from nearly 200 small business owners from around the state. i ’ d like to personally thank those who participated in the survey. the remainder of my remarks will focus on recent developments in the national and local economy. as always, what i have to say today reflects my own views and not necessarily those of the federal open market committee ( fomc ) or the federal reserve system. u. s. economic outlook despite the swings we have seen in financial markets over the past few months and the recent divergences across different economic and financial market indicators, recent developments have not led me to make a fundamental change in my outlook for the u. s. economy. i continue to expect that the economy will expand over the course of this year at a pace slightly above its long - term trend – sufficient to push the unemployment rate down a bit further and to more fully utilize the nation ’ s labor resources. on inflation, although recent data have been somewhat firmer, it still appears that inflation for this year will fall short of our bis central bankers ’ speeches 2 percent objective for the personal consumption expenditure ( pce ) deflator. however, i anticipate an eventual return to our objective as the transitory factors that have held down inflation dissipate over time. in assessing the current state of the u. s. economy, recent news has generated divergent signals. several sectors have been showing signs of softness. real consumer spending growth appears to have moderated somewhat from the relatively robust pace of the second half of 2015. both new and existing home sales have flattened since the middle of last year. finally, indicators of real business investment spending point to continued softness. in contrast, manufacturing production – which had been a particular weak spot of the u. s. economy in 2015 – rose in the first two months of this year. recent survey data, including our own empire state manufacturing survey, indicate further improvement in conditions for the manufacturing sector in march. through it all, the u. s. labor market has remained healthy. payroll employment increased an average of about 229, 000 per month over the course of 2015, and the gains in the first quarter of this year were nearly as high. even though the unemployment rate ticked up in march to 5 percent, the amount of slack in the labor market still appears to be diminishing. both the share of the population that is employed and the labor force participation rate have risen a bit over the past several months, with the employment - to - population

outlook, although public investment is expected to increase, distinct narrowing in the output gap is hardly expected toward the first half of 1999, as private demand is likely to remain sluggish. furthermore, the decline in wages and the appreciation of the yen since autumn 1998 are likely to continue exerting downward pressure on prices. hence, prices are expected to remain on a downtrend. this report was written based on data and information available when the bank of japan monetary policy meeting was held on february 12, 1999. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on february 12, as the basis of monetary policy decisions. in the financial markets, the japan premium and euro - yen interest rates ( both on three - month contracts ) remain stable despite the approach of the fiscal year - end. this reflects the abatement of the market ’ s anxiety about liquidity and credit risks of japanese banks against the background of the bank of japan ’ s maintenance of a decisive stance on easy monetary policy as well as the formulation of the framework to restore the stability of japan ’ s financial system. yields on japanese government bonds have risen again reflecting the market ’ s concern over the prospective expansion of fiscal deficits. in the foreign exchange market, the trend has been toward a higher yen. stock prices continue to be weak. considering that these developments can be a hindrance to an economic recovery, their ensuing developments require close attention. with regard to corporate finance, credit demand for economic activities remains weak, as a result of the significant decrease in business fixed investment. firms ’ moves to increase their on - hand liquidity in the face of difficult fund - raising conditions are gradually settling down. although private banks have basically retained their cautious lending stance, they continue to actively utilize the credit guarantee system. as a result, the previously tightened credit conditions are easing somewhat. nevertheless, private banks and capital market participants are still cautious of corporate credit risk, and thus firms with relatively low credit ratings remain under severe fund - raising conditions. the situation continues to warrant careful monitoring, particularly with regard to how corporate finance develops toward the end of the fiscal year. * * *