Danish central bank expected to mirror ECB and cut key rate

ECB policymakers met at the bank's headquarters in Frankfurt on Thursday.

Its dovish stance comes after Germany was pushed to the brink of a recession by the intensifying US-China trade war.

The ECB will also cut its deposit rate - the interest paid to commercial banks when they place funds with the central bank - by 0.1 percentage points to a new all-time low of -0.5%, meaning banks incur charges on any balances they keep there.

In a policy statement the European Central Bank said: "The Governing Council expects (bond purchases) to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key European Central Bank interest rates".

President Donald Trump reacted quickly to the bank's move in a dig at the US Federal Reserve. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting US exports. It has since seen mortgage rates fall to record lows and its entire government bond yield curve dip into sub-zero territory. And the Fed sits, and sits, and sits.

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Danske Bank expects the central bank to cut the deposit rate by 10 basis points, but suggests it could then intervene in foreign exchange markets to steady the crown. Christine Lagarde, former head of the International Monetary Fund, will step in as the new European Central Bank president and has already indicated more stimulus packages will be on the way. In fact, with an interest rate of -0.5%, the Euro will continue to struggle against most currencies although it is possible that perhaps some of the selling will update right around this big figure and cause a bit of a bounce.

He said today's announcement "is a reminder to everyone that we are only part way through the recovery following the financial crisis".

In response to Trump's allegation that the European Central Bank is deliberately "depreciating the euro", Draghi insisted that exchange rates was not a target of monetary policy. "It remains doubtful, however, that this will do much to reboot the euro-zone economy let alone achieve the near 2% inflation target", he added.

Unlike most central banks, Denmark's does not adjust rates to control inflation.

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