abroad helped spur a robust expansion in u. s. real exports, which grew about 9 percent last year. the pattern of real u. s imports was somewhat uneven, partly because of fluctuations in oil imports over the course of the year. on balance, import growth slowed in 2006, to 3 percent. economic growth abroad should support further steady growth in u. s. exports this year. despite the improvements in trade performance, the u. s. current account deficit remains large, averaging about 6 - 1 / 2 percent of nominal gdp during the first three quarters of 2006 ( the latest available data ). overall, the u. s. economy seems likely to expand at a moderate pace this year and next, with growth strengthening somewhat as the drag from housing diminishes. such an outlook is reflected in the projections that the members of the board of governors and presidents of the federal reserve banks made around the time of the fomc meeting late last month. the central tendency of those forecasts – which are based on the information available at that time and on the assumption of appropriate monetary policy – is for real gdp to increase about 2 - 1 / 2 to 3 percent in 2007 and about 2 - 3 / 4 to 3 percent in 2008. the projection for gdp growth in 2007 is slightly lower than our projection last july. this difference partly reflects an expectation of somewhat greater weakness in residential construction during the first part of this year than we anticipated last summer. the civilian unemployment rate is expected to finish both 2007 and 2008 around 4 - 1 / 2 to 4 - 3 / 4 percent. the risks to this outlook are significant. to the downside, the ultimate extent of the housing market correction is difficult to forecast and may prove greater than we anticipate. similarly, spillover effects from developments in the housing market onto consumer spending and employment in housingrelated industries may be more pronounced than expected. to the upside, output may expand more quickly than expected if consumer spending continues to increase at the brisk pace seen in the second half of 2006. i turn now to the inflation situation. as i noted earlier, there are some indications that inflation pressures are beginning to diminish. the monthly data are noisy, however, and it will consequently be some time before we can be confident that underlying inflation is moderating as anticipated. recent declines in overall inflation have primarily reflected lower prices for crude oil, which have fed through to the prices of gasoline, heating oil, and other energy products used by consumers

uncertainty on the introduction of the euro has contributed further to the increasing financial integration of the euro area member states. in recent years, new joint framework conditions for the european securities markets have also been drawn up. the globalisation of the financial markets provides for more efficient use of capital, with potential substantial gains for the global economy. for investors, the greater integration of the financial markets augments opportunities for investment. capital can seek out new markets yielding higher returns, and a larger financial market increases opportunities to spread risk. in addition, borrowers gain access to raise capital from a wider and deeper pool of investors. the overall effect is the more efficient use of capital, such that the capital is utilised where it has the greatest effect. but financial integration has also brought new risks. substantial financial imbalances across countries can be financed for as long as the financial markets have confidence in developments, but once this confidence has gone, things can change very quickly. since 2002, and without interruption, the usa has been able to finance a current - account deficit of around 4 - 7 per cent of gdp ( slide 6 ). during this period the usa's consumption and investment demand has persistently and significantly exceeded its income. considerable capital inflows from abroad have made this possible. but what will happen if these capital inflows suddenly cease? this will push up us interest rates and weaken the dollar significantly. in this scenario there is a risk that the necessary adjustment will be very cost - intensive for large parts of the global economy. the prices of a number of financial assets will adjust rapidly, leading to economic adjustments. fortunately, it is widely believed that the risk of an abrupt adjustment is diminishing, but it still exists. denmark has also been part of the global financial integration. danish companies frequently acquire companies abroad, and foreign companies buy danish companies. even in international terms, the sale of tdc to an international capital fund in 2006 was one of the largest ever transactions of its kind. the development in the danish securities markets reflects increasing financial integration, especially with the euro area. statistical analyses show that yield changes in danish 10 - year government bonds closely follow equivalent german yield changes ( slide 7 ). there is also relatively close covariation between danish, german, british and japanese interest - rate changes and interest - rate changes in the world's most important bond market – the market for us government bonds ( slide 8 ). the convergence has increased significantly in recent years. investors apparently increasingly consider