the 12 months ending in january from 2 - 1 / 4 percent in the year - earlier period. wide margins of economic slack and reduced cost pressures suggest that inflation is likely to remain quite low over the next couple of years. although the near - term outlook for the economy is weak, over time, a number of factors should promote the return of solid gains in economic activity in the context of low and stable inflation. the effectiveness of the policy actions taken by the federal reserve, the treasury, and other government entities in restoring a reasonable degree of financial stability will be critical determinants of the timing and strength of the recovery. if financial conditions improve, the economy will be increasingly supported by fiscal and monetary stimulus, the beneficial effects of the steep decline in energy prices since last summer, and the better alignment of business inventories and final sales, as well as the increased availability of credit. fiscal policy in the current economic and financial environment as you are well aware, the congress recently passed a major fiscal package, which is aimed at strengthening near - term economic activity. the package includes personal tax cuts and increases in transfer payments intended to stimulate household spending, incentives for business investment, federal grants for state and local governments to reduce their need to cut services or cancel building projects, and increases in federal purchases. by supporting public and private spending, the fiscal package should provide a boost to demand and production over the next two years as well as mitigate the overall loss of employment and income that would otherwise occur. that said, the timing and the magnitude of the macroeconomic effects of the fiscal program are subject to considerable uncertainty, reflecting both the state of economic knowledge and the unusual economic circumstances that we face. for example, households confronted with declining incomes and limited access to credit might be expected to spend most of their tax cuts ; then again, heightened economic uncertainties and the desire to increase precautionary saving or pay down debt might reduce households'propensity to spend. likewise, it is difficult to judge how quickly funds dedicated to infrastructure needs and other longer - term projects will be spent and how large any follow - on effects will be. the congressional budget office ( cbo ) has constructed a range of estimates of the effects of the stimulus package on real gdp and employment that appropriately reflects these uncertainties. according to the cbo's estimates, the effect of the stimulus package on the level of real gdp at the end of 2010 could range from about 1 percent to a little more than 3 percent,

an option, for brief periods of time, to counter adverse exchange - rate movements. intervention cannot stand alone, however. organisationally, this also implies that we must be able to adjust our interest rates when required, without being tied down by the meeting schedule of a monetary - policy committee. this is a well - known fact in the market and thus highly transparent. alternatively, one could say that our monetary - policy committee convenes every day and as required. central bank independence is a prerequisite in this respect. without it, the implementation of necessary measures can be endangered. we have a clear division of work regarding intra - marginal interventions. the board of governors, in collaboration with market operations, establishes a strategy based on current market conditions. the board of governors has access to real - time information on any interventions, but is not consulted in advance. interventions within one day are never capped, but subject to ongoing assessment in order to establish whether strategy adjustments are called for. the ecb is kept informed on an ongoing basis. in principle, one might ask whether the design of our stabilisation policy is appropriate? theoretically, there are two arguments for acting as we do. firstly, the institutions are designed to be in compliance with emu participation and thus also with the provisions of the treaty. at some future point in time we expect denmark to enter emu, and when it does, we will not have to alter our fiscal policy, since it is already based on government finances in surplus or close to balance. there is strong political support for this rule - bound division of labour in economic policy. the awarding of this year ’ s nobel prize in economic science demonstrates that the design of institutions is also considered to be of great theoretical importance. secondly, we know from the “ impossible trinity ” that in a world of free capital movements, it is not possible to set interest and exchange rates independently of one other. the central bank has one instrument, and one instrument only, at its disposal : the short - term rate. any attempts to stabilise the exchange rate while at the same time meeting other targets, are thus futile in theory. in practice, they spawn a number of problems which are aggravated the closer one seeks to stabilise the exchange rate. a number of central banks, including several from new eu member states, currently base their monetary policy on inflation targeting. in principle, the central bank seeks to approximately meet not only one, but two targets, an inflation target and an