Denmark’s central bank lowered its benchmark interest rate by -0.35% to a record low of 1.65%.

Nationalbanken, which uses monetary policy to keep the krone pegged to the euro, has narrowed the spread with the European Central Bank (ECB) to 0.65%. The ECB earlier cut its main rate by 0.25% to 1%.

Scandinavia’s smallest economy is struggling through its severest recession in six decades as the global crisis adds to pressure on consumers burdened with five consecutive quarters of declining property values.

According to the International Monetary Fund (IMF), Danish gross domestic product (GDP) will probably contract -4% in 2009 after shrinking -1.1% in 2008. IMF estimates the economy will return to growth of +0.4% in 2010.