, roughly back to where it was before the recession. and, over the past seven years, the economy has added about 15 – 1 / 2 million net new jobs. although inflation has been running below our 2 percent objective for quite some time, we have seen it start inching back toward 2 percent last year as the job market continued to improve and as the effects of a big drop in oil prices faded. last month, at our most recent meeting, we took account of the considerable progress the economy has made by modestly increasing our short - term interest rate target by 1 / 4 percentage point to a range of 1 / 2 to 3 / 4 percent. it was the second such step — the first came a year earlier — and reflects our confidence the economy will continue to improve. now, many of you would love to know exactly when the next rate increase is coming and how high rates will rise. the simple truth is, i can ’ t tell you because it will depend on how the economy actually evolves over coming months. the economy is vast and vastly complex, and its path can take surprising twists and turns. what i can tell you is what we expect — along with a very large caveat that our interest rate expectations will change as our outlook for the economy changes. that said, as of last month, i and most of my colleagues — the other members of the fed board in washington and the presidents of the 12 regional federal reserve banks — were expecting to increase our federal funds rate target a few times a year until, by the end of 2019, it is close to our estimate of its longer - run neutral rate of 3 percent. the term “ neutral rate ” requires some explaining. it is the rate that, once the economy has reached our objectives, will keep the economy on an even keel. it is neither pressing on the gas pedal to make the car go faster nor easing off so much that the car slows down. right now our foot is still pressing on the gas pedal, though, as i noted, we have eased back a bit. our foot remains on the pedal in part because we want to make sure the economic expansion remains strong enough to withstand an unexpected shock, given that we don ’ t have much room to cut interest rates. in addition, inflation is still running below our 2 percent objective, and, by some measures, there may still be some room for progress in the job market. for instance, wage growth has only recently begun to pick up and

of technological advances, are not a good fit for the jobs that are available. or suitable jobs may be available but are not close to where they and their families live. these are factors over which monetary policy has little influence. other measures — such as job training and other workforce development programs — are better suited to address structural unemployment. after taking account of both frictional and structural unemployment, what unemployment rate is roughly equivalent to the maximum level of employment that can be sustained in the longer run? the rate can change over time as the economy evolves, but, for now, many economists, including my colleagues at the fed and me, judge that it is around 4 - 3 / 4 percent. it ’ s important to try to estimate the unemployment rate that is equivalent to maximum employment because persistently operating below it pushes inflation higher, which brings me to our price stability mandate. does price stability mean having no inflation whatsoever? again, the answer is no. by “ price stability, ” we mean a level of inflation that is low and stable enough that it doesn ’ t need to figure prominently into people ’ s and businesses ’ economic decisions. based on research and decades of experience, we define that level as 2 percent a year — an inflation objective similar to that adopted by most other major central banks. 1 individual prices, of course, move up and down by more than 2 percent all the time. such movements are essential to a well - functioning economy. they allow supply and demand to adjust for various goods and services. by “ inflation, ” we mean price changes as a whole for all of the various goods and services that households consume. no one likes high inflation, and it is easy to understand why. although wages and prices tend to move in tandem over long periods, inflation erodes household purchasing power if it is not matched with similar increases in wages, and it eats away the value of households ’ savings. so, then, why don ’ t we and other central banks aim for zero inflation? there are several technical reasons, but a more fundamental reason is to create a buffer against the opposite of inflation — that is, deflation. deflation is a general and persistent decline in the level of prices, a phenomenon americans last experienced during the great depression of the 1930s and one that japan has confronted for most of the past two decades. deflation can feed on itself, leading to economic stagnation or worse. it puts pressure on employers to either cut wages or cut jobs. and it