' s estimates of the rate of growth of output and the unemployment rate that are sustainable in the long run in the united states, taking into account important influences such as the trend growth rates of productivity and the labor force, improvements in worker education and skills, the efficiency of the labor market at matching workers and jobs, government policies affecting technological development or the labor market, and other factors. the longer - run projections of inflation may be interpreted, in turn, as the rate of inflation that fomc participants see as most consistent with the dual mandate given to it by the congress - - that is, the rate of inflation that promotes maximum sustainable employment while also delivering reasonable price stability. this further extension of the quarterly projections should provide the public a clearer picture of the fomc's policy strategy for promoting maximum employment and price stability over time. also, increased clarity about the fomc's views regarding longer - run inflation should help to better stabilize the public's inflation expectations, thus contributing to keeping actual inflation from rising too high or falling too low. at the time of our last monetary policy report, the federal reserve was confronted with both high inflation and rising unemployment. since that report, however, inflation pressures have receded dramatically while the rise in the unemployment rate has accelerated and financial conditions have deteriorated. in light of these developments, the federal reserve is committed to using all available tools to stimulate economic activity and to improve financial market functioning. toward that end, we have reduced the target for the federal funds rate close to zero and we have established a number of programs to increase the flow of credit to key sectors of the economy. we believe that these actions, combined with the broad range of other fiscal and financial measures being put in place, will contribute to a gradual resumption of economic growth and improvement in labor market conditions in a context of low inflation. we will continue to work closely with the congress and the administration to explore means of fulfilling our mission of promoting maximum employment and price stability.

first time in two decades. in this year ’ s negotiations, base pay was raised for the second year in a row, and at many firms the increases were larger than last year ( chart 4 ). base pay increases were achieved at more firms than last year and became widespread across industries and firms of different size. as for price setting, an increasing number of firms seem to be able to pass increased costs, including the rise in input prices and personnel expenses, on to sales prices. in addition, it seems that households have started to accept such sales price increases on the back of an increase or prospects for an increase in their wages. there is a variety of evidence that firms ’ price - hiking behavior has become widespread and sustained since the start of this fiscal year. for example, looking at the items that make up the cpi ( all items less fresh food ), the share of items for which prices rose minus the share of items for which prices fell has risen markedly since the beginning of this fiscal year and recently has reached the highest level since 2000 ( chart 7 ). in addition, price indices compiled by the university of tokyo and hitotsubashi university by aggregating the prices of food and daily necessities also show clear price increases since april this year on a year - on - year basis, and the increases seem to be accelerating. many firms attempted to raise their sales prices at the beginning of last fiscal year, but this coincided with the consumption tax hike, which was followed by a decline in demand. firms therefore were forced to quickly take price rises back. the price changes this year present a clear contrast with those last year. the simultaneous occurrence of base pay increases and price hikes should be regarded as evidence that a positive feedback loop between the increases in employment and wages and the moderate rise in inflation is now in place. given these developments, although annual cpi inflation is likely to be about 0 percent for the time being, with the underlying trend in inflation steadily rising and the negative contribution of the crude oil price decline dissipating, annual cpi inflation will accelerate toward the price stability target of 2 percent. the timing of reaching around 2 percent is projected to be around the first half of fiscal 2016, but it should be noted that the timing could be either earlier or later than the projection, depending on developments in crude oil prices. iii. monetary policy going forward the bank has been pursuing qqe, aiming to achieve a state in which the 2 percent inflation rate is maintained in