on - year rate of increase in the cpi ( excluding the direct effects of the consumption tax hikes ) is likely to be at around the current level for the time being, and subsequently accelerate gradually and reach around 2 percent around the middle of the projection period ; that is, in or around fiscal 2015 ( chart 3 ). thereafter, the cpi inflation is likely to edge up as medium - to long - term inflation expectations will converge to around 2 percent and the output gap is expected to continue expanding in positive territory. in other words, after achieving inflation of around 2 percent in or around fiscal 2015, japan ’ s economy is projected to shift to a growth path that sustains such inflation in a stable manner. it is assumed that a trend in which the output gap will be positive is likely to take root in the second half of fiscal 2014 and thereafter is expected to move further into excess demand territory, thereby increasingly exerting upward pressure on prices, and that such positive price developments will help to raise medium - to long - term inflation expectations to converge to around 2 percent. meanwhile, import prices will likely be pushed down by the recent declining trend in commodity prices on the one hand, and pushed up by recent developments in foreign exchange rates on the other. with regard to medium - to long - term inflation expectations, the bank generally makes a judgment on the movements of the inflation expectations as a whole using a wide range of related indicators. this is because there is no single data set that represents inflation expectations and the indicators entail statistical problems, such as various biases, and exhibit divergent movements from each other. the bank ’ s sample indicators include the inflation expectations of households, firms, economists, and japanese government bond ( jgb ) market participants, as well as those inferred from market data such as the break - even bis central bankers ’ speeches inflation ( bei ) rate and the inflation swap rate. the bank regularly releases these data under the headline chart title “ inflation expectations ” in its monthly report of recent economic and financial developments as well as in the outlook report. among the data, the most relevant indicators for the bank are those projected more than one year ahead, which are regarded as representing medium - to long - term inflation expectations ( charts 4 – 1 and 4 – 2 ). as mentioned, the bank projects that medium - to long - term inflation expectations will converge to around 2 percent, since this will sustain inflation at around 2 percent in a stable manner. thus, the judgment

today they are being exhorted to make loans to small businesses under the mudra scheme. because there are positive social benefits to financial inclusion that are not captured by the service provider ( what economists call “ externalities ” ), such mandates are reasonable from a societal perspective. for instance, the higher familial and community status a farm worker gets from starting her own poultry farm and contributing to the family income may, on net, outweigh the costs the bank incurs on making the loan. the bank cannot monetise the status benefits, but a government can decide those benefits are worth generating and mandate them. in a similar vein, there may be network benefits from universal access – for instance, direct transfer of benefits is easier when the vast majority of beneficiaries have a bank account, and the accounts themselves will be used heavily when account to account transfers are made easier through mobile phones via the soon - to - be - introduced unified payment interface ( upi ). mandated account opening essentially creates the universal network with its associated positive network externalities. there are, however, a number of risks emanating from mandates. the first is that there is no market test of usefulness, and indeed, these may not be possible – how does one measure the value of the enhanced social status of the poultry farmer? so mandates are driven by the beliefs of the political leadership, and may persist a long time even if they are not effective. furthermore, some vested interests may benefit from specific mandates and push for their perpetuation long after they have ceased being useful. bankers themselves, seeing little profit in obeying the mandate, will try and “ achieve ” it at least cost by targeting the most accessible and least risky in the eligible category, and even mislabeling normal activity so that it fits in the eligible list. finally, some mandates fall primarily on the public sector banks. as competition reduces their profitability, their capacity to carry out mandates and still earn enough to survive diminishes. so while acknowledging the value of mandates at the rbi, we have tried to make them more effective. for example, the list of sectors eligible for priority sector treatment has been revised, with an emphasis on targeting the truly excluded. specifically, the share of adjusted net bank credit ( anbc ) that has to go to small and marginal farmers ( including share croppers ) is set at 8 percent for march 2017, and that for micro enterprises set at 7. 5 percent.