Denmark may raise rates independently of ECB this year, analysts say

Denmark's central bank may be forced into the rare position of raising interest rates independently of any rate move by the European Central Bank, analysts said, if the ECB phases out its bond-buying program as expected.

Denmark's Nationalbank does not adjust its rates in response to inflation, but to keep the value of Denmark's currency, the crown, within a narrow range linked to the value of the euro. Consequently, it usually moves in tandem with the ECB.

But phasing out bond purchases would mean the ECB will shift its policy to focus on interest rates, which is likely to strengthen the euro.

Except for a few months in 2014, the Nationalbank has kept its key rate in negative territory since mid-2012. It raised its certificate of deposit rate to minus 0.65 percent from 0.75 percent in an independent move in January 2016, still well below ECB's minus 0.40 percent rate.

"We believe the Nationalbank would like to normalize the interest rate spread and that the gradual tightening from the ECB gives room to start turning around the very negative interest rates we have in Denmark," Handelsbanken chief economist Jes Asmussen said.

Sydbank and Handelsbanken both expect an independent rate increase of 10 basis points in the fourth quarter this year. Jyske Bank also forecasts an independent rate hike but not until the second half of 2019.

Danske Bank, Nordea and Capital Economics said they do not expect an independent rate hike from the Nationalbank.

They emphasized that the crown has remained on the strong side of its central parity to the euro with no purchases from the Nationalbank for almost 11 months, even though ECB's winding down of its bond purchases has already been priced into the market.