Danish central bank to cut interest rates, tracking ECB

COPENHAGEN Thu May 2, 2013 7:46am EDT

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COPENHAGEN May 2 (Reuters) - Denmark's central bank is expected to cut interest rates on Thursday to at least partly track the European Central Bank's 25 basis point reduction, taking the main Danish policy rate to within touching distance of zero.

The ECB cut its main refinancing rate by 25 basis points, leaving the Nationalbank on course to trim its borrowing costs too in line with its mandate of keeping the crown currency steady against the euro.

Analysts forecast a Danish cut of up to 25 basis points, potentially trimming the main lending rate from 0.30 percent to as low as 0.05 percent.

"It is our expectation that the central bank will follow the European Central Bank and cut the lending rate by between 0.15 and 0.25 percentage points," said Danske Bank economist Jens Pedersen.

The Danish central bank, which makes its policy announcement at 1400 GMT, tends to move on rates in lockstep with the ECB to hold the crown within a narrow trading band against the euro.

But the two banks diverged in January, when the Nationalbank raised the lending rate by 10 basis points from a record low of 0.2 percent. ECB base rates had been unchanged for 10 months.

"We believe that the Nationalbank will also cut interest rates by 0.25 percent," said Handelsbanken's chief economist Jes Asmussen, though there was a small possibility the bank could decide on a smaller reduction.

The Nationalbank is expected to keep its certificates of deposit (CD) rate unchanged at minus 0.10 percent, where it has been since last July, when it became the first official Danish rate to turn negative.

The bank is also expected to leave its current account rate at zero. (Reporting by Mette Fraende; Editing by John Stonestreet)

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