sustainable grounds and unemployment is at the lowest level in the last quarter of a century. ladies and gentlemen, dear colleagues, by maintaining price and financial stability and relative stability of the exchange rate, the nbs has greatly contributed to the creation of a predictable environment for doing business and for financing production, investment and consumption. inflation is low and stable and is expected to remain so in the period ahead. y - o - y inflation is within the target tolerance band. it measured 2. 2 % in october. that inflationary pressures are still low is indicated by the fact that more than half of the contribution to y - o - y inflation stems from the hike in the prices of petroleum products and fruit and vegetables. this is also corroborated by the low and stable core inflation which moved around 1 % y - o - y in the past months. according to our latest medium - term projection, which is almost unchanged from august, inflation will be moving within the target tolerance band of 3. 0±1. 5 % until the end of the projection horizon, that is, over the next two years. inflation movements in the medium term will be determined by the rise in aggregate demand. also, disinflationary pressures on account of the past appreciation of the dinar will gradually wane in the coming period. in the short term, low costs of food production will work in the opposite direction. financial and corporate sectors also expect inflation to be within the target band both for one and two years ahead. their anchored expectations are the best evidence of market participants ’ confidence in the measures taken by the nbs and an indicator of the rising monetary policy credibility. chart 2 anchored one - year ahead inflation expectations ( y - o - y rates, in % ) chart 1 low and stable inflation ( y - o - y rates, in % ) average 8. 7 % oct 2018. 2. 8 % financial sector ( bloomberg ) 3. 0 % 2. 4 % corporate sector ( ipsos ) financial sector ( ipsos ) 6. 4 % average 2. 1 % 2. 0 % sources : sors and nbs calculation. headline inflation core inflation oct 2018 2. 2 % 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. 1 % sources : gallup, ipsos / ninamedia, bloomberg and nbs. private sector and government financing conditions are much more favourable and lending activity is on the rise. much more favourable financing conditions for the private sector and government are indicated

policy without the need for a legal framework that is controlled by courts of law. no legislation takes into account the multitude of factors at play in real life. undoubtedly, issues such as how to calculate the structural balance, whether exceptional circumstances exist or when a downturn can be characterised as “ severe ” will give rise to disagreement. as a result, the legal rules may have to be expanded or clarified at some point. europe is wrapping its economic policy in red tape. but i have to say that this is necessary in the current situation. the risk is that, on the one hand, the system will not be sufficiently flexible to allow for appropriate adjustments, and, on the other hand, flexibility will be used to avoid implementing the required adjustments. experience shows that particularly the large member states find it difficult to accept regulative restrictions in good times. we ’ ll just have to see what happens. should denmark adopt the fiscal compact? despite my reservations, the answer is yes. being a small country with an open economy, we will, at any rate, have to observe the standards it sets for responsible budget policy. irrespective of the fiscal compact, a danish budget act is forthcoming that is to prevent overspending year after year. it is long overdue. and being a small country with an open economy, we need to be present when the external framework for our economic policy is laid down. that is our best opportunity to have a say – be it ever so small – and to learn what is going on. it is in our own interest to comply with the obligations we are now essentially taking on. that gives us greater freedom to determine bis central bankers ’ speeches our own policies. at the same time, we are signalling to the world that denmark wishes to remain committed to stability - oriented economic policy. thank you for your attention. bis central bankers ’ speeches