This baseline scenario reflects the following assumptions about the developments of three factors that will primarily determine the inflation rate going forward. •  The aggregate supply and demand balance (output gap) is expected to follow a moderate improving trend and expand toward the latter half of the projection period.
Nominal wages are likely to see gradual upward pressure as a tightening of labor supply and demand conditions becomes evident. •  Medium- to long-term inflation expectations are likely to continue on a rising trend with continued monetary easing, partly supported by a rise in the observed inflation rate, gradually converging to around 2 percent.