trade conflict between the us and china may be a trigger. in general, history shows that upswings are inevitably followed by downturns in a market economy. the danish economy is well - positioned to withstand a possible global downturn. the upswing over the past six years has been balanced. low rates have not resulted in an excessive surge in investments nor hampered household savings. on the contrary, the household consumption ratio is relatively low, despite rising disposable incomes and high household net wealth. let me conclude with a few thoughts on the title of this speech : " low for long - causes and consequences ". the pertinent question is " how long is long ". we do not know. what we do know is that it will be prudent for the financial sector and investors to prepare for a long period of very low interest rates. this is - so to speak - the new normal. it creates new challenges for the financial sector. the only thing you can do is to adapt. and the same is true for monetary policy. thank you for listening. page 6 of 6 danmarks nationalbank low for long – causes and consequences governor lars rohde, cfa society denmark conference, 19 september 2019 danish government bonds : the whole curve is in negative territory per cent 1. 00 0. 75 0. 50 ultimo 2018 0. 25 0. 00 - 0. 25 september 2019 - 0. 50 - 0. 75 - 1. 00 duration note : the yield curve on the 16 september 2019. 18. september 2019 decline in the natural real interest rate ( r * ) per cent real interest rate - 2 natural real interest rate - 4 - 6 source : danmarks nationalbank. 18. september 2019 selected contributers to the global savings glut private financial wealth in per cent of global gdp source : credit suisse global wealth databook, oecd, imf, norsk oliefond. 18. september 2019 low level of inflation at present per cent, y - y per cent long term interest rate ( right hand axes ) inflation - 5 - 5 - 10 - 10 - 15 - 15 - 20 - 20 18. september 2019 unconventional monetary policy is playing a larger role per cent billion euro 5, 000 4, 000 danmarks nationalbank's monetary policy rate 3, 000 balance sheet ecb 2, 000 ecb's monetary policy rate 1, 000 - 2 18. september 2019 synchronised cycle in nordic

four months. danish pension companies are scarcely likely to make equally risky investments, but the case illustrates that what does not seem very risky beforehand may subsequently prove to be so. however, stress tests such as the traffic lights do have a downside. under turbulent market conditions such as those seen in the autumn of 2001, all pension companies are compelled to undertake major portfolio restructuring at the same time in order to observe the danish financial supervisory authority's traffic lights. this entails a risk of exacerbating a negative spiral. and players in a falling market never obtain the best prices for their assets. the solution is naturally not to abolish the traffic lights, but to seek to avoid situations where they may be inappropriate. more specifically, this means that the companies must adjust their reserves to match their risks. the responsibility of the sector the growth in danish pension assets makes demands of the sector in terms of accountability in relation to investment behaviour, as well as product range and marketing. both the commercial pension companies and the labour - market pension funds have increasingly encouraged customers to choose market - rate products, i. e. products where the return is more directly linked to the developments in the financial markets. in this way a larger part of the investment risk is transferred to the individual policyholder. an argument often used by the pension companies when selling " market products " is that the return is typically higher than for traditional pension savings. that may well be the case, but there is usually no " free lunch ". higher expected returns invariably involve greater risk. if the customer understands and accepts this correlation, there is no problem. the problem arises in cases where advertising and " clever " marketing make customers opt for products for which they do not understand the related risk! it is therefore important that the pension companies are aware of their responsibilities as advisors. we cannot say for sure how interest rates and share prices will develop in the future. the pension company may entertain certain expectations, but no - one knows what will actually happen. so what seemed like sound advice ex ante may prove not to be so ex post. the same applies to advice based on taxation aspects. no - one knows what our tax system will look like in 20 - 30 years'time in relation to the structure of individual incomes. the pension sector crisis in the wake of the plummeting share prices in 2000 - 2002 obviously gave many companies rather a shock. falling share prices combined with lower interest rates and rising life expectancy was a potent cocktail.