speech speech by governor lars rohde at the swiss finance policy seminar of the federal assembly ’ s finance committees 3 july 2017 danmarks nationalbank's monetary policy – possibilities and limitations first let me thank you for inviting me to speak at this seminar. 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. especially with this audience as there are many similarities between monetary policies in denmark and switzerland. out of the grey sky on a cold and dull thursday in january 2015, these similarities caught the financial markets'attention – fueled by the snb announcement that it would abandon the floor on the swiss franc against the euro. as you probably know, denmark experienced a massive inflow of currency shortly after this announcement. and over the following weeks, we saw unusual turbulence in the danish foreign exchange market. [ agenda ] today i will talk about the danish fixed - exchange - rate regime with the cold thursday in january 2015 as a point of departure. then i will discuss some of the potential spill - overs to danish financial markets from the unconventional monetary policies conducted by the ecb in recent years. i will end my speech with some remarks on our experiences with very low interest rates. we have had negative rates for some years now and so far their implications 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. page 1 of 9 1 background for the fixed - exchange - rate regime let me revert to that episode in 2015. [ chart 1 : intraday dkkeur ] the swiss announcement surprised financial markets resulting in increased volatility in a wide range of financial asset markets. the danish fx market was one of them. in the first few hours after the swiss announcement, the danish exchange rate fluctuated more than usual. over the following days and weeks, we experienced a massive currency inflow, resulting in strong appreciation pressure on the exchange rate. the swiss decision seems to have led some foreign investors to look for comparable candidates to abandoning a peg. there are not many countries to look for. these investors could make a substantial profit if the fixed - exchange - rate policy were to be abandoned and the krone appreciated. the initial push came from foreign investors. however, nearly two thirds of the increased demand for kroner in those few weeks in january and february came from domestic investors, including insurance companies and pension funds

each piece of communication. summing over the 17 pieces of communication included in the study, we arrive at the effects that you can see here. 1 the chart shows that in all of the 2 - day windows combined, danish 10year sovereign bond yields declined by a total of 30 basis points. this is very close to the corresponding decline in german yields of 28 basis points. yields in other northern european countries declined slightly more. however, countries in the south of europe experienced substantially larger declines in yields. to sum up, danish and german bond yields are close substitutes. the impact of qe on bond yields in the euro area also has a spillover effect on danish bond yields. 3 monetary policy when rates go negative let me share with you some of our experiences with very low and negative interest rates. danmarks nationalbank pioneered by setting a key monetary - policy rate well below zero already in 2012 to stave off large capital inflows. since then, many other central banks, including the ecb and the snb, have now gained experience with policy rates significantly below zero. with monetary policy rates as low as currently - 0. 75 per cent in switzerland and - 0. 65 per cent in denmark, we have been in unchartered territory for some years now. what have we learnt from this period? a key message is that the situation with negative policy rates in denmark largely mimics that of low, but slightly positive rates. and side effects have generally been negligible. in the following i will go a bit more into detail on some of the aspects. [ chart 8 : different deposit rates for different segments ] there has been more or less full pass - through to lending rates in the economy since the key policy rate was lowered to - 0. 75 per cent in 2015. however, the degree of pass - through to banks'deposit rates has differed across customer segments. many large non - financial corporations face negative interest rates on their bank deposits. the same applies to the majority of insurance and we use the 17 events listed in carlo altavilla, giacomo carboni and roberto motto, 2015, asset purchase programmes and financial markets : lessons from the euro area, ecb working paper series, no 1864. page 7 of 9 pension companies. this is appreciated due to the importance for the transmission to the exchange rate. banks have, on the contrary, been reluctant to introduce negative interest rates to households. their actions have generally little impact on the exchange rate. with negative policy