on 5 may 2011 confirms continued upward pressure on overall inflation, mainly owing to energy and commodity prices. a cross - check of the outcome of the economic analysis with that of the monetary analysis indicates that the underlying pace of monetary expansion is gradually recovering. monetary liquidity remains ample, with the potential to accommodate price pressures in the euro area. furthermore, the most recent data confirm the positive underlying momentum of economic activity in the euro area, while uncertainty remains elevated. overall, our monetary policy stance remains accommodative, lending support to economic activity. on balance, risks to the outlook for price stability are on the upside. accordingly, strong vigilance is warranted. on the basis of our assessment, we will act in a firm and timely manner. we will do all that is needed to prevent recent price developments giving rise to broad - based inflationary pressures. we remain strongly determined to secure a firm anchoring of inflation expectations in the euro area in line with our aim of maintaining inflation rates below, but close to, 2 % over the medium term. this is a prerequisite for monetary policy to make an ongoing contribution towards supporting growth and job creation in the euro area. turning to fiscal policies, all parties involved in the preparation of the 2012 national budgets must ensure that they are fully in line with the requirement to support confidence in fiscal policies. a comparison between the latest economic forecasts by the european commission and the fiscal plans embodied in the stability programmes points to the need for many countries to underpin their budget targets with concrete consolidation measures in order to correct their excessive deficits by the commonly agreed deadlines. the implementation of credible fiscal adjustment strategies is crucial in view of ongoing financial market pressures. at the same time, the implementation of ambitious and far - reaching structural reforms is urgently required in the euro area to strengthen substantially its competitiveness, flexibility and longer - term growth potential. in particular, countries which have high fiscal and external deficits or which are suffering from a loss of competitiveness should rapidly carry out comprehensive economic reforms. in the case of product markets, policies that enhance competition and innovation should be vigorously pursued to facilitate productivity growth. regarding the labour market, the priority must be to enhance wage flexibility and incentives to work, and to remove labour market rigidities. we are now at your disposal for questions. bis central bankers ’ speeches

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