tend to limit economic fluctuations. overall, the policy framework has delivered strong results. compared to most other countries, we have enjoyed a stable macroeconomic environment. the long history of the exchange rate peg means that all agents in the economy make decisions based on its existence : page 4 of 8 firms and households set wages knowing that a loss in competitiveness will not be offset by a depreciation of the exchange rate. this has ensured price and wage stability – and firmly anchored inflation expectations. banks implicitly support the peg by engaging in what you could call ” stabilising speculation ” : they take positions, if the exchange rate starts to fluctuate. this illustrates the credibility of the peg in financial markets. the government also knows that monetary policy will not ” correct the mistakes ” made by fiscal policy. also, as an overly expansionary fiscal policy may reduce the credibility of the fixed exchange rate. this – to some extent – disciplines fiscal policy. the tendency to fiscal pro - cyclicality during the strong economic expansion in the mid - 2000s might well have been worse under a different monetary regime. to summarize, the peg to the d - mark / euro has served denmark well for more than three decades. from time to time the framework is, however, put to a test by strong capital in - or outflows. one such test occurred in january and february 2015 when denmark experienced a very large inflow of capital. the inflow started as the swiss national bank announced on 15 january that they would no longer prevent the swiss franc from appreciating against the euro. to prevent the krone from appreciating, danmarks nationalbank responded by intervening in the fx market followed by interest rate reductions. with effect from 6 february, the rate on certificates of deposits was reduced to - 0. 75 per cent. this was a level that had not been seen previously. as the inflow of capital started, its width and depth was not known. this induced us to reduce rates gradually. danmarks nationalbank's monetary policy interest rates were transmitted to money - market interest rates. control of the difference between money - market rates in the euro area and denmark – the interest - rate spread – is crucial for controlling the exchange rate. and the experience clearly showed that the interest rate spread is also effective during episodes of negative interest rates and appreciation pressure on the krone. these conventional measures were supplemented by extraordinary measures such as the temporary suspension of the issuance of government bonds

of gdp – the highest level in the post - war era. denmark has consistently run a balance of payments surplus since 1990. the balance of payments surpluses have turned a net foreign debt of close to 40 per cent of gdp in the beginning of the 1990s into an even larger net claim. in recent years there has been a substantial return on net foreign assets of 3 - 4 per cent of gdp. this explains a part of the large surplus on the current account. another part is due to the buildup of pension funds. the ageing of the population will eventually reduce the surplus on the current account and perhaps turn it into a deficit. let me stress that the surplus on the current account is the aggregated result of households'and firms'individual decisions. it is not a public priority to have as high a surplus as possible. although the danish economy today is sound there have been bumps on the road … the danish economy boomed in the mid - 2000s and ended up over - heated with big imbalances in terms of a housing bubble, loss of competitiveness, and high household indebtedness. the economy was particularly hard hit by the financial crisis almost ten years ago, and it has taken a long time to recover. since 2012 the economy has been in an upswing with growth in employment and a closing output gap. we expect this to continue in the coming years with growth in real gdp of around 1. 6 per cent per year. there are currently no major imbalances in the economy that call for immediate political action. danish firms today are very competitive. public finances are healthy and sustainable in the long run. inflation has been low for a period due to the fall in oil prices in late 2015 but is now forecasted to just below 2 per cent in 2018. the only major ” imbalance ” is a surplus on the current account of 8 per cent of gdp, and it is not really an imbalance but reflects to a certain extent demographic induced structural savings surplus, as previously mentioned. there are challenges, however … one is to ensure sufficient labour supply to cover the increasing demand for labour. employment is close to its structural level and in the coming years it will be a bit above as seen in the chart. unemployment is also close to its cyclically neutral level. thus, there are very few available resources on the labour market. page 2 of 8 in our central forecast scenario, the increased demand for labour will be covered by increased labour supply. major reforms of the labour