this does not mean that we can remove the uncertainty that actually exists about future developments. we continuously evaluate our previous assessments when new information and statistics are received. and we continuously develop our methods and models and may, when we have received new information, be obliged to re - evaluate earlier conclusions. this was the case, for instance, in the spring when we revised our assessments about the output gap. the conclusion of that is that the interest rate path cannot be announced in advance and even less that we can undertake to supply the interest rate decisions that the market participants sometimes consider that we have given indications of. the inflation target is necessary transparency stimulates debate both about the monetary policy strategy we have adopted and about the way in which the riksbank carries it out. we have recently been criticised for not slavishly complying with the simple decision - making rule that i have just described. however, debate has also taken place on the suitability of having an inflation target as a guide for monetary policy. the alternative would be a monetary policy based on discretionary decisions resting on assessments of the monetary policy that would best favour long - term stable growth. as will be evident from what i have said, while monetary policy is guided by a simple decision - making rule, the rule serves as a guide and not a straitjacket. we can depart from the rule if we make the assessment that the costs of complying with it will lead to unnecessary fluctuations in output and employment provided that inflation expectations and the credibility of monetary policy are not affected. monetary policy decision - makers are always confronted to some extent by having to strike a balance between price stability and output variability in the short term. the balances must be struck so as to maintain confidence in price stability. it is easy to see that a central bank with a good reputation and many years of successful combating of inflation has more freedom than a central bank in a country with many years of negative experiences of high inflation. on our part, it is undoubtedly the case that the inflation target is necessary as a lodestar in order for monetary policy to be able to contribute to creating good conditions for long - term growth.

considered more “ market based ”. these differences across economies also determined different policy responses. the us and the uk initially focussed on asset support that was intended to return markets to proper functioning. eventually, they turned to their second line of defence, with direct capital injections to support the banks. in the euro area, this order was reversed, with authorities more focussed on the banking sector and turning to asset support as a second line of defence. 2. preparing for the future having described the recent policy response to the crisis, i turn now to the challenges that remain for the future. i will divide my remarks in three parts. first, the immediate challenge is to implement exit strategies from the current extraordinary monetary and fiscal measures. second, a longer term challenge is to design and implement financial reform that effectively mitigates systemic risk. finally, i will discuss some new ideas advanced within this process of reform. 2. 1 immediate challenge : monetary and fiscal exit strategies first, let me consider the exit strategy from current extraordinary monetary measures. as i mentioned before, there are signs of substantial improvement both in financial markets and in the real economy. these suggest that the eurosystem extraordinary liquidity measures are not all needed to the same extent as in the past. however, unwinding of enhanced credit support must be both timely and gradual. it must be timely because there are risks associated with acting either too early or too late and it must be gradual because the situation is only improving progressively. the process of withdrawal is facilitated by the fact that many of the non - standard measures were designed to phase out naturally over time unless renewed by explicit policy decisions. for other measures, the situation has improved sufficiently for governing council to initiate the gradual process of withdrawal. the cornerstone of the exit strategy is the ecb primary objective of price stability in the medium term. this has guided the introduction of enhanced credit support and will govern the process of withdrawal. as with the monetary policy strategy, the exit strategy cannot precommit governing council to a given timing or sequence of actions. these must be decided with reference to changing economic and financial circumstances. now i wish to briefly address the exit strategy from the current fiscal stimulus. in addition to government measures supporting the financial sector, the extraordinary fiscal stimulus and the so - called automatic stabilisers have substantially deteriorated public finances during the current economic crisis. according to autumn 2009 forecast of the european commission, the deficit ratio in the euro area should reach 6. 9 % of gdp in