CET. To participate, please contact kommunikation@nationalbanken.dk.

Enquiries can be directed to press advisor Ole Mikkelsen on tel. +45 3363 6027.