INTEREST DEVELOPMENT

A fixed exchange rate policy against the Euro means that the development of the short-term interest rates of the National Bank usually follow the interest rates in Europe, fixed by the European Central Bank (ECB).

The short-term rate of the National Bank expresses the cost of borrowing money for private banks, including The BANK of Greenland. These rates determine the interest rates that private customers and businesses get on their deposits and must pay for loans.

Figure 1

The Short-Term Rate of the National Bank

Source: The National Bank of Denmark

The interest rate on loans to be repaid over many years, the so-called long-term rate, plays a role for the cost of financing home purchases and business investments. The bond interest rate in Denmark closely follows interest rates in the euro zone.

Figure 2

Interest Rates for a 10 Year State Bond

Source: The National Bank of Denmark