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Economy in Brief

Inflation and Monetary Policy in Denmark, Norway and Sweden
by Louise Curley June 10, 2008

The Monetary policy of the Central Bank of Denmark has shadowed that of the European Central Bank while those of Sweden and Norway have tended to be tighter. Currently the official interest rate in Norway is 5.5% and in Sweden, 4.25%, while in Denmark and the Euro Area, it is 4%. The first chart plots the official interest rates of the three countries and the Euro Area. Denmark and the Euro Area have had identical official interest rates.

Current trends in inflation in the three countries will keep their central banks vigilant. The second chart shows the inflation rates in Denmark, Norway and Sweden. Inflation has been rising since early 2007, but with rising interest rates, real interest rates remain positive in contrast to the situation in the Far East where negative interest are the rule as monetary policy has continued easy in the face of rising inflation. (See June 2nd Commentary "Far East Inflation and Easy Monetary Policy Mean Negative Real Interest Rates in the Area.")

INFLATION (%) May 08 Apr 08  May 07  M/M Chg  Y/Y Chg  2007 2006 2005
Denmark 3.56 3.38 1.60 0.18 1.89 1.67 1.85 1.70
Norway 2.81 2.72 0.58 0.09 2.23 0.72 2.48 1.48
Sweden 4.0 3.4 1.7 0.6 2.3 2.21 1.36 0.45
OFFICIAL INTEREST RATES EOP (%)
Denmark 4.00 -- -- -- -- 4.00 4.0 2.25
Norway 5.50 -- -- -- -- 5.25 3.50 2.25
Sweden 4.25 -- -- -- -- 4.00 3.00 1.50
ECB 4.00 -- -- -- -- 4.00 3.50 2.25
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