is defined by the achievement of positive inflation rates. market participants, who once appeared to be skeptical of our scenario of registering a 0. 3 percent rise in the core cpi in fiscal 2006, now seem to anticipate the likely end of the current policy regime within one year, as observed in euroyen futures market interest rates. this has led to a pickup in interest rates over a wide range of maturities. in this sense the market informs us when the exit is coming. president of the san francisco federal reserve janet yellen once asked me why deflation has subsided despite the existence of the output gap. my answer was, " it is because of the speed limit effect. " the narrowing output gap was brought about by the lengthy and sustained recovery phase in and after 2002. it may be noteworthy that the effect of the speed limit ( narrowing the output gap ) dominated the effect of the level of the output gap on the deceleration of deflation. 5 now we have reached the stage where it can be said that a long time is not needed to satisfy the conditions to end the quantitative easing policy. dynamic price stability target policy to the extent that the combination of the provision of the price stability anchor with the monetary easing policy based on our clear commitment has succeeded in bringing japan's economy to a virtually zero inflation rate, compared with deflation of the core cpi of about 1 percent in 2001, it seems reasonable to maintain the key elements underlying the quantitative easing policy framework at succeeding stages. about two years ago, i described the step - by - step approach to attain ultimate price stability as a " dynamic price stability target policy " for extricating japan from deflation, in contrast to the " timeless perspective " price level target policy. i identified the three phases of the dynamic adjustment process moving out from the deflationary equilibrium to the normal equilibrium, thereby avoiding the over - and undershooting of the inflation rate and the longterm interest rate, notably during the transition period. recently, former federal reserve governor laurence meyer ( 2005 ) has presented a threestep strategy for the future of japan's monetary policy. he identifies three phases : namely, the quantitative easing policy, the zero interest rate policy, and the interest rate policy. in between, there are two transitional phases : one is dismantling the bank reserve target to the required reserve level ( about 6 trillion yen ), or the shrinkage of zero interest rates to the uncollateralized overnight call rate.

consolidation will continue. the government has shown its commitment to this process by continuing to adjust expenditure where the revenues fall below budget. additionally, the government has demonstrated its commitment to fiscal transformation with the commencement of the phased implementation of the central treasury management system, which will result in more efficient management of public sector finances. the process to divest the government of public bodies that are a drag on the budget has achieved major milestones and is continuing. with these developments, there is going to be a continuing decline in the fiscal deficit and the debt ratios. lower demand for financing from the domestic market by the government will continue to result in more and more resources being available for private sector credit. repeated success in meeting the quantitative targets under the imf - sba has led to increasing confidence about the prospects for the economy. we saw this in the strong preference for jamaica dollar assets during the fiscal year and the steady appreciation in the exchange rate. the bank ended 2010 with strong net international reserves ( “ nir ” ) of bis central bankers ’ speeches us $ 2. 17 billion, an increase of us $ 442. 1 million for the year. gross international reserves, at us $ 2. 98 billion, represented 23. 7 weeks of projected goods and services imports. in the context of the relatively stable market conditions during the year, the bank lowered the interest rate on its 30 - day certificate of deposit by 375 basis points to 6. 75 per cent by endfebruary 2011. in addition, the bank increased the pool of loanable funds in the system by reducing the cash reserve requirement for both jamaica dollar and foreign currency deposits. market - determined interest rates also trended down during the year at a faster pace than the central bank ’ s policy rate. despite emerging challenges from rising international commodity prices, headline inflation continued its progress towards the achievement of the target for the fiscal year of 7. 5 to 9. 5 per cent. statin released its inflation report for february ten days ago although this may come as a surprise to you as the news media appear to have concluded that the results in the report are not sufficiently newsworthy to be reported in a timely manner. interestingly, i read a statement in one of today ’ s newspapers that food prices rose by 25 per cent last year in an environment where the minimum wage is j $ 4, 500 per week. well, not exactly. in the same inflation report for february that was released by statin ten days ago, prices in the food category