the impact of price rises has been particularly notable for goods such as food products and daily necessities, which have seen large price increases, and consumption of " nondurable goods, " including food products and daily necessities, has declined, as shown by the green line. households'defensive attitudes toward spending have been observed, such as a shift toward inexpensive products. consumer sentiment has also become cautious, as seen in the right - hand graph. regarding the outlook for private consumption, it is necessary to continue to pay close attention to the impact of price rises. meanwhile, in this year's annual spring labor - management wage negotiations, the highest level of wage growth in around three decades was achieved across a wide range of firms, and the effects of this have gradually been reflected in actual wages. various survey results indicate that this year's summer bonus payments are likely to exceed those of last year. the baseline scenario is that private consumption will remain resilient. please take a look at chart 4. risks to the outlook for japan's economy include developments in overseas economic activity and prices and in global financial and capital markets. overseas economies have grown moderately on the whole, and the baseline scenario is that they will keep growing moderately. as the left - hand graph shows, the international monetary fund ( imf ) projects that the global economy will grow at 3. 2 percent for 2024 and 3. 3 percent for 2025, which is broadly in line with past average growth rates. that said, adjustment pressure has remained in the labor and real estate markets in china, and there are also geopolitical risks such as the situation surrounding ukraine and the middle east. inflation rates in europe and the united states have followed a declining trend, albeit with fluctuations, and some central banks have started to lower their policy interest rates. it should be noted, however, that inflationary pressure has remained in these economies, and there are uncertainties over how past policy interest rate hikes by overseas central banks will affect their real economies and financial systems given the significant degree of these hikes. as shown in the upper right - hand graph, the u. s. economy has continued to grow at a relatively high rate despite the high policy interest rate of over 5 percent. as the lower right - hand graph indicates, the u. s. labor market has also remained tight, but the tightness has waned recently, broadly returning to the pre - pandemic level. meanwhile, employment - related

on inflation strictly within the twoyear horizon. and although the mpc ’ s primary focus is obviously the rate of inflation, it has other objectives too. recognising these, the “ planning horizon ” for returning inflation to target can vary according to the various trade - offs involved. after significant cost shocks, for example, it wouldn ’ t make sense to return inflation very rapidly to target, given the volatility in output, and in interest rates themselves, that can induce. second, the forecast depends not only on future interest rates but lots of other conditioning assumptions as well, any of which can shift from one quarter to the next. so even to the extent you can infer anything from the forecast about the mpc ’ s view of the yield curve, this too can only ever be a highly conditional inference. perhaps that ’ s why the two - year inflation is not actually a very good predictor of changes in interest rates ( as we shall see ). empirically, what matters more is the subsequent evolution of the economy. another difficulty is that the yield curve may not actually be giving us a pure read on the market ’ s interest - rate expectations to begin with. it ’ s long been recognised that forward yields, even on “ risk - free ” instruments like government bonds, can be affected by shifts in risk or term premia. the mpc ’ s forecasts are conditioned on the yield curve as it is, not what we believe the market ’ s true expectation to be. so, in and of itself, this doesn ’ t invalidate the sort of inferences we ’ re talking about. but it ’ s certainly a complicating factor. bis central bankers ’ speeches flexible inflation targeting let me expand on the first point with the help of some simple simulations, performed using the bank ’ s compass model of the economy. they all kick off with the same unwelcome economic conditions, presumably caused by some prior, off - stage shock to costs : inflation is 2 % points above the target, output ’ s 1 % point below potential and official interest rates are at ( what is assumed to be ) their “ neutral ” rate, which is assumed not to change. all three simulations also have inflation back at target two years later. but each involves a very different means of getting there. in the first, the policymaker – call it committee a – hikes bank rate immediately and aggressively, by 2 % points. this rapidly pushes the economy into