, not only in the short - term but at longer horizons too. 11 ( b ) inflation expectations chart 18 : projection for wage growth and inflation, assuming a starting level of slack of 2 % percentage change oya - 2 - 4 wages - february ir projections wages - more slack inflation - february ir projections inflation - more slack a complementary explanation for the wage puzzle, which goes in the same source : ons and bank calculations. direction, is that inflation expectations have shifted downwards. to the extent these weaker expectations shape firms ’ wagebargaining and price - setting behaviour, this would impart downwards persistence into wage and inflation dynamics. there is an array of inflation expectations measures covering different sectors – households, companies, financial markets – and horizons – short and longer term. all of these measures have fallen over the course of the past two years, as actual inflation has fallen, though often by differing amounts. among households, one - year - ahead inflation expectations, as reported by citigroup, have fallen by 120bp over the past year. at the five to ten year horizon, they have fallen by around 30bp ( chart 19 ). shorter - term expectations are around 1. 5 percentage points, and longerterm expectations around 1 percentage point, below their pre - crisis averages. over the same period, households ’ inflation expectations from the bank / nop survey have fallen by 90bp, 60bp and 50bp respectively at the one, two and five year horizons. chart 20 looks at the term structure of expected inflation by households from the bank / nop survey, relative to the past and the bank ’ s forecasts. 12 the term structure of expected inflation is currently lower than at any stage since the crisis. moreover, household inflation expectations are significantly below 2 % at the two - year horizon and, to a lesser extent, thereafter. that means it is unclear, at present, whether household inflation expectations are consistent with the bank hitting the inflation target. the mpc ’ s february inflation report included a small downside skew to the inflation fan chart, but this did not extend to two years. these have been adjusted to take into account the average difference between perceptions of the level of current inflation and actual inflation. bis central bankers ’ speeches chart 19 : uk household inflation expectations citigroup 1 year ahead chart 20 : term structure of uk household inflation expectations per cent citigroup 5 - 10 years ahead per cent vintage series ( 2009 - 2014 ) feb

responsibility for providing economic assistance. conclusion in concluding, let me reiterate that the prosperity now experienced by the united states, and potentially to be shared by the rest of the world, is certainly a welcome development. it is clearly the goal of the federal reserve to follow policies that will help extend this prosperity for as long as possible. however, it is also important for the financial sector and other members of the private sector here in the united states, and for market participants, banks, and regulators in other countries, to remain vigilant if this expansion is to continue here and to spread globally. we are in the midst of a period of enormous opportunity, one that can be extended and strengthened if we are realistic, remaining mindful of our obligations to act responsibly, both individually and collectively. in this context, for managers in the financial sector acting responsibly includes recognizing that not all financial institutions can successfully consolidate or profitably take advantage of every new power. for individuals, personal financial decisions - both investment and borrowing - should take into consideration the possibility that the most optimistic expectations of corporate or personal financial success might not come true. finally, nations seeking to replicate the growth experience of the recent past in the united states should recognize that the current expansion is built, in part, on an underpinning of a sound financial system, including both healthy institutions and well - functioning capital markets, as well as solid supervision and regulation. i hope that we all recognize these lessons so that our age of opportunity reaches its full potential.