Foreign Exchange and Liquidity and Monthly Balance Sheet, May 2023

​In May 2023, the foreign-exchange reserve increased by kr. 0.4 billion to kr. 603.3 billion. The increase reflects Danmarks Nationalbank's net purchase of foreign exchange for kr. 1.2 billion, and the central government's net repayment of foreign debt for kr. 0.8 billion.

Foreign bank problems in the spring underline the need for solid buffers

​The largest banks still have a solid liquidity position, but challenges faced by specific foreign banks have highlighted the importance of sound risk management for the banks.

Homeowners’ budgets and debt servicing capacity projections

By 2023, because of inflation and rising interest rates the monthly budget of an additional 3.4 percent of homeowners would be insufficient to obtain their current loans from a Danish credit institute. Further, in case of unemployment the budget of 3 out of 4 affected households would be severely impacted despite insurance and spousal income.

Financial stability - Interest rate hikes affect the banks and their customers

Higher interest rates and consumer prices are draining the resilience of household customers, with spillover effects on businesses. At the same time, banks are generating increased net interest income because of the development in interest rates. Increased earnings may counter the effect from higher impairment charges, which may be the result of the higher interest rates in the long term. In March, problems in specific foreign banks highlighted the need for sound risk management in banks – which includes a sufficient excess capital relative to the regulatory requirements.

Working Paper: Firm Cyclicality and Financial Frictions

Firms’ sensitivities to business cycles differ by size and age. The differences are large: “young and small firms” are more cyclical than large firms, whereas “old and small” firms are closer to acyclical. A heterogeneous-firm model with heterogeneous returns to scale can replicate these findings, and implies changes in the potency of different stabilisation policies.

Smaller difference between fixed and variable rates

In April 2023, the average interest rate difference was 1.63 percentage points on new loans with fixed and variable interest rates. The figure applies to the homeowners' new loans paid out in April and is calculated before contributions. This difference was 3.40 percentage points six months ago.

Working Paper: A Fiscal Theory of Persistent Inflation

We develop a model with partially unfunded debt to propose a fiscal theory of persistent inflation. After the pandemic, unfunded fiscal shocks sustain the recovery, but also cause a persistent increase in inflation. The model predicts the inflationary effects of the ARPA stimulus out of sample and using real-time data.

Governor Signe Krogstrup's speech at the annual meeting of the Association of Local Banks, Savings Banks and Cooperative Banks in Denmark

On 25 May 2023, Danmarks Nationalbank Governor Signe Krogstrup gave a speech at the Local Banks' annual meeting on the latest economic development and financial stability. In addition, she touched on a number of current topics in the financial sector, including CBDC and climate. (The presentation is in Danish only).

Nowcast models

On this page you will finde results from Danmarks Nationalbanks different nowcast models. In the box to the right you can click on the respective models to see the newest results.

Governor Christian Kettel Thomsen's speech at the Board Leadership Society anniversary conference

Governor Christian Kettel Thomsen gave a speech on 11 May at the Board Leadership Society anniversary conference. The speech focuses on inflation; how we got there, and why we are in a different place than in the 70s. In addition, he touched on monetary policy and globalisation. (The speech is in Danish only).

Governor Signe Krogstrup’s presentation at Nordea's 11th Annual Nordic AAA Seminar

On 11 May 2023, Governor Signe Krogstrup gave a keynote presentation at Nordea's 11th Annual Nordic AAA Seminar. She gave a status on climate change and financing and discussed the role of the financial sector in the energy transition. Furthermore, she highlighted activities related to climate change and the energy transition in Danmarks Nationalbank.

New data for instituional investors' climate footprint, 1. quarter 2023

Interest rate increase

​Danmarks Nationalbank raises the current-account rate, the rate of interest on certificates of deposit, the lending rate and the discount rate by 0.25 percentage point with effect from 8 May 2023.

Close to the same return in active and passive funds

In the 1st quarter of 2023, Danish households received a return of 5.2 per cent before costs in funds that invest in global equities. There was a small difference in returns for active and passive management. The return was 5.1 per cent in actively managed funds, while it was 5.6 per cent in passively managed.

Foreign Exchange and Liquidity and Monthly Balance Sheet, april 2023

​In April 2023, the foreign-exchange reserve increased by kr. 3.7 billion to kr. 603.0 billion.

Rising deposit rates in the wake of high inflation

The average annual interest rate on Danish private customers' deposits was 0.69 per cent in March 2023. This is an increase of 0.86 percentage points compared to a year ago and the highest interest rate level since 2015. Even though the interest rates are positive again, private customers will experience that the value of their savings in the bank is eroded due to the high inflation. The increase in consumer prices (inflation) was calculated at 6.7 per cent for March 2023.

Oversight of the financial infrastructure 2022

The report presents the conclusions of Danmarks Nationalbank’s oversight of the Danish payments infrastructure in 2022. The core payment and settlement systems as well as the key payment solutions comply with international safety and efficiency standards to a high degree. Continuous action is taken to counter the cyber threat, but it is not possible to implement safeguards that provide full protection against the most sophisticated attacks. It is therefore important to continue the work with crisis management planning and the ability to handle serious cyber incidents.

Assistant Governor Thomas Harr's presentation at Finansforeningen

On 27 April, Assistant Governor Thomas Harr gave a presentation about inflation and interest rates at Finansforeningen. In the presentation, he argues that the inflation momentum has fallen in the US, the euro area and Denmark, but is still high for core inflation in the euro area and Denmark. However, there are indications that the indirect effects of energy price increases have peaked. (The presentation is in Danish only).

Governor Christian Kettel Thomsen’s speech at The Association of Danish Mortgage Banks

On 18 April 2023, Governor Christian Kettel Thomsen gave a speech at a conference at The Association of Danish Mortgage Banks. In the speech he emphasised the importance of a robust housing market. It is important that the housing tax reform is implemented as planned in 2024 and to limit the use of deferred amortisation to robust homeowners. Finally, Christian Kettel Thomsen highlighted analyses of the influences of energy renovations for the housing market and pointed out that floods may become a new source of credit risk. (The presentation is in Danish only).

Working Paper: When credit expansions become troublesome: The story of investor sentiments

We decompose fluctuations in stock prices into fundamental and noise shocks and estimate their effects on credit. Both shocks lead to a credit expansion, but only a noise shock results in a reversal if the anticipated shock fails to realise. A novel debt overhang channel is important for the propagation of noise shocks.

Tighter credit standards and decline in loan demand

In Danmarks Nationalbank's lending survey for the first quarter of 2023, the credit managers in 8 out of the 15 banks report that they have tightened the credit standards for private customers. The tightening is happening at the same time as a large part of the banks are experiencing lower demand for loans from existing private customers. It is still the slowdown in the number of housing transactions that the banks refer to as the primarily reason for the lower demand in the 1st quarter.

Foreign Exchange and Liquidity and Monthly Balance Sheet, March 2023

​In March 2023, the foreign-exchange reserve decreased by kr. 0.8 billion to kr. 599.2 billion.

Denmark’s IIP fell kr. 136 billion in 2022

At the end of fourth quarter 2022, Denmark’s net international investment position, IIP, was kr. 1,792 billion. It has been a very turbulent year for the IIP due to the large price fluctuations on shares, bonds and exchange rates. Overall, the IIP fell kr. 136 bil-lion in 2022 (corresponding to 7.1 per cent), despite a record surplus of kr. 367 billion on the balance of payments.

Danish investors’ climate footprint has been reduced

Danish institutional investors, i.e. insurance and pension companies and investment funds, have invested more than kr. 1,300 billion in listed companies with varying greenhouse gas emissions. Together, they thus financed emissions of 10.9 million tonnes of greenhouse gases in 2022, which is a reduction of around 20 per cent since 2018. Concurrently, the investors have become less exposed to equities in companies with high greenhouse gas emissions measured in relation to revenue. The figures for the investors’ climate footprint are presented in a new publication of climate-related indicators from Danmarks Nationalbank.

DESTR is a robust anchor in the Danish capital market

The existence of a robust and reliable reference rate in Danish kroner is important for both financial market participants, companies and households since reference rates are used in a wide range of financial products, including bank loans, mortgage bonds and interest rate swaps as well as input for the valuation of financial assets. The Danish market should follow international standards by developing a liquid and well-functioning DESTR market across asset classes and market participants are encouraged to use DESTR as the primary reference rate in financial products going forward.

New 2-year and 10-year benchmark bonds

Homeowners refinanced loans for DKK 243 billion in 2022

Danish homeowners bought back fixed-rate callable mortgage bonds for a total of DKK 243 billion in connection with refinancing of their home loans dur-ing 2022. Buybacks related to refinancing rose steadily throughout 2022 in line with interest rate developments and peaked in the 4th quarter with DKK 70 billion.

Mortgage debt reduced in almost all municipalities

In the past year, homeowners in all municipalities have reduced their mortgage debt, with the exception of Gentofte and Gribskov municipalities. Danish homeowners had mortgage debt of kr. 1,786 billion (nominal) by the end of February, which is 2.1 per cent (kr. 38 billion) less than a year ago.

Assistant Governor Thomas Harr’s presentation at PwC’s CEO Conference

On 23 March, Assistant Governor Thomas Harr gave at presentation at PwC’s CEO conference 2023. The presentation focused on macroeconomic volatility and the outlook for growth, inflation and real interest rates. In the presentation, he argues that growth and inflation is expected to drop significantly in 2023 but inflation will remain at a high level in the coming years, and there is considerable uncertainty about the level of real interest rates (the presentation is in Danish only).

Interest rate increase

​Danmarks Nationalbank raises the current-account rate, the rate of interest on certificates of deposit, the lending rate and the discount rate by 0.50 percentage point with effect from 17 March 2023.

Outlook for the Danish economy – Declining but still high inflation

The significant tightening of monetary policy is helping to dampen inflation and take the pressure off the Danish economy. However, higher wage in-creases will sustain inflation in the coming years. Therefore, there is a need for a tight economic policy that does not add to inflation, and it is important that fiscal policy does not counter work monetary policy in bringing the inflation down. A tightening of fiscal policy may become relevant if the risk of a Danish wage-price spiral rises further.

Monetary and financial trends - Monetary policy will cool down the economy

Inflation remains too high, and central banks around the world have signalled that monetary policy interest rates need to be raised further. Danmarks Nationalbank has hiked monetary policy interest rates in tandem with the ECB, but twice at a lower rate than the ECB to weaken the value of the krone against the euro. Market and lending rates have increased as a consequence of tighter monetary policy. The effects of this are expected to dampen economic growth significantly in 2023 and 2024.

Annual report 2022

Danmarks Nationalbank posted a loss of kr. 8,464 million in 2022, against a profit of kr. 194 million in 2021. The loss was primarily due to capital losses on the bond portfolio as a result of the higher interest rate level.

Tight economic policy is required to bring down inflation

​Danmarks Nationalbank expects inflation to fall to 4.0 per cent this year from 8.5 per cent last year. In 2024 and 2025, inflation is projected to reach 3.6 per cent and 3.0 per cent, respectively. Danmarks Nationalbank finds that a tight economic policy is required to bring down inflation.

Disclosure of climate footprint of the foreign exchange reserve: Background and methodology

For the first time, Danmarks Nationalbank discloses the climate footprint from the part of its foreign exchange reserve that is invested in securities issued by governments, regional authorities and companies. With the disclosure, Danmarks Nationalbank aims to contribute to greater transparency about the climate footprint of financial portfolios, in line with other European central banks.

Governor Signe Krogstrup's speech at Danmarks Nationalbank's conference New types of digital money

On 9 March 2023, Governor Signe Krogstrup gave a speech at Danmarks Nationalbank’s conference "New types of digital money". The speech focused on valuable lessons from monetary history and scholarship, and touched upon some of the key implications for the assessment of future types of money, covering central bank digital currencies, stablecoins and unbacked crypto-assets.

Working Paper: Drivers of Real Interest Rates in A Two-country, General-equilibrium, OLG Model

We examine drivers of the equilibrium real interest rate in a two-country, general-equilibrium, OLG model. The model predicts that population growth, growth in technology, and increased longevity have reduced the equilibrium real interest rate by 2.25 percentage points from 1950 until today – and that these factors will pull it down by further 0.25 percentage points towards 2050. Differences in longevity may explain the build-up of the large Danish net foreign asset position.

Monetary History of Denmark 2005-2020

Volume 7 of Monetary History of Denmark covers the years 2005 to 2020. This period saw a global financial crisis and pressure on the Danish krone in 2008, a sovereign debt crisis in Europe from 2010 to 2012, a Danish krone crisis in 2015 and a prolonged upswing in the Danish economy which was brought to an abrupt end by the coronavirus pandemic in 2020.

Publication of green bond allocation and impact report

Pension wealth fell by kr. 558 billion in 2022

The total pension wealth in Danish pension companies fell by kr. 558 billion during 2022 and amounted to kr. 3.754 billion at the end of the year. The wealth has fallen to around early 2020 level, and the large drop in wealth occurs after several years of good returns and high pension contributions.

Foreign Exchange and Liquidity and Monthly Balance Sheet, February 2023

​In February 2023, the foreign-exchange reserve increased by kr. 5.4 billion to kr. 600.0 billion. The increase reflects Danmarks Nationalbank's net purchase of foreign exchange for kr. 5.4 billion.

Foreign investors continue to sell Danish mortgage bonds

Over the past 12 months, foreign investors have re-duced their total holdings of fixed-rate convertible mortgage bonds by kr. 118 billion to kr. 376 billion. Foreign investors' share of ownership provisionally peaked in early 2020 at 36 per cent after an almost uninterrupted rise since 2012. Danish investors have reduced their holdings of fixed-rate mortgage bonds by kr. 92 billion over the same period.

Higher rates on mortgage loans after adjustment

The average interest rate excl. administration rate on the home owners' mortgage debt was at the end of January 2023 at 1.71 per cent. This is 0.97 percentage points higher than a year ago, of which a full 0.39 percentage points of the increase occurred during January 2023. The higher interest rate means that the home owners' interest expenses (before tax) have increased by almost DKK 10,000 on average per borrowed million in the past year.

Publications from FSOR

In the Financial Sector forum for Operational Resilience (FSOR), Danmarks Nationalbank and the key players in the financial sector work to increase the cyber resilience of the sector. At the beginning of each year, a report is published on the most important work done by this forum for collaboration in the past year. The latest publication, FSOR 2022, is now available.

Working Paper: The Danish Problem

Danmarks Nationalbank has been able to maintain the krone’s peg to the euro since the euro came into existence in 1999, and the krone’s peg to the Deutschmark and SDR for 17 years before that. This paper considers a series of hypotheses that may help to account for the exceptional nature of this case.

Real interest rates in the context of inflation and higher government debt

Since the 1980s, interest rates have gradually fallen across countries due to structural conditions. Although interest rates have risen sharply since 2020, there are indications that the conditions that contributed to the decline in interest rates are still present. However, new trends such as higher government debt, climate change, the green transition and changing trade patterns may potentially affect interest rates in the longer term.

Inflation – why did it rise and what are the drivers ahead?

The surge in inflation in 2021-22 reflects the covid-19 pandemic and Rus-sia’s war in Ukraine as well as the associated policy responses. In 2023-24, at least three factors are likely to drive inflation: (a) more stable energy prices, (b) an expected slowdown in aggregate demand growth caused in part by tighter monetary policy, and (c) improving supply chains.

Danish Government Borrowing and Debt 2022

​​A government budget surplus reduced central government debt by approximately kr. 115 billion to kr. 323 billion at the end of 2022, equal to just under 12 per cent of GDP. Rising interest rate levels in 2022 meant that the average yield to maturity on nominal government bonds issued in 2022 was 1.13 per cent p.a., which is the highest level since 2013. However, the rising interest rates do not affect interest costs on that part of the central government’s nominal debt which has already been raised.​

Interest rate increase

​Danmarks Nationalbank raises the current-account rate, the rate of interest on certificates of deposit, the lending rate and the discount rate by 0.35 percentage point with effect from 3 February 2023.

Foreign Exchange and Liquidity and Monthly Balance Sheet, January 2023

​In January 2023, the foreign-exchange reserve increased by kr. 16.5 billion to kr. 594.6 billion. For settlement in January, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 13.2 billion.

Refinancing behaviour by homeowners in Denmark when mortgage rates rise

Rising mortgage rates have led to high mortgage refinancing activity in Denmark. The Danish mortgage system has a match-funding principle, and rising rates allow fixed-rate mortgage borrowers to buy back their mortgages at a discount. 62 per cent of this discount was used to reduce debt, while 38 per cent was cashed out. When cashing out, homeowners may become more sensitive to adverse developments in interest rates and house prices.

Refinancing wealth gains have reduced debt and may also support consumption

Many Danish homeowners have used interest rate increases to refinance their mortgages. When interest rates rise, the price of fixed-rate mortgage bonds falls, enabling homeowners to repay their loans at a price below the price of the loan when it was taken out. This means that homeowners can realise a net wealth gain, which they can use for various purposes. Danmarks Nationalbank’s economists have conducted a study of how these homeowners have spent their net wealth gain on. The study showed that most people have reduced their bank or mortgage debt. Others have chosen to extract cash to support consumption or savings at a time when rising interest rates and high inflation generally dampen economic activity.

Card turnover has returned after restrictions

The total card turnover in 2022 reached kr. 642 billion, which is 8 per cent larger than in 2021. The industries that were hit hardest by corona restrictions are now well on their way to or above their level from 2019, which is the most recent year without corona restrictions.

Decline in funds

In 2022, Danish households lost kr. 108 billion on their investments in funds corresponding to a return of -13.7 per cent. At the same time, they purchased significantly fewer investment certificates than in 2020-2021. The households’ assets in investment funds now amount to kr. 511 billion, where it was kr. 616 billion at the beginning of 2022.

Opening of 2.25 per cent bullet loan 2033

On 8 February 2023, 2.25 per cent bullet loan 2033 (ISIN: DK0009924532) will be opened with interest payment date 15 November and repayment 15 November 2033. The new bond will replace 0.00 per cent bullet loan 2031 as key on-the-run issue. After this the central government can conduct buy-backs in 0.00 per cent bullet loan 2031.

Housing wealth and consumption during Covid-19

House prices increased considerably in Denmark during the pandemic, while consumption remained moderate. The marginal propensity to consume out of changes in housing wealth was modest in the years leading up to the pandemic. The largest housing wealth gains during the pandemic occurred among household segments with relatively low marginal propensities to consume.

Assistant Governor Thomas Harr's presentation at The Danish Association of the Pharmaceutical Industry's new year's banquet

On 20 January, Assistant Governor Thomas Harr gave a presentation at The Danish Association of the Pharmaceutical Industry’s (Lif’s) new year’s banquet about perspectives on the Danish economy. In the presentation he argues that the Danish economy is facing a slowdown, but the economy is robust (the presentation is in Danish only).

Christian Kettel Thomsen appointed as Chairman of The Board of Governors

​Christian Kettel Thomsen has been appointed as Governor by Royal Appointment and Chairman of the Board of Governors.

Faroese economy - Economic upturn and growing reform needs

The Faroe Islands are experiencing an economic upturn with high fish prices, high employment and low unemployment. Despite the cyclical tailwinds, public finances are showing a deficit. The proportion of working-age adults will decline in the future, which increases the need for economically sustainable reforms

Decrease in loan demand from private customers

In Danmarks Nationalbank’s lending survey for the 4th quarter 2022, 16 of the 19 largest banks and mortgage institutions report that loan demand from private customers has decreased. In the 3rd quarter 2022 slightly more than half of the 19 institutes experienced decreasing demand from private customers. This means that the lower demand is now more prevalent among the institutes.

Open invitation to TIBER provider event

The TIBER-DK Cyber Team (TCT) cordially invites providers of Threat Intelligence (TI) and Red Team (RT) services to a provider event on 31 January. The meeting will focus on how both TI and RT can create the highest possible degree of learning and value via deliverables in TIBER-DK. Discussions and experience sharing will be facilitated. The initiative reflects the TCT’s wishes to strengthen the crucial dialogue with and between TI and RT providers.

Danmarks Nationalbank publishes Monetary History of Denmark 2005-2020

​Today, Danmarks Nationalbank is publishing the seventh volume in its Monetary History of Denmark series (in Danish - an English version will be available later).

Foreign Exchange and Liquidity and Monthly Balance Sheet, December 2022

​In December 2022, the foreign-exchange reserve increased by kr. 10.3 billion to kr. 587.4 billion. For settlement in December, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 5.8 billion.

Central government borrowing strategy 2023

The government bond issuance target is set at kr. 65 billion in 2023. The focus will primarily be on issuances in the 2-year and 10-year nominal maturity segments. In February 2023, a new 10-year nominal bond will be opened. In the second half of the year, a new 10-year green bond will also be opened. In 2023, the central government expects to issue a foreign currency bond under the EMTN programme.

Do banks manage their flood risk exposures? Evidence from the Danish credit registry

Some regional banks are highly exposed to flood risk. Yet, there is little evidence that banks manage these exposures. The lack of flood risk management in these banks could worsen the adverse local economic impact of a flood. Therefore, banks should incorporate flood risk in their risk management.

Slowdown in homeowners’ mortgage debt

At the end of November, Danish homeowners had mortgage debt of kr. 1,799 billion, which is 0.31 per cent (kr. 5.6 billion) less than a year ago. It is the first time since 1994 that the year-on-year development in homeowners’ mortgage debt has been negative.

Interest rate increase

​Danmarks Nationalbank raises the current-account rate, the rate of interest on certificates of deposit, the lending rate and the discount rate by 0.50 percentage point with effect from 16 December 2022.

Significantly higher turnover in kroner and larger Danish foreign exchange market

Global trade in kroner has increased significantly, and the Danish foreign exchange market has grown. A daily turnover of kr. 378 billion is generated globally, which is 36 per cent up on 2019. Total global turnover in all currencies has also increased. In Denmark, a daily turnover of kr. 571 billion is generated in all currencies, which is 22 per cent up on 2019. Increased volatility in the financial markets has contributed to the increase in turnover. This is shown by the Triennial Survey of the Foreign Exchange and Derivatives Markets conducted by the Bank for International Settlements (BIS) in collaboration with a number of central banks worldwide, including Danmarks Nationalbank.

Negative pension returns of kr. 741 billion

Overall, the insurance and pension sector has had a loss of kr. 741 billion on their 9nvestments in the first three quarters of 2022. In comparison, the return was kr. 1,027 billion combined in the three previous years 2019-2021, which, overall, were years of large share price increases. The negative return has been driven by falling prices on the financial markets on the basis of, among other things, increased inflation and rising interest rates. The pension assets were kr. 4,070 billion in September 2022.

Governor Lars Rohde's speech at the Annual Meeting of Finance Denmark

On 5 December, Governor Lars Rohde gave a speech at the Annual Meeting of Finance Denmark. The speech focused on liquidity, economic dampening and a look back.

Foreign Exchange and Liquidity and Monthly Balance Sheet, November 2022

​In November 2022, the foreign-exchange reserve increased by kr. 13.5 billion to kr. 577.2 billion. For settlement in November, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 3.7 billion.

Financial stability - Turbulent times call for a focus on risk management

The financial markets are characterised by high inflation, higher interest rates and considerable volatility. Higher interest rates, high inflation and the prevalence of risky loan types, combined with declining property prices, will lead to credit losses in banks. The weaker economic outlook underlines the need for prudence in the institutions’ capital planning.

Turbulent times call for focus on risk management in financial sector

These are turbulent times with considerable market fluctuations, high inflation and higher interest rates. This calls for strong liquidity management throughout the financial sector, according to a new analysis from Danmarks Nationalbank.

Fewer fixed-rate mortgage bonds

The market value of 30-year fixed-rate mortgage bonds fell steadily up until October this year. There are several reasons for this: The price of the bonds fell in connection with increasing market rates, while the redemption of low-yield bonds has exceeded the issuance of high-yield bonds.

Growth in business lending

The banks’ lending to Danish businesses has been increasing and has increased by 20.1 per cent over the past year to kr. 521.6 billion. However, this year-on-year growth rate has slowed slightly since Au-gust, when it peaked at a whopping 27.9 per cent. This is the highest year-on-year growth for bank lending to businesses in recent times. Before this, the highest measured growth rate was 26.6 per cent in July 2006.

The Greenlandic economy - Pressure on the economy and growing need for reform

Greenland has a booming economy and a marked need for foreign labour. Price increases remain modest due to the country’s special energy infrastructure. Although the Greenlandic economy is doing well, the Greenlandic politicians need to address a number of major challenges if growth is to continue. Fiscal policy is clearly unsustainable in the longer term and, in future, public expenditure cannot be funded under the current taxation rules. There is a growing need for reform of, e.g., the tax system and the education system.

Governor Lars Rohde's speech at the Danish Chamber of Commerce

On 23 November, Governor Lars Rohde held a presentation at The Danish Chamber of Commerce. In his presentation, he gave his view on the current economic situation. (The presentation is in Danish only).

Evaluating the macroprudential stance in a growth-at-risk framework

The ultimate objective of macroprudential policy is to contribute to financial stability by curbing the build-up of systemic risks and alleviating negative outcomes for the economy should risks materialize . Measuring and communicating whether policy goals are achieved is challenging, as financial crises are rare and risks are often only measurable in case they materialize. The memo outlines how growth-at-risk can be used to illustrate the objectives of macroprudential policy.

Issuance of 2-year euro bond

On November 9, the government issued a euro bond maturing on No-vember 18 2024. The bond was issued as a bullet bond with a coupon of 2.50 percent. In total euro 1.5 billion was issued. The issuance process and the composition of the investors can be seen in the attached press release. By continuously issuing in the EMTN programme, the program is kept active and thus forms part of the central government’s and Danmarks Nationalbank's liquidity reserve. The issuance also contributes to ensuring that everything in the issuance process functions as it should, and that the government maintains a strong and diversified market access in foreign currency funding.

Effects of borrower-based regulation on housing demand

Borrower-based regulation, influencing housing buyers’ access to credit, would have different effects depending on buyer’s demographics, wealth and location. By modelling housing buyers’ preferences and budget constraints, we find that any such regulation would push demand to suburban areas. Limits on debt-to-income ratios (DTI) would mainly affect buyers in the largest cities; however, we find that the restrictions would not affect net demand for small apartments in Copenhagen.

Governor Lars Rohde's speech at The Danish Property Federation

On 3 November, Governor Lars Rohde held a presentation at The Danish Property Federation. At the meeting, he presented his view on the Danish economy and the housing market. (The presentation is in Danish only).

Conference marking Denmarks 40 year fixed exchange rate regime

On 31 October, Danmarks Nationalbank hosted a conference marking Denmarks 40 year fixed exchange rate regime. The speakers at the conference were Governor Lars Rohde, Governor Per Callesen, Governor Signe Krogstrup, former Governor Bodil Nyboe Andersen, former Prime Minister Poul Nyrup Rasmussen, Professor Barry Eichengreen, Governor at Norges Bank Ida Wolden Bache, Governor at Sveriges Riksbank Stefan Ingves and Member of the ECB's Executive Board Philip Lane.

Foreign Exchange and Liquidity and Monthly Balance Sheet, October 2022

​In October 2022, the foreign-exchange reserve increased by kr. 9.4 billion to kr. 563.6 billion. For settlement in October, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 22.3 billion.

Assistant Governor Thomas Harr’s presentation at the University of Copenhagen

On 2 November, Assistant Governor Thomas Harr gave a presentation at the Institute of Economics, University of Copenhagen, on inflation. In the presentation, he argues how different economic theories may be used to understand the current high inflation, and how they can be used to analyze the future forces of inflation.

Governor Signe Krogstrup’s speech at Danmarks Nationalbank conference marking the 40th anniversary of the Danish fixed exchange rate regime

On 31 October, Governor Signe Krogstrup gave a speech at the Danmarks Nationalbank conference marking the 40th anniversary of the Danish fixed exchange rate regime. The speech summarized some key takeaways from the conference and discussed the current situation of high inflation and how we address inflation in a fixed exchange rate regime. Signe Krogstrup finished with some considerations about why the peg will continue to be an important pillar in Danish macroeconomic policy in the future.

Governor Lars Rohde’s speech at Danmarks Nationalbank conference marking the 40th anniversary of the Danish fixed exchange rate regime

On 31 October, Governor Lars Rohde gave a speech at the Danmarks Nationalbank conference marking the 40th anniversary of the Danish fixed exchange rate regime. The speech focused on the history of the fixed exchange rate regime. A regime which has withstood the test of time and contributed to the transformation of the Danish economy from a fragile economy in the early 1980s to the strong economy that we know today.

Record sales of foreign equities

Since October 2021, Danish investors have sold foreign equities for kr. 100 billion. The highest number of sales were made in September, when foreign equities were sold for a total of kr. 28 billion. The sales were made during a period in which equity prices have generally fallen.

Interest rate increase

Danmarks Nationalbank raises the current-account rate, the rate of interest on certificates of deposit, the lending rate and the discount rate by 0.60 percentage point with effect from 28 October 2022.

Monetary and fiscal policy in Denmark

The primary objective of monetary policy is to maintain low and stable inflation. In Denmark the objective is achieved by pegging the Danish krone to the euro. This entails that Danish monetary policy tracks the monetary policy conducted by the European Central Bank. To the extent that developments in the Danish economy deviate from the euro area, domestic fiscal policy can be used as a tool for stabilisation.

Positive interest rate on private customers’ deposits

The Danes’ deposits had an interest rate of 0.17 per cent in average in September and is thus positive for the first time since January 2021. The increase in the interest rate in deposits happens in the wake of Danmarks Nationalbank’s increase in interest rates over the last months. This have lead banks to gradually remove negative interest rates on private customers’ deposits.

Labour scarcity in Denmark: What role do foreign recruitments play?

This Economic Memo examines the role of international recruitments in the Danish labour market. It shows that while only a small share of new recruitments has tended to come from abroad, foreign labour has contributed markedly to employment growth in Denmark. Looking forward, Danish firms still appear to have the option of recruiting workers from abroad.

Stable turnover on the unsecured money market

The banks' mutual unsecured deposits in kroner were DKK 4 billion per day on average in the 2nd quarter. This is the same level as last year. The figure appears from Danmarks Nationalbank's annual money market survey, which includes the banks' mutual money market and interest rate derivatives transactions in the 2nd quarter.

Danmarks Nationalbank's comments on the Danish Economic Council's discussion paper, autumn 2022

Danmarks Nationalbank's comments on the Danish Economic Council's discussion paper, autumn 2022.

Stricter requirements for private customers’ economy

In Danmarks Nationalbank’s lending survey, 8 of the credit managers in the 16 surveyed large and medium-sized banks say that they have tightened their credit standards for private customers in the 3rd quarter of 2022. The tightening must be seen in light of the fact that 5 out of the 8 banks also tightened their credit standards in the 2nd quarter. The majority of the surveyed banks also expect to tighten the credit standards in the 4th quarter.

Working Paper: Walking the talk? Firm emissions and disclosure during the third phase of the EU emissions trading system

This study documents trends in emissions and emissions reporting for a sample of 141 large firms that were active within the EU Emissions Trading System during 2013–2019. Using text from annual reports, I document a rising share of information related to emissions. However, my measure of emissions talk is generally not predictive of past or future changes in firm emissions.

Corporate climate communication is not associated with fewer emissions

Companies are communicating more and more about efforts aimed at reducing their greenhouse gas emissions. However, there is no correlation between how much companies communicate about their emissions and the actual change in their emissions. This is one of the main findings in a new working paper.

Foreign Exchange and Liquidity and Monthly Balance Sheet, September 2022

In September 2022, the foreign-exchange reserve increased by kr. 22.4 billion to kr. 554.2 billion. For settlement in September, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 23.0 billion.

New Head of Banking and Markets in Danmarks Nationalbank

Inequality and savings

This memo studies the impact of demographic shifts and income inequality on the evolution of savings rates in Denmark, and compares with evidence from the US. Income inequality has followed similar trends in Denmark as in the US, and savings rates vary in a similar way over the life cycle and along the income distribution in the two countries. Changes in savings behavior play an important role for the evolution of total savings.

Status on the Danish economy, green government bonds and responsible investing of the FX reserve

On 29 September 2022, Governor Signe Krogstrup gave a presentation at Nykredit Capital Markets Day. She spoke about the latest inflation development and monetary policy response as well as Danmarks Nationalbank’s experience with issuing green government bonds and responsible investing of the FX reserve.

Large regional differences in loan-to-value ratios

Loan-to-value ratios for Danes' homes (sum of bank and mortgage loans relative to the value of the home) vary considerably across the country. The loan-to-value ratio is a measure of how exposed homeowners are to falling prices in the housing market.

Governor Per Callesen's speech at Nykredit Capital Markets Day for Banks 2022

On September 28, Governor Per Callesen held a presentation at Nykredit Capital Markets Day 2022. He presented the recent development and risks on the Danish housing market and gave his assessment of the effect on the first-year payment for different reforms (The presentation is in Danish only).

Foreign countries hold fewer Danish mortgage bonds

This year, foreign investors have net sold 30-year Danish convertible mortgage bonds for kr. 55 billion. The foreign share of ownership has thus fallen from 38.1 per cent in January to 36.1 per cent in August. The value of the 30-year bonds fell by kr. 87 billion in the same period, e.g. due to conversion of mortgage loans.

Assistant Governor Thomas Harr's speech for Finansforeningen

On 27 September, Assistant Governor Thomas Harr gave a presentation for Finansforeningen on the subject of inflation. In the presentation, he argues why inflation is likely to remain high short-term, why inflation will drop medium-term and why there are substantial differences to the situation in the 1970s. (The presentation is in Danish only).

Energy renovations of houses will pay for themselves by the heating bill – not by the sales price

The majority of energy renovations of houses cost more than they increase the sales price. This holds particularly in the metropolitan area and Aarhus, but also in a number of rural areas. Renovations that increase the sales price more than the renovation costs reduce CO2 emissions only marginally and are typically only possible for houses in and around the medium to large towns and more generally in the geographically more central parts of the country. (Memo available in Danish only).

Working Paper: Opportunities and risks in the residential sector during a green transition: House prices, energy renovations and rising energy prices

Higher energy prices reduce sales prices of houses without district heating in some rural areas. Most energy renovations do not increase sales prices beyond their costs. Those that do have little impact on CO2 emissions, are cheap, and are typically only possible for houses located in and around towns and mid-sized cities and more generally in the geographically more central parts of Denmark.

Outlook for the Danish economy - The pressure on the economy should be eased

Inflation is at 40-year high, and central banks across the world are currently tightening monetary policy. Together, these factors are dampening growth prospects for the Danish and international economies for the coming years. However, the combination of high inflation and a very tight Danish labour market carries the risk of self-reinforcing wage and price increases. Therefore, fiscal policy should help reduce the demand pressure as quickly as possible.

Inflation must be tamed

​Gas, electricity and food prices have risen significantly. This is contributing to current inflation reaching a 40-year high in Denmark and many other places in the world. Danmarks Nationalbank's new projection for the Danish economy estimates that inflation will be 8.6 per cent this year, 4.3 per cent in 2023 and 1.7 per cent in 2024.

Monetary and financial trends - Tighter monetary policy has made financing more expensive

High inflation and rising inflation expectations have brought about a need to tighten monetary policy for central banks worldwide. Danmarks Nationalbank has followed the ECB's interest rate hikes in accordance with the fixed exchange rate policy. The tightening of monetary policy and developments in the financial markets have increased loan rates for Danish households and companies.

Working Paper: What do negative policy rate economies have in common?

Five economies, Denmark, the euro area, Switzerland, Sweden and Japan, have conducted negative interest rate policies. In this paper, we document that these economies have high levels of public as well as private savings, not matched by high investments, relative to other high-income non-NIRP OECD economies.

Governor Per Callesen’s speech at Human House and Business Fredericia

On 15 September, Governor Per Callesen held a presentation at Human House and Business Fredericia. In his presentation, he gave his view on the Danish economy and which driving forces that will affect the economy in the short and long term. (The presentation is in Danish only).

Interest rate increase

​Danmarks Nationalbank raises the current-account rate, the rate of interest on certificates of deposit and the lending rate by 0.75 percentage point with effect from 9 September 2022. In addition, the discount rate is raised by 0.65 percentage point.

Governor Signe Krogstrup's speech at Finance Denmark's Director Conference 2022

On 5 September, Governor Signe Krogstrup held a presentation at Finance Denmark’s Director Conference 2022. She gave her view on some of the global challenges we face, both today and in the longer term. She zoomed in on the latest inflation development and the monetary policy response, before giving some remarks on the development of the Danish economy. (The presentation is in Danish only).

Unlisted shares have outperformed listed this year

In the second quarter of 2022, the insurance and pension fund sector has had a return of 1 per cent on its unlisted shares. At the same time, the sector has lost 10 per cent on its listed shares. Unlisted shares account for 50 per cent of the sector’s total investment in shares and other equity.

Foreign Exchange and Liquidity and Monthly Balance Sheet, August 2022

​In August 2022, the foreign-exchange reserve decreased by kr. 1.6 billion to kr. 531.7 billion.

Governor Lars Rohde retires

(Mis)matching in the post-pandemic Danish labour market

Since the beginning of the pandemic, matching in the Danish labour market seems to have become less efficient: a given number of job seekers and vacancies result in fewer matches than previously. This economic memo studies mismatch between job seekers and vacancies as a potential explanation. Mismatch was an important driver during the great financial crisis, but much less so during the pandemic.

Assistant Governor Thomas Harr's speech at Danske Asset Management's client seminar

On 1 September, Assistant Governor Thomas Harr gave a presentation for Danske Asset Management’s clients on the subject of inflation. In the presentation, he argues why inflation is currently so high in the US, the euro area and Denmark and where it is heading. (The presentation is in Danish only).

Regulatory adjustments are to contribute to more effective capital buffers

The interaction between requirements limits capital buffer usability in Denmark. Financial regulation should therefore be adjusted, so that banks are not allowed to use the same capital to meet both capital buffer requirements and other requirements at the same time. This will improve the usability of capital buffers.

Still potential of loan conversion

In 2022, many borrowers have used the higher interest rates and thus lower prices on the underlying bonds to convert their fixed-rate mortgages. One reason for this is to cut a chunk of their remaining debt.

Working Paper: Segmentation of the Housing Market with Internet Data: Evidence from Denmark

In this paper, we introduce a novel tool for housing market analysis developed on the basis of online listings data from the largest real estate listing site in Denmark. The tool uses a combination of machine learning techniques to provide a data-driven segmentation of the housing market into meaningful submarkets that differ from administrative classifications. We demonstrate how the tool can support monitoring and research of underlying housing market developments in Denmark.

Opening of 0.10 per cent inflation-linked bullet loan 2034

On 14 September 2022, 0.10 per cent inflation-linked government bond with maturity on 15 November 2034 will be opened (ISIN: DK0009924458). The government bond will be linked to the Danish consumer price index, CPI. The new bond will replace the 0.10 per cent inflation-linked bond 2030 as key on-the-run issue. After this the central government can conduct buy-backs in 0.10 per cent inflation-linked bullet loan 2030.

The rise in cash holdings of Danish companies

We show that the cash holdings of a typical Danish company have increased after the 2007/08 financial crisis. Especially the cash holdings of small companies have seen a strong increase. The increase in cash holdings coincides with a decrease in the use of loan financing for the typical company, which suggests a decrease in loan demand or supply to these companies. The development of cash holdings is also driven by a strong selection effect: companies with low cash holdings have been especially likely to exit during and after the financial crisis.

Foreign Exchange and Liquidity and Monthly Balance Sheet, July 2022

​In July 2022, the foreign-exchange reserve decreased by kr. 0.5 billion to kr. 533.4 billion.

Interest rate increase

​Danmarks Nationalbank raises the current-account rate, the rate of interest on certificates of deposit and the lending rate by 0.50 percentage point with effect from 22 July 2022.

Foreign Exchange and Liquidity and Monthly Balance Sheet, June 2022

​In June 2022, the foreign-exchange reserve decreased by kr. 0.2 billion to kr. 533.8 billion.

Danes’ financial wealth decreased by kr. 183 bn.

The Danes’ financial wealth, which is the difference between financial assets and debt, fell by kr. 183 billion in 1st quarter. This corresponds to a reduction of kr. 66 thousand for an average household. The decline comes after almost two years of economic upturn on the financial markets. Since 1st quarter 2020 the financial wealth has increased by kr. 2,409 billion.

The market for green bonds is booming

Since the first green bond was issued in Denmark in 2015, the market has risen to kr. 169 billion as of May 2022.

Steep increase in interest rates on new mortgages

The interest rate on the Danes’ new mortgage loans has increased. The average interest rate on mortgage loans disbursed in May is 1.99 per cent (excl. administration fee). The interest rate has more than doubled since the beginning of the year where new loans were disbursed at 0.88 per cent. The development reflects large interest rate increases, which have defined the first five months of 2022.

New types of digital money

The money we currently use in Denmark is well-functioning, and new types of digital money are likely to gain a foothold if they offer benefits for citizens and society. Danmarks Nationalbank is working to ensure access to secure and efficient money and payment solutions that are available to the whole society, also in the future. This applies regardless of the solution, provider or technology that may form the basis of new types of digital money.

Governor Signe Krogstrup's presentation on FRIC'22 Conference on Financial Frictions at CBS

On 10 June 2022, Danmarks Nationalbank Governor Signe Krogstrup gave a presentation on the FRIC'22 Conference on Financial Frictions at CBS. Signe Krogstrup touched upon the topics of climate change and green government bonds.

Financial stability - Rising interest rates and prices can challenge banks’ customers

Housing lending is still driven by loans with deferred amortisation, and variable interest rate have become more prevalent. An amortisation requirement for homeowners with a high loan-to-value ratio may contribute to a more resilient housing market. The ability of some companies to service their debt is put under pressure by higher energy and commodity prices and an interest rate hike. (Appendix 1 has been revised 16. June 2022).

Rising interest rates and prices can challenge banks' customers

Central government borrowing strategy in the 2nd half of 2022

The target for sales of domestic government bonds and short-term loan programmes in 2022 is kept at kr. 65 billion and kr. 35 billion, respectively. The on-the-run issues remain unchanged and focus will continue to be on issuance in the 2-year and 10-year nominal bonds including the green bond. In September, a new inflation-linked government bond will open.

Rising interest rates result in value losses

The value of the insurance and pension fund sector’s investments fell by kr. 273 billion in the first quarter of 2022. This is a larger loss than in the first quarter of 2020, which marked the start of the corona crisis. The losses in the first quarter of 2022 are primarily attributable to rising interest rates, while the market value loss during the corona crisis was largely driven by significant stock market declines.