forecasting inflation and in assessing the appropriate course of monetary policy. it is important that, as the forces retraining inflation dissipate or reverse, that this upward pressure on inflation is not reinforced by inflationary pressures generated from very high utilization rates. the key to sustaining the best possible performance going forward is making the transition from the current state where performance is exceptional but unsustainable to the best possible sustainable state. that will require a slowdown in growth, preferably in the near term. asia may accomplish this, in which case it would substitute for monetary tightening that in my judgment would otherwise be required. [UNK]

increased at an annual rate of 3 percent this year, significantly faster than real gdp. household spending growth has been particularly solid in 2015, with purchases of new motor vehicles especially strong. job growth has bolstered household income, and lower energy prices have left consumers with more to spend on other goods and services. increases in home values and stock market prices in recent years, along with reductions in debt, have pushed up the net worth of households, which also supports consumer spending. finally, interest rates for borrowers remain low, due in part to the fomc ’ s accommodative monetary policy, and these low rates appear to have been especially relevant for consumers considering the purchase of durable goods. other components of pdfp, including residential and business investment, have also advanced this year. indeed, gains in real residential investment spending have been faster so far this year than last year, although the level of new residential construction still remains fairly low. and outside of the drilling and mining sector, where lower oil prices have led to substantial cuts in outlays for new structures, business investment spending has posted moderate gains. turning to inflation, it continues to run below the fomc ’ s longer - run objective of 2 percent. overall consumer price inflation – as measured by the change in the price index for personal consumption expenditures – was only 1 / 4 percent over the 12 months ending in october. bis central bankers ’ speeches however, this number largely reflects the sharp fall in crude oil prices since the summer of 2014. because food and energy prices are volatile, it is often helpful to look at inflation excluding those two categories – known as core inflation – which is typically a better indicator of future overall inflation than recent readings of headline inflation. but core inflation – which ran at 1 - 1 / 4 percent over the 12 months ending in october – is also well below our 2 percent objective, partly reflecting the appreciation of the u. s. dollar, which has pushed down the prices of imported goods, placing temporary downward pressure on inflation. even after taking account of this effect, however, inflation has been running somewhat below our objective. let me now turn to where i see the economy is likely headed over the next several years. to summarize, i anticipate continued economic growth at a moderate pace that will be sufficient to generate additional increases in employment and a rise in inflation to our 2 percent objective. although the economic outlook, as always, is uncertain, i currently see the risks to the