SPEECH
BY GOVERNOR LARS ROHDE AT THE ECB
CENTRAL BANK COMMUNICATIONS
CONFERENCE
CHECK AGAINST DELIVERY
15 November 2017
Ladies and gentlemen,
First let me thank you for inviting me to speak at this conference. It is a
special pleasure to have this chance to share views and experiences on a
matter close to my heart - namely Danish monetary policy and communi-
cation.
Slide 2: Never explain - never apologize
"Never explain - never apologize": It has been said that it was the motto
of the Bank of England from 1920 to 1944 when the bank was led by
Governor Norman.
It has also been said that Norman - somewhat of a character - enjoyed
the secrecy and the mystery that the role of a central banker enabled him
to have. He often adopted a false identity when travelling. Central bank-
ers preferred to operate in secret back then.
Like a sphinx, many central bankers like to be mysterious and inscrutable.
But when it comes to communication, a lot has changed since then. Cen-
tral banks' most powerful tool today is still their ability to set interest
rates, but communication has come very high on the agenda.
Today we see open-mouth operations conducted by the Federal Reserve
and other central banks and they are using forward guidance as an effec-
tive tool.
By doing so, usually others in the financial industry will take the appro-
priate actions.
It underscores the power of the communication tool.
Slide 3: Five lines about a new monetary policy
When Denmark in 1982 decided to stop a decade-long tradition of deval-
uating the Danish krone to counter past policy mistakes, the announce-
ment was a one-pager - five lines announced the big news.
It was in fact one of the biggest news about Danish monetary policy for
many years, but it was told in five lines and sent by the government to
newspapers and the national news agency in Copenhagen. The Danish
central bank did not publish a press release, or anything else, and it was
not mentioned in its annual report with a single word.
It's hard to understand today. An epoch-making event like Denmark's de-
cision to quit decades with devaluations of the Danish krone was an-
nounced in a few words.
It's quite clear for everybody that a lot of things moved slower 35 years
ago. Financial markets were not as tense as they are today and neither
Twitter nor Facebook were even invented.
Denmark has ever since shown both the will and the ability to pursue a
fixed exchange-rate policy.
Another big event in the Danish monetary-policy history took place in the
beginning of 2015.
Slide 4: Sharp increase in foreign-exchange reserves
Out of the grey sky, on a cold and dull Thursday in January 2015, the
Swiss national bank announced that it would abandon the floor of the
Swiss franc against the euro. As some of you might remember, Denmark
experienced a massive inflow of currency shortly after this announce-
ment. And over the following weeks, we saw unusual turbulence in the
Danish foreign-exchange market.
The massive currency inflow led to a strong appreciation pressure on the
exchange rate. The Swiss decision seems to have led some investors to
look for comparable candidates to abandon a peg. There are not many
countries to look for. These investors would make a substantial profit if
the fixed exchange-rate policy were to be abandoned and the krone ap-
preciated.
We then decided to activate a Danish version of open-mouth operation.
After we had cut the deposit rate four times in three weeks in the begin-
ning of 2015 to an unprecedented low of -0.75 per cent, and the govern-
ment decided to suspend issuance of government bonds temporarily we
launched a targeted communication effort.
It was a critical moment and it was crucial to deliver the message that we
had no plans to give up the fixed exchange regime at all - and deliver the
message without blinking an eye.
Sales of kroner by Danmarks Nationalbank were historically large in early
2015. The volume sold within just over one month totalled 275 billion
kroner - corresponding to 37 billion euros. It resulted in the sharp in-
crease of the foreign-exchange reserves as you can see on the slide.
During the hours after the interest-rate decision I spoke with a lot of me-
dia outlets. Again and again I told the journalists that we had unlimited
amounts of kroner available and we could let the currency reserves grow
indefinitely. It is an option that we could use and it was unlimited since
the interest differential between DKK and euro resulted in net profit on
the currency reserves.
... And the communication worked as intended.
Slide 5: Rohde among sharks
In other words: We were and are ready to do whatever it takes.
It was an unusual situation and with negative interest rates as low
as -0.75 per cent we were in unknown territory, but the open-mouth op-
eration worked as intended.
We have had negative rates for some years now and so far their implica-
tions have been far less exciting or radical than some might have thought
before entering the negative territory. Basically, negative interest rates
have just been a continuation of low interest rates.
Slide 6: Denmark is an ECB copycat
Today, nearly three years after the massive inflow of currency, it is clear
for most people that Denmark is not Swiss national bank copycats - we
are ECB copycats.
If the Danish central bank again should be in a situation where highly
targeted communication becomes necessary we will consider various op-
tions and use whatever it takes to get the message out.
Slide 7: Target groups for the communication
Nowadays our communication is not only targeting people in the finan-
cial markets. We have started a journey on which we aim to communicate
much broader and wish to reach all Danes in an effort to pave the way for
their understanding of why there is a central bank and what we are do-
ing.
We are not publishing traditional quarterly review anymore. The publica-
tion has been cut into slices and is now released on an ongoing basis. We
are now working with five different target groups: The professionals, the
public servants, the academic community, the journalist and the politi-
cian. Publications are edited and targeted to audience groups.
Next step is the public and we expect to use the 200 anniversary of the
Danish central bank next year to reach out to the Danes.
We have so far received positive response to the new strategy.
Are we going to see a central-bank governor using Twitter or Facebook
to announce personal and professional matters? I'm not able to answer
that question. What I know is, that Danmarks Nationalbank will use all
appropriate communication channels but from my point of view too
much information could devaluate the message.
Communication is a powerful tool but it should be used in a clever way
and with caution.
Thank you for your attention!
DANMARKS
NATIONALBANK
CENTRAL BANK COMMUNICATIONS CONFERENCE
​Lars Rohde, Chairman of the Board of Governors, 15 November 2017
Never explain
- never apologize
Governor Montagu Norman
Bank of England (1920-1944)

Sharp increase in
foreign exchange reserves in 2015
SNB abandon the floor
of the Swiss franc
Can he make it?
Heads or tails?
Denmark is an ECB copycat
Target groups for the communication
DANMARKS
NATIONALBANK
THANK YOU