Lars Rohde: Low for long - causes and consequences

Speech by Mr Lars Rohde, Governor of the National Bank of Denmark, at the CFA Society Denmark 1st Nordic Investment Conference, Copenhagen, 19 September 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you for inviting med to speak here today.

The term "historically low" has been used many times to describe interest rates in recent years. In Denmark, the key monetary policy rate has been negative since 2012 except for a few months. At the latest auction, yields on government bonds and T-bills fell into negative territory for all matur-ities. Recently there have even been cases where new homeowners have received payments when taking out mortgage credit loans - that is, financing costs including fees have been negative.

A robust economy and sound economic policy is part of the explanation. This has turned Denmark into an attractive destination for international investors in periods of high market uncertainty. This is not the whole story though. The declining trend in interest rates is a global phenomenon and structural in nature. Interest rates in Denmark mirror interest rate developments abroad. This is a consequence of free international capital flows and the fixed exchange rate policy.