Gordon Brown yesterday insisted the economy remained fundamentally sound despite global financial turbulence.
The Prime Minister said he had earlier held talks on the state of the economy with Chancellor Alistair Darling, Bank of England Governor Mervyn King and the chairman of the Financial Services Authority, Sir Callum McCarthy.
He is also due to speak to President George Bush.
Addressing his last Downing Street press conference of 2007, Mr Brown said he wanted to hear, at first-hand, measures being taken to ensure stability.
"I heard from the Governor and the chairman of the Financial Services Authority that inflation has been brought down, and remains low, demonstrating that the fundamentals of the British economy are, and remain, sound," he said.
Mr Brown insisted inflation was lower in Britain than in the US or Europe, demonstrating that measures this year - including controlled increases in public sector pay - had been effective.
"We stand able to weather the global financial storms and to respond where necessary, as the Bank of England has already done, with a cut in interest rates," he said.
Standing alongside Mr Darling, the premier added: "This year has been about progressively addressing one by one the long-term challenges this country faces."
Mr Brown said the fact Northern Rock's problems had not spread to other institutions showed the tripartite system between the Bank, the FSA and the Treasury was "working well".
And the Prime Minister and Chancellor denied any rift with Mr King and rejected suggestions that they had ignored warnings that Northern Rock was in trouble.
"The Governor and I and the Chancellor are completely at one in both the way we deal with these events and analyse what's happened," said Mr Brown.
Pressed on whether Mr King had given the Government early warning of a possible run on Northern Rock, Mr Darling said: "That's simply not true and if you heard Mervyn King yesterday, giving his evidence (to the Treasury Select Committee), he refuted that suggestion."
He said a package of reforms would be unveiled early next year.
"I will be announcing some wide-ranging reforms in January which I believe will improve the position, especially in relation to banks which might get into difficulty."
Mr Brown, who has invited his French and German counterparts to Downing Street for talks about the economic situation, defended the system he set up in 1997.
"Of course it needs amending from time to time, but it is fundamentally the right framework."
Asked whether the nationalisation of Northern Rock was likely, Mr Brown and Mr Darling said all options were on the table.
"We do not rule out anything for the future," the Prime Minister said.
Mr Brown also said he would be taking a holiday over the Christmas period, despite the current economic turmoil.
Mr Darling said he would also take a holiday, but added: "I have discovered since becoming Chancellor there doesn't appear to be anything called a day off."
The Prime Minister also dismissed demands for a U-turn over the controversial police pay deal, insisting it was vital to maintain economic stability.
He accepted the decision to defy an arbitration panel by not backdating the 2.5 per cent rise to September had been unpopular but said it was "necessary to ensure the low inflation and stability of the economy that we have".