levels for the federal funds rate at least through late 2014 ”. that follows a structure for forward guidance that the committee first began last august, when it said conditions were likely to warrant exceptionally low rates through mid 2013. then in january, it pushed back that calendar date another 18 months. the fomc has also announced that the fed intends to continue the maturity extension program, or “ operation twist ”, first launched last september and set to end in june. in this program, the fed is buying $ 400 billion of longer - term treasuries and selling an equal amount of shorter - term treasuries, in an effort to reduce long - term yields from already historically low levels. the fomc is also continuing to reinvest principal payments from its holdings of agency debt and mbs into mbs in an effort to help mortgage markets. you may know that i dissented from the fomc decisions in august and september, because it was not clear to me that further monetary policy accommodation was appropriate then. after all, inflation was higher and unemployment was lower relative to the previous year, as we have been discussing. monetary policy should be responsive to economic conditions, and since that time, unemployment has decreased, and inflation is above target. i believe monetary accommodation is still called for, but i do not believe it should be as accommodative or aggressive as it was at the height of the crisis, when unemployment was over 10 percent and inflation was just 1 percent. now that unemployment is at 8. 3 percent and falling and inflation is over 2 percent and drifting up, we should not anticipate additional accommodation. indeed, in the absence of some shock that derails the recovery, we may well need to raise rates before the end of 2014. nevertheless, monetary policy should be responsive to economic conditions. in my view, current conditions do not warrant further accommodation. yet, should economic conditions significantly deteriorate or the upside risks to inflation i have stressed fall and significant risk of deflation emerge, we should rethink our policy stance. but neither of these events seems likely to me at this juncture. i believe further accommodation at this stage of the business cycle could lead us down a very treacherous path – one that would be ever more difficult for us to navigate and one that would increase the already substantial risk of higher inflation. yet, the problem is not just inflation risk down the road. prolonged efforts to hold interest rates near zero can lead to

decline in crude oil prices. nevertheless, a decline in crude oil prices by nature is a considerable positive factor for japan ’ s economy, and its effects on overall prices eventually will dissipate. thus, i consider that the delay itself is acceptable. also, in terms of monetary policy, i believe that it is appropriate to exclude the effects of energy prices as temporary factors and grasp the underlying trend in prices. the year - on - year rate of increase in the cpi ( all items less fresh food ) for december 2015 was 0. 1 percent but that for all items less fresh food and energy – which indicates the underlying trend in prices – was 1. 3 percent. the bank projects that, in a situation where japan ’ s economy is likely to continue growing at a pace above its potential, the year - on - year rate of increase in the cpi ( all items less fresh food ) will likely rise closer to 2 percent through fiscal 2017 when the negative contribution of energy items dissipates. inflation expectations are referred to as a factor that largely affects the price outlook, but it is difficult to actually assess them. it can be said that the inflation expectations of both firms and consumers have been rising from a somewhat longer - term perspective – as suggested by the recent price - setting behavior of firms and the subsequent purchasing behavior of consumers, or by rises in base salaries for two consecutive years. in addition, i consider that two indicators – the inflation swap rates and break - even inflation ( bei ) rates for jgbs, both of which are frequently used to assess inflation expectations and are compiled based on financial market data – have not sufficiently reflected the actual inflation expectations in japan, unlike in the cases of the united states or europe, given the size and liquidity of japanese financial markets. therefore, these indicators should be regarded only as a reference. let me note here that prices are normally determined when consumers accept the prices set by firms. since spring 2015, manufacturers have been raising the wholesale prices of their standard products, due mainly to the rise in costs, and this has led to a rise in sales prices. in addition, prices of general services have been rising due to labor shortages. these factors have been pushing up the underlying trend in prices. it is the second year of such price increases, which raises difficult issues including the following : ( 1 ) whether manufacturers can raise the prices of their standard products again ; ( 2 ) whether manufacturers will implement a de facto price increase by developing new products with value