Lower Bound
As governor of Denmark’s central bank, Rohde oversees a monetary policy institution that has kept its rates below zero for the better part of almost four years. He has even said that market estimates that Denmark’s policy rate might not go positive until 2019 may well be right.
The experience has provided the lesson that minus 0.75 percent is not the lower bound, Rohde said. We also know that negative rates work much in the way that positive rates function, and there’s no collapse in monetary logic once one passes zero, he said. And though the ability of negative rates to revive inflation is questionable, the policy’s impact on exchange rates seems clearer. Denmark won praise from the International Monetary Fund for its successful peg defense last year.
The central bank targets 7.46038 kroner per euro. One euro cost 7.4398 as of 2:10 p.m. in Copenhagen. Rohde said the extreme measures deployed mean that the situation for the euro peg has now normalized.