picking up, with most measures now running around 3 percent on an annual basis. and, for the past couple of years, wage gains have been notably faster for lower - income workers. 2aggregate wage gains are broadly in line with productivity growth and our 2 percent inflation objective, and they are consistent with a labor market that is operating in the vicinity of full employment. they are not, at present, a source of upward, cost - push pressure on price inflation. with regard to labor supply, we have had a pickup in labor force participation among prime - age workers ( those 25 to 54 years old ) that is, at least for now, boosting the supply side of the economy. the participation rate of prime - age workers has risen about 1 - 1 / 2 percentage points over the past few years. and participation in the job market may still have some further room to rise, as the prime - age participation rate is still a couple of percentage points below the levels that prevailed in the late 1990s, when the labor market was last this strong. price stability, of course, is the other leg of our dual mandate, and pce ( personal consumption expenditures ) inflation over the past 12 months has been running close to our 2 percent objective. that said, and notwithstanding strong economic growth and a low unemployment rate, 1 / 5 bis central bankers'speeches inflation has surprised to the downside recently, and it is not yet clear that inflation has moved back to 2 percent on a sustainable basis. because expectations of future inflation are such an important determinant of actual inflation, central banks are as much in the business of anchoring inflation expectations as they are of managing actual inflation. longer - run inflation expectations, based on straight readings of inflation compensation from tips ( treasury inflation - protected securities ), have drifted downward, although, when adjusted for term premiums and liquidity, they remain near 2 percent. the university of michigan surveys of consumers'measure of expected inflation over the next 5 to 10 years has been broadly stable but has edged down over the past few years and is now at the very lower end of the range that has prevailed historically. inflation expectations of professional forecasters have remained stable and consistent with our 2 percent objective. at each future fomc meeting, as i consider what, if any, adjustment to our policy stance is warranted to achieve and sustain our dual - mandate objectives, i will closely monitor the incoming data on inflation expectations as well as actual inflation, among the

broad range of real and financial indicators that i consult. to me, it is important that any future policy decisions we may consider in 2019 be consistent with both pillars of our dual mandate. i will also be monitoring closely the incoming data on labor supply and productivity. 3 not only has aggregate demand growth been robust, but so, too, has been the growth in realized aggregate supply. over the first three quarters of 2018, hours worked in the nonfarm business sector were up 2. 0 percent ( at an annual rate ), and productivity was up 1. 8 percent. realized productivity growth over the past eight quarters has averaged 1. 3 percent, which is up from the 0. 7 percent average recorded between 2011 and 2016. strong growth supported by supply - side gains in hours worked and productivity is not inflationary, as the experience of 2018 confirms. with labor supply and productivity growth in 2018 having surprised on the upside, some mean reversion in 2019 is not unreasonable to forecast. but right now, that is just a forecast, and if the positive developments on the supply side of the economy continue in 2019, they would need to be factored into the inflation outlook and thus the appropriate settings for monetary policy. as i have indicated previously, i believe we may have seen the bottom on the productivity slowdown, but how much of the recent welcome uptick in productivity growth can be sustained or extended is hard to judge at this point. it will depend in part on how much business investment spending adds to the stock of capital in the economy. we saw a welcome pickup in investment in the first half of last year, but growth of capital spending slowed notably in the third quarter and the manufacturing indexes from the institute for supply management have softened, though other data are consistent with a rebound in business spending in the fourth quarter. if a pickup in the growth of investment spending was realized and sustained, it would be expected to contribute to future productivity growth. the december decision and the outlook for monetary policy in 2019 with a robust labor market and inflation running close to our 2 percent inflation objective, the committee decided at its december meeting to raise the target range for the federal funds rate to 2 - 1 / 4 to 2 - 1 / 2 percent. 4 that said, growth and growth prospects in other economies around the world have moderated somewhat in recent months, and overall financial conditions have tightened materially. these recent developments in the global economy and financial markets represent crosswinds to the u. s.