There is no limit.
For Denmark, where the sole monetary policy mandate is to defend the krone’s peg to the euro, the central bank is reminding markets that it has limitless scope to deter another speculative attack on its currency regime.
“We are quite confident that we would be able to handle a new wave, if some central banks around the world go even lower,” Governor Lars Rohde told Bloomberg in an interview in Shanghai. “We have a lot of instruments in our toolkit and we will use them.”
Rohde even acknowledges that market predictions pointing to negative Danish rates for most of the rest of this decade might well come true.
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