states because the us - dollar libor is one of the most widely used benchmarks, and canadian investors and issuers have material exposure to it. consider the sheer size of the market that references usd libor. in 2016, notional contracts priced off usd libor totalled nearly us $ 200 trillion. the lion ’ s share of that exposure — 95 per cent — was in derivatives, primarily interest rate swaps. another us $ 8 trillion in cash products was based on usd libor — everything from floating - rate notes to consumer loans. the work to develop an alternative to libor in the united states is being led by the alternative reference rate committee ( arrc ), which is composed of dealers, asset managers, issuers, exchanges, regulators and official institutions. in april, the federal reserve bank of new york began publishing the secured overnight financing rate ( sofr ), which it concluded is a reliable benchmark for new us - dollar derivatives. sofr is an overnight rate based on the treasury repo market. it covers multiple segments of this market, including tri - party, dealer - to - dealer and centrally cleared bilateral repos. based on us $ 800 billion in daily transactions, sofr adheres closely to the standards set out by iosco. to establish sofr as a widely used benchmark, an entire ecosystem of products needs to be built around it to encourage trading and generate liquidity in sofr - related products. this work has begun. futures contracts for sofr started trading in may, with all primary dealers pledging to support that market. trading has been light so far but is expected to increase as more market participants revamp their systems. some time this summer, overnight index swaps referencing sofr will begin trading, and they will be accepted for clearing through central counterparties later this year. of course, greater market adoption will require buy - side involvement — the engagement of asset managers and issuers is critical. the next step may be the identification of a term rate based on sofr. it is possible that this could be developed through the futures market. many trade groups are collaborating in this work, which goes beyond just selecting a new benchmark and developing markets that reference it. for example, fallback provisions are an important transition element. these provisions are a contingency written into financial contracts in case the current benchmark is no longer viable. fallbacks, or contingency plans, are a feature of many things we consume in everyday

3. 6 percent prior to the lehman shock. on the price front, even though many economies have registered somewhat lower growth compared with their potential, the year - on - year rate of change in consumer prices has been hovering around 2 percent, the rate targeted by central banks. the year - on - year rate of increase in the cpi in the united states, the euro area, and the united kingdom has centered around 2 percent from a long - term perspective, albeit with some fluctuations ( chart 7 ). firms ’ and households ’ medium - to long - term inflation expectations have also been stable generally around 2 percent. in this situation, we can say that inflation expectations are anchored. this means that even when the observed inflation rate is affected by economic conditions, inflation expectations do not deviate substantially from, and are thus anchored to, the central bank ’ s target inflation rate. taking into account the economic and price developments across countries, at present – in the united states and europe – the top priority is to continue to provide or to further strengthen the stimulus to the real economy. while this sounds like an orthodox challenge, from the standpoint of central banks, it presents difficulties in terms of steering their policy. as a result of fiscal actions taken in response to the economic plunge following the lehman shock, the room is limited for providing further stimulus to the economy from the fiscal side, and there are strong expectations for policy responses from the monetary policy side. however, if the inflation rate continues to exceed the inflation target due to monetary easing, there is a risk that people ’ s confidence in the price stability target will be lost. it can be said that central banks in the united states and europe have been addressing the challenge of how to stimulate the real economy from the monetary policy side while avoiding the risk of de - anchoring inflation expectations and inducing future inflation. in the united states and the united kingdom, the central banks have declared that they will continue with monetary easing until unemployment rates decline to some extent, with the condition that inflation forecasts do not deviate significantly from the price stability target. these actions reflect an attempt to strike a balance in the trade - off between inflation and unemployment. in contrast, japan faces a different type of challenge. in the united states and europe, people ’ s inflation expectations have been anchored around the central banks ’ targeted inflation rates. in japan, amid some 15 years of deflation, deflationary expectations have become entrenched among people – in other words, people ’