There was a meeting of the European Central Bank (ECB) earlier this week, and as expected there was no change in the ECB's interest rates. ECB chief Christine Lagarde mentioned at the subsequent press conference that the ECB still has some concern about the development of inflation in the Eurozone. The concern is partly due to wage developments, which have been higher in several countries in the Eurozone than expected, and partly to the development of several commodity prices, such as oil and petrol, which have been increasing in the first months of the year. On top of the ECB meeting, the assessment among analysts continues that the long-awaited interest rate cut can be announced at the ECB's meeting on 6 June, when figures for inflation up to and including May are ready. Other economic indicators show that the Eurozone economy is under pressure with low growth, and there is no prospect of improvement in the coming quarters, which in isolation speaks for lower interest rates from the ECB. Seen in the light of the fact that the ECB has an inflation target, the assessment is that the ECB weighs inflation more heavily than growth in connection with future changes to the interest rate.

In the US, the economic reality is somewhat different than in the Eurozone. The US economy is showing impressive strength with low unemployment and good growth in the economy. As new key figures are published, the assessment is that there is no need for lower interest rates to stimulate the economy in the US. It is especially the latest figures for inflation in the USA, which are rising again against expectations, and which have pushed the expectation for the first US interest rate cut from the US Central Bank (FED) to September. Seen in light of the fact that there are presidential elections in the US on November 5, the FED can hardly lower interest rates until the election, so September is probably the only meeting this year that the FED can use for a rate cut. It is thought-provoking that the market's expectation of interest rate cuts from the FED has gone from six cuts to now a maximum of two in 2024, which is primarily due to the continued strong US key figures. At the same time, several members of the FED's interest rate committee have indicated that there is no rush to lower interest rates in the current economic environment, and that it is essential to get inflation to move further down towards the FED's target of 2%. The next meeting of the Fed's interest rate committee is on 1 May.

Finally, if we look at the development in Danish interest rates, it has not changed that Danmarks Nationalbank will follow the ECB's interest rate changes. DKK is stable against EUR, and there are no signs that this trend will change in the near future.

Disclaimer

3M CIBOR and swap rates based in DKK are used for the interest graphs. Swap rates in DKK are the most liquid and used interest rates in the Danish interest rate market. The swap rates with an addition or deduction are the basis for determining the interest on fixed-rate loans in KommuneKredit. The interest rate graphs show the development in 3M CIBOR and DKK interest rate swaps with fixed interest. An interest rate swap with a fixed rate is an agreement between two parties in which CIBOR interest is exchanged for a fixed rate over a given time horizon of more than 1 year. Interest rate swaps are very liquid and are commonly used in the Danish interest rate market. CIBOR interest rates and swap rates – with an addition or deduction – are the basis for pricing KKcibor and KKfast loans in KommuneKredit.

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