. 0 - 0. 5 percent. the rate of increase for all items less fresh food and energy had remained on a decelerating trend, following the peak of 1. 2 percent in winter 2015 ; recently, the rate of change has been at around 0 percent. with regard to the outlook, the year - on - year rate of change in the cpi for all items less fresh food is likely to continue on an uptrend mainly on the back of the improvement in the output gap and the rise in medium - to long - term inflation expectations. the rate will likely reach around 2 percent in around fiscal 2019. specifically, the medians of the policy board members'forecasts of the year - on - year rate of change in the cpi for all items less fresh food presented in the july 2017 outlook report are 1. 1 percent for fiscal 2017, 1. 5 percent for fiscal 2018, and, excluding the direct effects of the scheduled consumption tax hike, 1. 8 percent for fiscal 2019. 3 it is assumed that the consumption tax will be raised to 10 percent in october 2019 and that a reduced tax rate will be applied to food and beverages - - excluding alcohol and dining - out - - and newspapers. the consumption tax hike scheduled to take place in october 2019 - - to 10 percent - - and the reduced tax rate to be applied to food and beverages - - excluding alcohol and dining - out - - and newspapers are incorporated in the forecasts, but individual policy board members make their forecasts of the cpi based on figures excluding the direct effects of the consumption tax hike. the forecasts for the cpi for fiscal 2019 that incorporate the direct effects of the consumption tax hike are constructed as follows. first, the contribution to prices from the tax hike is mechanically computed on the assumption that the tax increase will be fully passed on for taxable items. the cpi will be pushed up by 0. 5 percentage point. second, this figure is added to the forecasts made by the policy board members. ii. keys to assessing the outlook for economic activity and prices in what follows, i will discuss several points that i think deserve particular attention in terms of realizing the outlook that i mentioned earlier. a. employment and income situation first, i will talk about developments in the employment and income situation. supply - demand conditions in the labor market have continued to tighten steadily and employee income has increased moderately. the rate of increase in the number of employees has remained at around 1 percent. against this backdrop,

is noteworthy that fiscal dominance has been one of the sore points of monetary management in nigeria, as it has tended to undermine the effectiveness of monetary policy. for most of the 1990s, for instance, the major source of general macroeconomic instability was the rising fiscal deficits of the federal government, financed mainly by the central bank. in recent times, the banking system has been characterized by the problem of excess liquidity arising from the expansionary fiscal operations of the three tiers of government, and the rapid monetisation of crude oil receipts. the large injections of liquidity into the system induced rapid monetary expansion that was substantially out of line with prescribed targets. a major problem of fiscal adjustment in recent times is the difficulty of lowering the largest components of recurrent expenditure such as wages and salaries, while attempting to raise the level of capital formation. a keen observer will notice that over the past decade, recurrent expenditure has been dominant in total federal government expenditure. it was 67. 4 per cent in 2002, compared with 56. 9 per cent and 65. 9 per cent in 2001 and 2000, respectively. to generate growth, a sizeable proportion of government expenditure should be allocated to capital and socio - economic sectors. beyond the issue of allocation, the quality of the expenditure remains critical in ensuring efficiency and optimal utilization of resources. in this regard, the federal government has instituted the due process compliance principle, which is being implemented. i wish to add that, to be able to measure the effects of policy, the availability of timely and reliable statistics on government revenue and expenditure cannot be over - emphasized. this is also consistent with the principles of transparency and accountability. there is a need for increased information - sharing on a regular basis, as information assymetry undermines policy design and analysis. it is noteworthy that this dispensation has witnessed the return of the public accounts committee of the national assembly and the oversight function of the auditor - general of the federation. these are welcome developments that should be sustained. before i conclude, permit me to highlight some of the practical ways of addressing the problem of fiscal dominance in order to enhance the effectiveness of monetary policy. first is ensuring how the overall budget deficit will be reduced and how it will be financed in a non - inflationary way. in this regard, current effort by the federal government to access the capital market and restructure the outstanding debt stock is a welcome development. secondly, the debt management office ( dmo ) should be encouraged to assume