only a gradual improvement in the economy and employment. to put it plainly, these housing - related headwinds are part of why i do not expect growth greater than 4 percent this year. and while 4 percent is not terrible, at that rate it will still take a very long time to get back to full employment. the second key question is, how concerned should we all be about a flare - up in inflation – and aren ’ t the measures the fed has taken inflationary? many have expressed concern that federal reserve policy actions that expanded our balance sheet dramatically will cause inflation. i firmly believe that in the short run inflation is likely to remain quite low – and that in the longer term we have the tools, and the steadfast commitment, to address inflationary pressures. indeed, while monetary policy works with lags, i would note that it has been more than two years since the fed ’ s balance sheet expanded dramatically. since that time, core inflation of course, the views i express today are my own, not necessarily those of my colleagues on the board of governors or the federal open market committee ( the fomc ). bis central bankers ’ speeches has fallen and core inflation measures using the cpi or pce indexes are at something like 50 year lows. today i will briefly address the role of the low inflation rate for the economy and policymaking. in doing so, i will discuss why inflation concerns have not materialized to date, and why i expect core inflation to remain below 2 percent over the next several years. question 1 : housing and the economic recovery the economic recovery officially began in the third quarter of 2009, according to the organization responsible for dating our recessions – the national bureau of economic research ( nber ). despite being a year and a half into the official recovery, the recovery period has been so tepid that there has been very little improvement in the percentage of the population employed ( see figure 1 ). the percent of the population employed in december was 58. 3, close to the low of this cycle and below the 59. 3 percent employed in july of 2009, when the recovery officially started. for context, the number was around 63 percent when the recession began. the recent stability of the employment - to - population ratio reflects the poor labor market performance of the current recovery. we are simply not generating enough jobs to reduce the number of unemployed persons. nor are we, by the way, providing job opportunities for the so - called “ discouraged workers

low relative to the potential growth rate, and is also low compared with that in other major economies. credit spreads, which are added to benchmark interest rates when firms borrow funds, have not been increasing either, unlike in europe and the united states. moreover, financial institutions'lending attitudes and firms'liquidity positions have continued to be favorable on the whole, although the situation for small firms has been relatively severe. turning to prices, the year - on - year rate of increase in the cpi excluding fresh food has been rising since around the end of 2007 due mainly to increased prices of petroleum products and food products, and was 1. 2 percent in march 2008. the rate was the highest increase in the 15 years since august 1993, if we disregard fiscal 1997, when retail prices rose due to the rise in the consumption tax. a major factor that affects inflation is the balance between aggregate supply and demand in the economy, or the level of resource utilization in terms of the labor and production capacity. on this point, the level of resource utilization is currently close to its historical average judging from firms'perception of employment conditions and production capacity as seen in the tankan, as well as from the unemployment rate and the capacity utilization rate. assuming that the economy grows at around the potential growth rate as i have described, aggregate supply and demand in the economy are likely to remain more or less balanced. therefore, the supply - demand balance in the domestic economy is unlikely to significantly affect cpi inflation either upward or downward. however, a process is likely to take place in which the rise in energy and materials prices will gradually be passed on to downstream prices, and thus cpi inflation is projected to be around 1 percent for both fiscal 2008 and fiscal 2009. cpi inflation of around 1 percent is consistent with the bank's " understanding of medium to long - term price stability " and it is where most policy board members'median figures of ranges that they understand as being consistent with price stability over the medium to long term are located. therefore, future developments in the cpi may also be assessed as being within the range of " price stability. " in this regard, the price situation in japan is favorable as compared with major overseas economies, where the inflation rate has been very close to or above the upper limit of the range regarded as consistent with price stability. however, inflation perceived by households in japan may in fact be higher than the rate of change in the cpi, as suggested by many survey results – for example, the bank