Danish central bank raises key rate to 0.3%

Denmark's central bank yesterday raised its key interest rate by 0.1 point to 0.3 percent, its first rate change since July. "The interest rate increase follows Danmarks Nationalbank's sale of foreign exchange in the market," it said in a statement. The central bank gave no further details on its decision, but Danish monetary policy is aimed at maintaining a stable exchange rate between the Danish krone and the euro. The krone is pegged to the euro through an agreement known as the European Exchange Rate Mechanism (ERM II), under which the Danish currency can only move 2.25 percent up or down from a fixed rate of 7.46 krone per euro. The rate hike comes a week before central bank head Nils Bernstein turns 70, the retirement age for Danish central bank governors. He will be replaced by Lars Rohde, who is currently the chief executive of ATP, Denmark's biggest pension fund. The change comes into effect on Friday. The central bank also raised the deposit rate by 0.1 point to -0.1 percent. The deposit rate was cut below zero for the first time last year to prevent the krone from strengthening too much against the weakening euro.