empirical relationship. unfortunately, in this episode, we don't need a precise estimate of slack to be highly confident that the level of slack in the labor market is at or above the record of the post - world war ii period. although the headline unemployment rate of 9. 8 percent is about one percentage point below its level at the end of the 1981 - 82 recession, other, more indicative measures paint a bleaker picture. for example, the prime age male unemployment rate is at a record high, by a significant margin. the labor market data released last friday showed the september value at 10. 4 percent, an increase of 6. 5 percentage points from the start of the recession. in contrast, in the 1981 - 82 recession the prime age male unemployment rate peaked at 9. 3 percent, rising by 4. 2 percentage points from the start of that recession. over the post - world war ii period as a whole, it was only in the wake of the 1981 - 82 and 1990 - 91 recessions that the prime age male unemployment rate remained above 6 percent for more than just a few months. in addition, during all post - war expansions, the prime age male unemployment rate has fallen below 5 percent, even during the short expansion of 1980 - 81. currently, even under very optimistic forecasts for the economy, it appears very unlikely that the prime age male unemployment rate will dip below 6 percent before 2011. alongside the current unusually high degree of labor market slack, we have a situation in which core inflation levels are low by historical standards. continuing the comparison with the recession of 1981 - 82, it is worth noting that the core inflation rate today is almost 5 percentage points lower than it was toward the end of that episode. in addition, historical experience shows that the slack generated during a recession typically pushes core inflation lower in the early stages of recovery. so far, this cycle looks little different. as the degree of slack in the economy has climbed over the past year, measures of core inflation, particularly of core services inflation, have moderated. the tendency for service price movements to be persistent, coupled with the current unusually large amount of slack in the economy, suggests that the core inflation rate is more likely to fall than it is to rise over the next 12 to 18 months. in summary, i believe the current balance of risks around the inflation outlook lie to the downside due to the very low level of resource utilization and the fact that long - run inflation expectations remain stable.

the accelerating integration of the world economy. although there is concern that the run - up in oil prices may serve as a factor causing price instability, oil has much less effect on inflation now than in the past. this is mainly due to declining oil - dependency in line with improved energy efficiency, to the stabilization of inflation expectations, and so on. this emergence of global low inflation is of course a welcome phenomenon for central banks, for whom price stability is the top priority. at the same time, however, it imposes upon them a new set of tasks. above all, if monetary policy is conducted solely with an eye focused on price stability, factors representing threats to the stability of the whole economy could be overlooked. from early 2001, thanks to an environment of continued price stability, central banks around the world were able to combat economic slowdowns through substantial reductions of their policy rates. the continuance of low interest rate stances over a significant length of time, however, led to overabundant supplies of liquidity with accompanying side effects including a sharp rise in asset prices. as we saw in the case of the japanese asset bubble in the late 1980s, low inflation does not always guarantee financial and macroeconomic stability. how best to deal with such economic imbalances is a common problem that many central banks nowadays face. particularly for those countries that have selected inflation targeting regimes, this challenge is even more serious. in the case of korea, during the protracted period of low interest rates, real estate prices rose sharply with the large increase in household sector borrowings from financial institutions. this now imposes a burden on the bank of korea in its conduct of monetary policy. another challenge confronting central banks in the current era of low inflation is the possibility of their policy response ability becoming blunted. if nominal interest rates are low, in line with a stabilization of inflation expectations, there is little room for central banks to act against a business recession. in particular, when nominal interest rates fall close to the zero bound due to deflation and other factors, there is likelihood of a loss of monetary policy effectiveness. besides this, the response of the real economy to interest rates may change, and the sensitivity to inflationary pressures may lessen in an environment in which prices have remained low and stable over an extended period of time. we need to keep a careful eye on these phenomena. closing remarks ladies and gentlemen, i look forward to a thorough and constructive debate on the various challenges facing central banks.