The Danish government, supported by a large majority in the Danish parliament, is committed to use fiscal policy if inflationary developments are out of line with the exchange-rate policy. The government has stated that fiscal policy will be adjusted if inflation deviates more than temporarily from the ECB’s definition of price stability (0-2 pct. increase in the harmonised index of consumer prices - HICP).
Through late 2009 and early 2010, the strength of growth in deposits reflected, in part, the intense competition amongst the banks for deposits.8 This saw the yield on deposits rise markedly as the Reserve Bank has documented in its regular output over the past few years.