>> we won't get more analysis from the three of you in a few minutes. let's go now to peter cook live in washington with that that decision and statement. -- fed decision and statement. >> the fed is changing its forward guidance language somewhat. they're insisting the fed be patient in deciding when to raise interest rates but they are saying that is consistent with their previous language. they can wait a considerable time before raising interest rates. there is a sum which on inflation and the economy. let me read directly from the statement. based on its current assessment, they are normalizing the stance monetary policy. consistent with its previous statement that it will likely be appropriate -- for a

considerable time following the end of its asset purchase program in october. projected inflation continues to run below its goal. they have left considerable time in here, but they had used it to condition there their - which. language. it were a language and. the committee expects inflation to rise gradually to 2%. the committee continues to monitor inflation developments closely. let me read you the dissent. there were three dissents here. three of these folks will not be

voters this year. while the committee should be patiently waiting to -- theze monetary policy date when they will likely be affected -- a different dissent believes the committee's decision in the context following market-based measures of longer-term inflation expectations created undo downside risk. charles believe the statement should not stress the importance. the passage of time is the key element. clearly some criticism of the language in here. this is how the fed is moving forward. let me share the projections. projectionsed the

for rates and the economy. the explicit changes here with regard to where they see rates. or 17 fed policymakers see the increase in 2015. the pace of that has changed. the median forecast shows the fed funds rate at the end of 2015 would be 1.125%. the 1.375% wethan saw previously in september. by the end of 2016, the median the end of 2017, the fed funds rate will see 3.65%. rising as high as 3%, growing as fast as 3%. gdp for 2015, 3%. unemployment next year as low as 5.2%. inflation they see as low as 1%

next year. that is a big drop. they see inflation hitting their 2% target as soon as 2016. a lot to digest here in these projections as well as new forward guidance from the fed. seems like they try to satisfy everyone to give than a bit more flexible. >> peter cook, a lot to digest on this bed today. day.is sai we have had some wall street on reaction on wall street. >> they are satisfying traders throughout the day. as missed the announcement had come s&p 500 did skyrocket. -- 23 now up close to points upwards.

pictures. you the we did see a deepening of the yield curve. -- a deepening of the yield steepening of the yield curve. the lowest since december 1. let's talk about gold. the fed released that announcement, you saw gold fluctuate between gains and losses. we are now looking at some of the losses on the board right here. gold buying below 1200. it was a between gains and losses for most of that. -- split between gains and losses for most of that. a continuation of what we saw before that announcement, just a bit higher.

we are seeing green across the board on this wednesday. let's get back to our roundtable, post fed reaction. , ira jersey,ter lisa abramowicz, a lot to digest. this change in language, do you see this -- >> it's a bit more dovish. the fact that today said this is not a big change -- some of the things in the summary, the gdp forecast and inflation forecast coming down make it a bit more dovish. the expectation has to be maybe they won't be so fast hiking next year. they canmmittee judges be patient and normalizing the stance of monetary policy.

what should we read between the lines about? >> let's connect the dots. let's also look at the part appropriateay with policy accommodations, economic activity will expand at moderate pace. is theyy are saying believe they are still cyclical factors holding back the labor market and this war accommodation forward will get .bove trend globe -- growth pulling in people who are not participating. we will reduce that gap. wages start to really improve. year-over-year on wages for are seeing improvement there. if you look at the inflation rate for services, running at 2.5%. which is an important indicator for the economy.

a bit higher than it has been over the past several months. there are cyclical factors they expected again. -- expect to kick in. we will see participation rates come up and then that long-term on of women come down a bit. >> does the bond market pay attention? markets issury splitting right appeared at the steepening of the curve is what we are about here piercing backe -- yields are coming down a bit. this to me indicates that people are looking at this and saying the fed is postponing what it -- when it will hike rates. the short-term rates will stay maybe perhaps lower in the short-term but over the longer term, allow inflation to accelerate. >> we have 30 seconds. the language about inflation, what are the concerns over this past year?

even though the fed it does have , inflationandate seems to be lost in the shuffle. >> it did get a bit lost in the shuffle. core inflation has been largely stable. the expectation for that came down. oure will get back to roundtable in a few minutes. more on the fed discussion and economy. we are standing by for janet yellen's news conference. you will see it live at 2:30 p.m. washington time. ♪

>> welcome back. this is "bottom line" on bloomberg television.

crumpton in new york. let's get you to the other top stories we are following today. was released from a cuban prison after five years. the u.s. is releasing three cubans jailed in florida for spying. it is a surprise move making way for a major shift in u.s. policy towards the communist island nation. president obama spoke with the past hour and a half. >> where we disagree, we will raise those efforts. -- i continue to do believe we can do more to support the cuban people and promote our values through engagement. , these 50 years have shown that isolation has not worked. it is time for a new approach. >> the bank of russia is taking steps to stabilize the banking system. the ruble collapse makes it more

expensive to meet foreign-currency debt obligations. russia's central bank approved today a temporary moratorium on market to market economy. crude oil rebounded on speculation that prices were -- a bid by the greek prime minister to elect a new -- ensuring he falls short of the 200 votes for his election as president. the prime minister needs a two thirds majority to win. if you fails in the third attempt on december 29, parliament is dissolved and early elections will be called.

bill ackman has launched a new attack on herbalife. he's calling herbalife a pyramid scheme. distributors have -- he spoke exclusively with stephanie ruhle. we don't know much about them. a number of them have come to us and say they are scared. i want to be protected. what if the companies whose me? -- sues me? we have been -- >> how does that work? you guys don't have them on salary. >> that is correct. >> herbalife has continually denied being a permit scheme. .- pyramid scheme the post-fed reaction -- , ira jersey and

lisa abramowicz. now, mia saini is standing by with market reaction. have taken tos this news. we are seeing green across the board on this wednesday. we learned of the projections that 15 of 17 fed policymakers see a rate change in 2015. 1.125%. what are we to make of these? >> that is a bit lower than the previous thought. we will reprice and the bond market for the expectation of how quickly the fed goes. not that they won't hike next year, but said of going -- jump, look at the biggest high-yield bonds are rallying the most since october of 2011. a vote of confidence that the fed is going to remain accommodative for a longer period of time.

>> with the slight oil rally today, that will help. >> by how much? >> the energy component is 70% of the index -- 17% of the index. >> the decline in oil prices plus a more hawkish fed would lead to fundamental problems with companies which would then trickle into the economy. that has been the fear the past week. constance -- >> probably the most dovish member. he was a dovish dissent. he has wanted the fed to be more hawkish. they are not surprising. it tells you there is a bigger views among the

members and that is important. >> that dispersion of the abuse -- does that tilt the ideological bent? >> a lot of the presidents change next year. there will be one less hawk on the fedex dear. fed next year. all the governors -- the regional presidents swap who votes all the time. they will not be voting next year. this is a way to last chance have their say with a statement for another year. >> let's talk about those projections are we have a chart that shows what we are talking about. as we look ahead to 2015, that in 2015. gdp, 2.6-3.0 unemployment, 5.2-5.3.

what is the engine that will drive the unemployment rate lower? jobs, wekeep growing will get down to that level pretty quickly. my guess is the fed is betting we get an uptick in the participation rate. there is a variety of estimates. wells fargo is closer to 6500 70,000 jobs a month. we are running about that level. closer to 65,000-70,000 jobs a month. .hose projections -- that drop >> the drop we are going to cnn employment -- see in unemployment, will that be enough to push the policymakers? the it be enough to push policy makers to say ok, we are down to almost 5%?

is now the time to move our rate? >> i think that is the case and that is what you have almost all the policymakers -- even if you the dovish people think they will move sometime next her. -- even a few of the dovish people think they will move sometime next year. them,ill be enough for along with that 5.2% of limit rate. -- unemployment rate. the fed it just told you, it's not going to be as fast as he thought before. >> it depends on how stimulative this lower energy prices. -- price is. we have to parse out where this low inflation rate is coming from. from u.s. wages being low? wages are going to rise next year.

in this case, the oil price is stimulative. in fromtion coming other countries is not necessarily bad for the united states given how much of our employment and wages you have to gives them more services spending, the economy gets better. the pace of how quickly they will hike rates, that inflation projectionist away above where the bond market is pricing. the expectations for the next five years is 1%. >> why the disconnect? >> that is a good question. it's why the fed has been pushing back in pushing back, withdrawing from the stimulus. getting affected by the global economy coming in crackdown --, getting dragged down? out theyou take

expectation of what energy prices are going to be from the inflation bond market, you find that expectations for core inflation are incredible he stable. are going down, causing the market expectations for low inflation. >> what are we looking at in 2015? are the fed projections in line with what you are expecting? >> they really are, actually. we might get a slightly higher inflation number. but not substantially. this factor of importing deflation and disinflation from the rest of the world is the thing that is driving the bus on prices. >> we will have to leave it there. thank you all so much. when we come back, another on the markets check. we're standing by for janet yellen's news conference. you will see a live at 2:30 p.m.

washington time with a special edition of "bottom line. ♪

>> 26 minutes past the hour. that means bloomberg is on the markets. statement the fed's -- put in patients for the interest rates. benchmarks extending those gains. at one point as close to 2%.

the bond market seeing this deepening of the old curve. -- steepening of the yield curve. stocks strengthening on this news. ♪ ♪

make the best entertainment part of your holidays.

catch all the hottest handpicked titles on the winter watchlist, only with xfinity from comcast. >> welcome back to our special coverage of the fed apostasy in on interest rates and its statement. 's stance on interest rates and its statement. it will raise its assessment of the labor market. let's go live to washington. janet yellen on bloomberg television. >> concluded its last meeting of the year earlier today. as indicated in their policy reaffirmedthe fomc its view that the current zero-

.25 percent target range for the federal funds rate remains appropriate. the committee updated its forward guidance for the federal funds rate, indicating that the committee judges it can be patient in beginning to normalize the stance of monetary policy. this new language does not represent a change in our policy intentions. it is fully consistent with our previous guidance, which stated that it likely won't be appropriate to maintain the current -- will be appropriate to maintain the current rate for a considerable time after the end to our asset purchase program. with that program having ended in october and the economy continuing to make progress toward our objectives, the committee judged modification to our guidance is appropriate at this time. i will have more to say in a

moment. first, let me review recent economic developments in the outlook. in the labor market, progress continues to the fomc's objectives of maximum employment. pace of drop growth has been strong recently, with job gains averaging nearly 280,000 per month over the past three months. , roughlypast 12 months 230,000 per month. the unemployment rate was 5.8% in november. latester than the reading at the time of the fomc meeting. broader measures have shown similar treatment. in the labor force participation rate, it has leveled out. --noted in the "c statement

fomc statement, labor resources continues to diminish. even so, there is room for further improvement. with too many people who want jobs being unable to find them, too many who are working part-time but would prefer a full-time work and too many who have given up searching for a job but would likely do so if the labor market were stronger. the committee continues to see sufficient underlying strength in the economy to support ongoing improvement in the labor market. increaselooks to robustly in the third quarter. reflecting solid consumption and investment spending. -- moving through the quarterly ups and downs, real gdp expanded around 2.5% over the four quarters ending in the third quarter.

the available indicators suggest economic growth is running at roughly that pace in the current quarter. the committee continues to expect a moderate pace of growth going forward. inflation has continued to run below the committee's 2% objective. the recent sizable declines in oil prices will likely hold down overall inflation in the near term. as the effects of these oil price declines in other andsitory factors dissipate as resource utilization committeeto rise, the expects inflation to move gradually back toward its objective. , theking this forecast committee is mindful of the recent declines in market based measures of inflation compensation. the committee views these movements as likely to prove transitory.

longer-term inflation expectations have remained stable. that said, developments in this area bear close watching. this outlook is reflected in the individual economic projections submitted in conjunction with this meeting by the fomc participants. participant'sh projections are conditioned on his or her own view of appropriate monetary policy. the central tendency of the unemployment rate projections is a slightly lower than the september projections. 5.2% at the end of next year. in line with its estimated longer than normal level. participants see the unemployment rate declining a little further over the course of 2016 and 2017. the central tendency of the projections for real gdp growth

is 2.3-2 .4% for 2014. up a bit from the september projections. over the next three years, the projections for real gdp growth run a somewhat above the estimates of longer run normal growth. finally, participants project inflation in the near term to be lower on account of the decline in energy prices. they continue to see inflation moving gradually back toward a 2%. the central tendency of the inflation projections is 1.0-1 in next year, rising to 1.8% 2017. noted earlier, the committee reaffirmed its view rangehe current target for the federal funds rate remains appropriate.

regard it's for the federal funds rate, it likely would be appropriate to maintain the current target range for the federal funds rate for a considerable time following the end of our asset purchase program. especially if projected inflation continues to run below the 2% longer run goal. today's statement which indicates the committee judges it can be patient and beginning to normalize the stance of monetary policy does not signify any change in the community that this judgment is based on the committee's assessment of realized and accessed -- expected progress.

an assessment based on a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations. notn that the committee is signaling a change in policy, why did we update our guidance? the reason is that with the asset purchase program having been wound down in october, it seems less helpful to continue to communicate that the possible timing of our first rate increase was reference to an event that is receding into the past. we have shifted to language that better reflects the committees focus on the economic conditions that would make the stuff appropriate. raising at healthy rates and the u.s. economy

strengthening. reflecting in part a highly accommodative stance of monetary policy. of course, inflation has been running somewhat below are: 2%. -- our goal of 2%. we expect that to close gradually over time. continues, at some point it will become appropriate to begin reducing policy accommodation. based on its current outlook, the committee judges it can be patient in doing so. in particular, the committee considers that unlikely to begin the normalization process for at least the next couple of meetings. is completelyt data dependent. if incoming information , theates faster progress

increases in -- the target range for the federal funds rate are likely to occur sooner than currently anticipated. conversely, if progress proves its lower-than-expected, increases in the target range will likely occur later than currently anticipated. once we begin to remove policy accommodation, it continues to be the committee's assessment that even after employment and inflation are near mandate consistent levels, economic warrant keeping the target federal funds rate below levels the committee views as normal in the longer run. this guidance is consistent with the paths for appropriate policy. the economy involves

probably in line with participants expectations, almost all participants believe it will be appropriate to begin raising the target range for the federal funds rate in 2015. there are a range of views on the appropriate timing of liftoff within the year. in part, reflecting differences in participant's expectations for how the economy will evolve. at the time of liftoff, participants expect to see some further decline in the unemployment rate and additional improvement in the labor market conditions. they also expect core inflation to be running near current levels. but foresee being reasonably confident in their expectations that inflation will move back toward our 2% longer run inflation objective overtime.

of course, as i previously emphasized, the timing of the initial rise in the federal path rate target and the for the target thereafter are contingent on economic conditions. by late 2016, the median projection for the federal funds remains more than a percentage point below the 3.3%r run value of projected by most participants. even though the central tendency of the unemployment rate by that time is slightly below its estimated longer run value and the central tendency for inflation is close to our 2% objective. fomc participants provide a number of explanations for the federal funds rate running below time,rmal level for that

in particular the residual effects of the financial crisis which are likely to continue to constrain household spending and constrain credit availability for some time. as these factors dissipate further, most participants expect the federal funds rate to longer run to its normal level by the end of 2017. finally, the committee will continue with policy of reinvesting proceeds from maturing treasury securities and principal payments from holdings .f agency debt in mbs the sizable holdings of longer-term securities should help maintain accommodative financial conditions and promote further progress toward our objectives of maximum employment and inflation of 2%. thank you. i will be happy to take your questions.

>> a number of officials have projected the timing for liftoff was around the middle of next year. i wonder if you could clarify that. you said in your statement that at least not for two meetings. the fomc forecast seems to be consistent with something like a middle of the year liftoff. could you speak to that and also speak to the downs we are seeing in inflation, particularly market-based inflation expectations and where that gives the committee and he hesitates about liftoff in the months ahead? >> i didn't say that the statements the committee can be asient should be interpreted

meaning it is unlikely to begin the normalization process for at least the next couple of meetings. that does not point to any preset or predetermined time at which normalization will begin. there are a range of views on the committee. howill be dependent on incoming data bears on the progress the economy is making. first of all, i want to emphasize that no meeting is completely off the table. in the sense that if we do see faster progress toward our , it is possible that the process of normalization would occur sooner than we now anticipate. of course, the converse is also true.

at this point, we think it unlikely that it will be appropriate that we will see conditions for at least the next couple of meetings. appropriate to decide to begin normalization. a number of committee participants have indicated that in their view, and conditions could be appropriate by the middle of next year. there is no preset time and there are a range of views as to when the appropriate conditions will likely fall in place. that is something we will be watching closely as the year unfolds. you ask also about inflation. as i mentioned in my present statement, especially with the downward pressures on inflation, we expect to see for a little while because of declining oil

prices and falling import prices headline inflation to be under downward pressure for a while. as i mentioned, most thatcipants do envision conditions will be appropriate sometime during this coming year to begin normalizing policy. they do largely expect that running close be to its current level. headline inflation could even be lower. have is ant to feeling of reasonable confidence that when we start the process of normalizing policy, it will be moving up over time. conditionsrket continue to improve, history suggests that as long as inflation expectations remain well anchored, is likely to

occur. given the -- what's happening now with the transition with the fed, there seems to be a pattern that the market expects big news to come when you have a press conference. isn't that a good expectation? on having a thought press conference at every meeting? >> i would like to discourage that expectation. [laughter] every meeting that we have is a live meeting. at which the committee could make a policy decision. so.ill feel free to do i would really like to strongly discourage the expectation that

policy moves can only occur when there is a scheduled press conference. we have long had in place the ability to hold a press call rather than in person press conference and we did do so on a number of occasions in earlier years. would wantee clearly to be able to explain its reasoning as we begin the process of normalizing policy. every meeting is live. if we were to decide at a meeting to begin to normalize policy, i expect we would hold a press conference call. >> [indiscernible] expressedir concern at the meeting that the signal coming from the markets, lower

oil prices, lower yields around the world, was one of deflation wouldvis was one that overshadow the concern over inflation on the other side? >> we are very attentive to global developments. we certainly discuss them in the meeting. the very substantial decline we have seen in oil prices is one of the most important developments shaping the global outlook. it will have different fx in different regions and could have fects on financial markets, as we are seeing. from the standpoint of the , thed states outlook decline we have seen in oil prices is likely to be a net positive.

it is something that is certainly good for families, for households. it is putting more money in their pockets, having to spend less on gas and energy. in that sense, it's like a tax cut that boosts their spending power. remains -- oures production of oil has increased dramatically. we still remain in net importer of oil. there may be some offset in the form of reduced drilling activity and possibly some change, some reduction in cap plans in the drilling area. i would see these developments as a positive for the standpoint of the u.s. economy. , we respect to deflation see downward pressure on fromine inflation

declining energy prices. we recognize that is going to be pushing down headline inflation and maybe even spill over to some extent to core inflation. at this point, although we indicated we are monitoring inflation developments carefully , we see these developments as transitory. the committee continues to believe, especially with the improvement we are seeing in the labor market, which we expect to continue, that inflation will move back up to our two-person objective overtime. feel -- the to people will expect to feel reasonably confident about that when the process of normalization begins. we do expect them to be transitory. over time.tive >> there is a big gap between

the pace markets expect you to raise interest rates and the rates you have indicated. -- our markets misunderstanding your intentions? >> i want to say our objective is to communicate as clearly as we possibly can about our plans and how we see the economic environment unfolding. when the participants in the committee fill out their projections, they are asked to give the path of the federal funds rate and of the various economic variables that they consider most likely. they are not asked to talk about all the different things that could happen, recognizing there is uncertainty. they wouldaths

consider appropriate if there is other alternatives. this otherone gives alternatives are priced into the market. pricesson the market make a difference and committees is the place probability of another outcomes. -- they place probability on other outcomes. how the economic outlook is likely to one full. two on full. i recognize there is significant differences. to unfold. how we think the economy is likely to progress and how we set the funds rate over time if that forecast bears

out. >> [indiscernible] there are a number of that are factors bearing on the path of market interest rates. including global economic developments. it is often the case that when oil prices move down and the dollar appreciates, that tends to put downward pressure on inflation compensation and longer-term rates. we have safe haven flows that may be affecting longer-term treasury yields. i can't tell you exactly what is driving market developments. what i can say is we are trying to communicate as clearly as we can. i was just hoping you would

go into more detail about the oil affect. even though you see this transitory, that could give more room to keep rates lower the next few months. if prices climb back, what is that going to do your ability to change rates? >> i think what we have seen ince the mid-1980's he is, an environment where inflation ,xpectations are well anchored movements in oil and commodity tend tond import prices have transitory effects on the inflation outlook. there were many years in which we had only anticipated increases in oil prices, really 2004-2005, that put

upward pressure on headline inflation and sometimes even spilled through into court. .- into core the committee looked through those impacts on inflation with a few they viewed as transitory. experience bears out they were transitory. that is the committee plus 's expectation here. , now down andil perhaps later up, will move inflation around. certainly headline inflation. the committee at this point anticipates those impacts to be transitory. participants feel reasonably confident that the inflation projection is one where we expect to meet our 2% whattive overtime, that is

we are looking at as we decide on the path for the funds rate. when you talk about reasonable confidence inflation expectation, can you elaborate a bit about what it would take to give you reasonable confidence that inflation is headed back to 2%? -- with respect to inflation, our forecast for inflationand expectations, i think it is important that monetary policy be forward-looking. the lags in monetary policy are long. therefore, the committee has to base its decisions on how to set the federal funds rate looking

into the future. theory is important. theories that are consistent with historical evidence will be something that governs the thinking of many around the table. typically, we have seen that as long as inflation expectations are well anchored, as the labor market recovers, we will gradually see upward pressure on wages and prices. inflation will tend to move back toward 2%. seen, aslly, we have the economy strengthens, inflation does tend to gradually rise over time. myself, i would be evidence that i

think strengthens my confidence in that view. range --t the full >> >> a little bit of technical problems. yellen's last press conference of 2014. has we heard from peter cook, some of the statement language had been changed at the top of the hour. >> i think you raised a very because, point although there is a great deal of market focus on the timing of lift off,