pressures and with longer - term inflation expectations stable, i anticipate that the subdued trend in inflation that we have seen for the past two years will continue. summary and policy outlook combining the various factors likely to influence the path of economic activity this year, including importantly the outlook for financial markets, i expect that the economic recovery will continue at a moderate pace. as the year goes on, i anticipate that we will see more signs that the improvements in financial markets, credit conditions, and business sales are reinforcing each other, leading to greater confidence and improving the prospects for 2011. even as economic activity strengthens, however, levels of resource utilization are likely to remain below historical norms for some time. as a result, cost pressures should be contained, inflation expectations should continue to be stable, and inflation is likely to remain subdued. in the current environment, the fomc continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. such policy accommodation is warranted to provide support for a return over time to more desirable levels of real activity and unemployment in the context of price stability. in addition, the federal reserve is committed to continue working with banks and bank holding companies to facilitate the flow of credit to consumers and businesses. of course, if economic conditions and the economic outlook were to change significantly, the outlook for policy would need to be adjusted as well. we have a wide range of tools for removing monetary policy accommodation when that becomes appropriate. the committee will evaluate the appropriate stance of policy in light of the evolving economic outlook and conditions in financial markets, with the aim of fostering maximum employment and price stability.

construction and land development loans. in addition, the cmbs market has only just recently seen its first activity in a year and a half. in this environment, a turnaround in cre is likely to lag the improvement in overall economic activity. however, compared with the situation in the early 1990s, the problems in this sector now appear to be due largely to poor business fundamentals rather than widespread overbuilding, suggesting that the performance of the cre sector will gradually begin to improve as the economy continues to strengthen. an important element of a sustained economic recovery will be an improvement in labor market conditions. employment gains typically lag the recovery in sales and production in the early months of an economic upturn. in many cycles, the lag occurs because businesses need to restore productivity and are reluctant to hire until they are more confident that any pickup in sales will be maintained. in this cycle, the reductions in jobs and hours of work have been so deep, and the pressure to cut costs has been so strong, that businesses in the aggregate have already realized solid gains in productivity. as a result, i expect that businesses will begin to add jobs this year, but i anticipate that they will do so cautiously in order to hang on to their cost savings and efficiency gains. even as the unemployment rate begins to decline later this year, it likely will remain high by historical standards. based on the experience of the last two economic recoveries, net gains of roughly 100, 000 payroll jobs each month are needed to reduce the jobless rate by 0. 1 percentage point. currently, at 10 percent, the unemployment rate is almost 4 percentage points higher than its peak after the 2001 recession, and a sustained recovery will be required to reduce it significantly. similarly, other measures of resource utilization are likely to show considerable, albeit diminishing, margins of slack for some time. in that environment, product markets will be highly competitive, businesses will have little pricing power, and the incentives to control costs will remain strong. both overall consumer price inflation and the core rate, which excludes food and energy costs, look to have been about 1 – 1 / 2 percent in 2009 after having been closer to 2 percent in 2008. to be sure, recent readings on overall consumer price inflation have been boosted by another run - up in energy prices. but those increases marked a reversal of some of the large declines that occurred in late 2008 and early 2009. more fundamentally, with substantial resource slack likely continuing to restrain cost