Since the turn of the year, the euro has weakened by almost 10 per cent against the dollar, which should push up prices in the euro area. Danmarks Nationalbank followed suit when the ECB lowered its interest rates and reduced the rate of interest on certificates of deposit to –0.05 per cent.
There is a second incentive for frontloading bank restructuring and balance sheet adjustment, which has to do more directly with monetary policy. Banks that need to recapitalise typically do not pass the low level of our policy rates through to their lending rates.