dollar-yen, 182. there was a doj announcement overnight in which it weekend but has now rebounded. as we get you closer to the announcement, erik schatzker standing by. no change in interest rates. a strong suggestion there will be a quarter-point hike before the end of the year. you can see it in the dots. 14 of 17 officials expect to end 2016 with the benchmark rate of at least 50 points. here is a direct vote. the committee judges the case for an increase in the federal funds rate has strengthened but for the time being to

wait for further evidence of continued progress toward the objective. for the sixth consecutive meeting, the federal open market committee let the fed funds target rate of 20 five basis points. yes, job gains have been solid, and household ending is growing strongly, another direct quote, but business investment is slow and inflation remains low. say exactly as a layer oreeled back two. for the first time since december 2000 13, three policymakers dissented from the majority. mr., and esther george voted to raise interest rates to a half point at today's meeting. ino, the word balance back the policy statement. near-term risks to the economic outlook appear roughly balanced.

the economic outlook, i have to say, nothing to get excited about. the fed economic projections paints what i would describe as a dismal picture. no more than 2% over the next three years. 1.8% over the longer run. that is why the fed dramatically trajectory fore next year and 2018. back to you in new york. the dissent is remarkable. >> i need to look up the last time we have three defense. scarlet: eric rosengren. we knew esther george has been dissenting for quite some time. eric rosengren was making the

case for maintaining. said, basing it on the idea there are financial markets and balances happening. >> he has indicated he thinks it is time to hike. important the balance of risk is back in the statement. they took it out after the december meeting. we should see the probability dressed up. >> the december rate increase going up to 53 percent. mike: bringing in erik schatzker. the first timek:

since december the 2014 that three of the voting members defended the majority. also, rosengren first hawkish defense. non-surprise only in that group for free. blog.king at the top live planning to raise rates very soon. what would have to happen for the fed to consider raising rates in november? i think that is a very long shot for the reason we described. anythingas not done

yet the sheer. they can persuade themselves to wait. the dissent, the language. they think they have to hike at least once this year, and they will. mike: we are members looking at the raise -- rates rising in december. yet the sheer. they can persuade themselves to wait. the dissent, the languagethe oue fomc would be jim the word. you can see the long range, the has come down gets again. now it is 2.75%. still not where the markets are. it has come down. tom: let's call joe baca forth. here is where we are now. here is where we were back in june. now we go to where we are now. you can see the shift down that

we talk about. >> the red and purple lines. the fact is, this is something we have been talking about for two years. now it is more than priced in. i think the markets are once ahead of the -- ahead of the fed on where they will end up. scarlet: richard clarida joining us. richard -- rick of professor at columbia business school. when you look at the fed moving thatr to the markets, does suggest they will raise either faster or more frequently than the market is expecting? >> i think the answer will depend on the data. if it does not keep coming and

strong, it is not appropriate. there may be a different view on how strong the economy is. mike: when you talk about slow, how slow? what would you see for 2017? is the fed should be very reluctant to raise rates as long as they are not confident it will raise to 2% level. inflation is still staying low. furthermore, we see inflation expectations remain low. it is hard to get inflation of. in that context, you have to be

very reluctant to raise rates. the wonderful economics textbook, which is policy related. did the federal reserve this afternoon become more bank of england like? the bank ofing england in our dissent? i think so it's been a different model for the bank of england then the federal reserve. the federal reserve tends to always have a can since -- consensus view. say that itned to was fine. there was a big change under ben bernanke. it used to be a was considered a lack of confidence and the chairman. he had several times more than the world didd

not fall in. i think this is a completely reasonable thing. deal.at big a >> moments ago on inflation of the federal reserve. going back to your teaching in columbia, is there any validity to the model that you and yellen and bernanke are working with just does not work at the moment? we may be in the area where low rates feeds on itself? >> it is not so much i think the phillips curve model is wrong per se, it is that it always had certain elements, parts of it that we do not have a good feel for. whether you are at the natural rate of unemployment work full employment rate -- unemployment rate.

that is a big? . we have had to revise very sharply down. at one point the fed thought it was an unemployment rate of 6%. at some point, inflation heats up. we do not know it where that is. is, if you are not thing a lot of inflation and unemployment is low, that is selling you made you can go lower before unemployment rises. this is one reason to have caution. the second issue is how responsive it is. i do not think we should abandon labor market tight has to do with inflation. it is hard to measure what tight labor markets are. what to go back to inflation. what do you know versus

what we still don't understand about how full employment leads to raises? this is like a squishy subject but we're not seeing it translated. inflation expectations are very low. that is one reason why you would not see much in terms of wage gains. that is one of the problems. it indicates it may be less likely to rise to 2%. that is very important. they would let inflation go about the 2% target. targeting a price level instead of a percentage increase. it is becoming more

of a possibility here? >> i think it should be. that face thems federal reserve. one is inflation phobia. theified of going above target range. goodroblem, if you have a target, sometimes you should hit of all it, sometimes below it. this was a severe problem before corona took over. the second issue is, when you inflation time of timet for a long amount of , there is a very strong case for you to aim higher than 2%. you should have an inflation target that on average you hit

2%. the fed should move in that direction. i do not think they are there yet. but i dovocated this not think they are there yet. june, they thought we would get to 2%. the latest projections, we do not get to 2% until 2018. admitting they are having trouble generating inflation. that is true of all the major banks. something that we need to be very aware of. we actually have experienced an environment where it has been too low. this should be very important in terms of the way you conduct policy.

it should make you much more .ikely to pursue easier policy >> really appreciate your attendance today. the first time ever we did not .o a data check off the meeting why is that? there was no need for a data check. move.s did not they have moved now if people digest. the two dear yield was a .800. i guess this is an advance. critically, new string down to 100.63. i had to get the shameless plug in. euro does not do much. oil with a bit of a lift. stronger yen something worth

watching. fundamentals did not change. .> bringing in peter fisher of course, our very own erik schatzker at the fed. you were looking through the statement and have seen confusing elements that you want to highlight. >> i am looking at the summary of economic projections. i am wondering, where will the inflation come from. is looking out to 2019 and beyond. so at least according to the fed, according to the people who put the projections together, the u.s. economy will not for

faster than a 2.5% between now and 2019 and beyond. , and even less, 1.8% in the years beyond. at the same time comes the very same participants are looking at the federal funds rate and anticipating to raise it next year. 1.9% the following year. 2.6% the following year. , where will the inflation come from that will justify that amount of monetary tightening is the growth will be so anemic? >> if there is not inflation, and certainly the fed is not forecasting it, what is the rush? >> they are obviously not in

much of a rush. i think there must be some have had they wouldn't changed the language as much. they are looking at the other measures for inflation. is 1.6. all of these have moved up above 2%. mindhas to be in their somewhere to have gotten the confidence. i think there is a bigger issue they confront. are they getting ready for the next recession or trying to policy? i think we get it meeting by meeting that they will fuss about rates and inflation.

>> we want to thank erik schatzker. he will join janet yellen. peter fisher still with us. the fed, at this point, 25 basis , 37 basis points, there is a question about how they were taught in -- respond to any kind of downturn ahead. they have to raise rates irrespective of inflation just to be able to respond that go >> i think the remarkable thing is that she really conceded the the big balance sheet and externally policies are here to take. just five years ago we are -- we were being promised it would be easy and not a big deal. we will need explanation of that. clearly she is hanging onto this

in case she has to deal with the downturn. the forecast has been so bad and murky, i think that is a problem she has to confront, whether they are really bracing themselves or planning to normalize. scarlet: i would like you to full than what the bank of japan announced overnight with regards to shifting the policy, more on steepening,ng -- compared to what it was looking like a earlier. reserve not being in any kind of rush, what does that mean for an the demand of u.s. stocks? >> it will continue. i read the bank of japan statement. subtle and confusing. the yield athor zero. then they said they would like

to have a deeper yield curve. there is a committee in japan about whether you want to have a steeper yield curve. i still find it a little confusing. i know that the market seem to like it. tom: so much for a boring meeting. erik schatzker will be in the room. peter fisher with us. good morning. i am looking at japanese yen with significant movement. strongerstronger and is notanet yellen working in the domestic vacuum. i think we have a very big

problem. we are running the most important monetary policy. in one sense, the largest economy. two years ago i thought to myself the fed will normalize, raise rates gradually. clearly it has at the longer end of the yield curve. the dollar clearly is the core asset and everyone's portfolio. i am sure when you breathe in the air, you breathe this in. when you look at public service and what you have done with treasury, you work at blackrock. i am fascinated what you think about the fed meeting today and the one in december, and the

bank financial system. ignore theellen impact on global commercial crexendo, clearly -- , negative interest rates are clearly bad for the banking system. world, tension in the and the question i would ask, the theory that the natural rate of interest is so low is a very stylized idea. it has no basis in the yield curve. i do not think it works through the substitution effect. that is if we keep rates low, people feel they need to save more. maybe it works through the exchange rate.

it is a deeply held belief that the central bankers and macroeconomists that it does not appear to be working. chart.me bring up the go to the bloomberg terminal to see this. they have raised the target rate. together about what you were just saying about how the theories are not working out in practice with the idea of the central bank of japan may be sending the message. i hope that monetary policy comes in -- fiscal policy comes in and save the day.

we have plenty about as far as we can go on the monetary side. >> i think that is right. i admire mohammed's book. let's turn that on its head. this is backward looking. let's look forward. time to stimulate productivity. time to do something with regulatory policy. longer the principal game in town that we can depend on. >> when you look at what the bank of japan is doing, targeting the yield curve, does it bother you a central bank is now taking control of prices and pushing the markets aside? >> they have all been doing that since the fed did the operation twist going back six or seven years ago.

the bank of japan is introducing this and locking in the rate where it is, but doing this so they can guide higher. they want to control that without it having abruptly. they are managing a slightly steeper yield curve and not suffocate the banking system. scarlet: we are waiting for janet yellen to begin her news conference. less than five minutes to go. we will take you there live when she began speaking. we are speaking with peter fisher. one thing the bank cannot control is monetary conditions. if we looked at libor, it has risen because of money market reform. in matters less

why it is rising and just that it it is rising. does this complicate matters come december? >> it will a little. in december they will thinking about the impact on the coming year. so i think about more as another in matters less why it is rising and just that it it is rising. does this complicateway -- reasr december. as you look ahead to the janet yellen news conference, what question do you think will be asked but probably it is thee asked? >> following. every central banker in the world is talking about the natural rate of increase, and the paper by a colleague about measuring the natural rate. i wish someone would ask whether she has noticed the first

conclusion of the paper is measurement is so uncertain we should rely on the natural rate less. >> we have to show a dazzling chart for radio. out to a major shout michael mckee, who has done great work. i am thunderstruck by the dispersion from bullard in the regime with a very low rate, and 2%.outlier high rate around we all know the 2% level on radio and television. the answer, what is the dispersion of good people who agree so much but really disagree where we will be two nots from now? >> these are forecast. these are not promises. these are individual fed officials and what they think

the policy would be under their economic forecast. chart isersion of the. terrific because it shows you how it moves. the white dots are where we are now. you can see how we come down at the long end. if you pick an economic forecast, what with the monetary policy be to get you to that? tom: it looks like season five of x-files. this is true. a lot of people say this was useful when we were waiting for syria and now we have achieved that and on course for normalization, what value do they provide gekko a widening

gap between what the market believes it should be and what fed officials to leave? >> i have never been a fan of the. lot-- dot plot. it effectively allows every committee member to send. the pathimportant is of short-term rates. we have 17 of them. the other mistake, they started it way too high. they began with the oddity of zero overnight rate. this was way too high. it should not be a point, it should be of range. good luck. peter fisher, thank

you. a live shot of janet yellen, the fair -- chair of the federal reserve. >> earlier today my colleagues and i on the central open market overalle discussed conditions and decided to keep 1.25 21.50.ate at we judged the case for the increase has strengthened but decided to wait for further evidence of continued progress toward our objectives. our current policy should help move the economy toward the of price goals stability. about have more to say our decision shortly, but first, i will review economic development and the outlook. dueomic growth, which was during the first half of the year, appears to have picked up. household spending continues to be the key source of growth.

ending supported by solid increases in household income, as well as high levels of consumer sentiment and wealth. business investment remains soft, both in the energy sector and more broadly. the energy sector has been hard hit by the drop in oil prices. investment in the sector continues to contract through the first half of the year. signs ofis now showing stabilizing. overall, we asked deked the economy will expand. turning to employment, job gains average 180,000 per month over the past four months. about the same pace recorded since the beginning of the year. in the longer run, that is well above the pace we estimate is needed to provide work for new

entrants in the job market. so far this year most measures of labor market slack have shown little change. the unemployment rate in august, in january. same as a measure that includes people who want and are available to work, but has not searched recently, as well as people working part-time but would rather work full-time. the fact that unemployment measures have been holding that he, while the number of jobs have grown solidly shows more people, presumably in response employment opportunities have started actively seeking and finding jobs. this is a very welcomed development.

we continue to expect labor market conditions will and then time.at further over ongoing economic growth and improving job market are key factors supporting the inflation outlook. overall consumer price inflation as measured by the price index for personal consumption expenditures was less than 1% over the 12 month ending in july. of the shortfall continues to reflect earlier declines in energy and import prices. volatiles to be more than other prices has been running 1.5%. as influences holding down and as the job market strengthens further, we continue to expect inflation to rise to 2% over the

next 2-3 years. outlook rests in portland on the judgment that longer run inflation expectations remain reasonably well anchored. andver, we cannot take this -- stability for granted, and we will continue to monitor actual progress toward inflation goals. indeed, we are fully committed to achieving the 2% inflation objective. let me turn to the economic thatssion -- the gestures we submitted for the meeting. , participants onditioned the objections their own view for appropriate monetary policy, which depends on each participant assessment of the multitude of factors that shape the outlook. the median projection for growth

of inflation-adjusted growth domestic product is 1.8% this year. this figure is somewhat lower than projected in june as a result of the weaker than expected growth seen in the first half of the year. in 2017 and 2018 the median growth projection is unchanged at 2%. somewhat higher than the median estimate of longer run normal. in 2019, growth inches down to 1.8% in line with the estimated longer run rate, which has been revised down since june. the median projection for the unemployment rate stands at 4.8% at the end of this year, a touch higher than in june. over the next three years, the median unemployment rate runs 4.5%, modest weight below the

longer run normal rate. finally, the median inflation 1.3% this year and rises to 1.9% this next year. returning to monetary policy, the recent pickup and economic growth and continued progress in the labor market has strengthened the case for increase in the federal funds rate. moreover, the committee chooses the outlook to be roughly balanced. we raise the federal funds rate at today's meeting? our decision does not reflect a lack of confidence in the economy. we expect the conditions to continue to strengthen. we expected to rise toward 2% objective over time. with labor market slack being

taken up at a somewhat slower pace than previous years, scope for further improvement in the labor market remaining, and inflation continuing to run below the 2% target, we chose to thisfor further evidence cautious approach to paring back monetary policy support is all the more appropriate, given the short-term interest rates are still near zero, which means we can effectively respond to strong inflation pressures. we continue to expect the evolution of the economy will warrant of gravel -- gradual increase in the federal funds rate over time to achieve and maintain objectives. rate thate interest

is neither expansionary or contractionary, and keeps the economy operating on an even byl is currently quite low historical standards. with the federal funds rate modestly below the neutral rate, the current stance should be viewed as modest leak which istive, appropriate to foster further progress toward objectives. since monetary policy is only monetary accommodative, there appears to be little risk of falling behind the curve in the near future and gradual increases will likely be sufficient to get to a neutral for the next few years. this is consistent with participant projections of appropriate monetary policy. gradually to 1.1% of band

of next year. 1.9% at the end of 2018, and 2.6 by the end of 2019. compared with the projections made in june, the path has been revised down according to a half percentage point. most marked down the normal with theunds rate media now at 2.9%. as i have noted on previous occasions, participant projections for the federal funds rate are not a fixed plan for future policy. on a presett course. these represent participants individual assessments of appropriate policy, given the projections of economic growth, employment, inflation, and other

factors at a particular point in time. however, the economic outlook is inherently uncertain. any assessment to the federal funds rate will change in response to the economic outlook and associated risk. , we will continue to invest proceeds from the treasury security and principal payments from mortgage backed securities. says, weatement anticipate continuing the policy until normalization at the level of the federal funds rate is well underway. maintaining the sizable holdings of long-term securities should help maintain accommodative conditions and should reduce the risk that we may have to lower the federal funds rate to zero in the event of a future large adverse shock. thank you.

>> madam chair, critics of the federal reserve have said you look for any excuse not to hike. it looks there are no goal posts now. looking for further evidence and suggest there is evidence that labor market slack is being taken up. what for thelain time being means, and the evidence in order to hike interest rates, and the notion that the goal posts seem to move. again me try to set out how the committee sees the economy and what we are looking for. we are generally pleased with

how the u.s. economy is doing. was weak in the first half of the year. seeing evidence that the economy is expanding more strongly. payroll gains have been solid, averaging around 100 80,000 per month, less than the pace of 2015. it is well above what is needed to provide jobs over time. the unemployment rate is pretty close. mentioned, that rate and other measures of utilization are little changed since the beginning of the year. i don't see that as bad news, because it may reflect a strong labor market is attracting people from outside the labor force back into employment.

force participation rate increased. it is on a declining them a graphic trend. of peopleial number being attracted to the labor market. we were not really certain that this is something that would happen is the labor market strengthened, and it is good to see development has taken place. that is news we have received in that the labor market does have the potential to have people come back in without the unemployment rate coming back down. we're not seeing pressures on utilization suggesting overheating. my suggestion is the economy has a little more room to run than

might have been previously thought. remember, inflation continues below 2%. we expect it to move up over time. the committee agrees risk to the outlook has become roughly balanced. continued to strengthen. whatal increases to remove is a modest degree of accommodation that will be appropriate. asdo not see the economy overheating now. my colleagues and i exchanged views on the appropriate timing as the next step of reducing .olicy stimulus

most of us judge the case for an immediate increase is stronger. but would be sensible, given the finding of more running room to see continued progress. , for the time being we will watch incoming evidence. mostan see that participants do expect the increase will be appropriate this year. i would expect to see that if we continue on the current course of labor market improvement and there are no major new risk that develop and we stay on the current course. >> howard schneider. thank you. i was wondering if you could comment on the apparent tensions of the study drug down.

if the market continues to come down over time, why not wait for the dust to settle on that? >> it is true of our estimates of the neutral rate are coming down, and that is what is largely responsible for that shift. at the same time we generally agree the stance of monetary policy is somewhat accommodative . 180,000 jobs per month is a faster pace of employment growth and sustainable in the longer run. we have seen people come into the labor force more than expected. that is probably not something that is possible without the

economy overheating on an indefinite basis. so policy needs to be forward-looking. we do not want the economy to overheat and overshoot the 2% inflation expectation. i think we generally agree increases to remove accommodation will be if we stay on the course. it is not that much accommodation, and the economy has shown evidence that there are more people being attracted to the labor force. wouldt sense i characterize it as we have found the economy has more running .oom nevertheless, we do not want the economy to overheat. if things continue on the current course, i think gradual increases will be appropriate.

mainly what we discussed today were issues affecting the timing of such increases. >> marty with the associated press. your speech you seem to raise expectations there could be a rate hike its september. -- in september. chairman fisher seem to support that. had governor brainard who seem to draw back. is this hurting the fed credibility or just a nominal think we should be looking for time? >> i did say at jackson hole i thought the case for a rate increase would strengthen. is included in

today's statement, so i think most of my colleagues agree with that assessment. we are trying to understand some difficult issues . there is less disagreement among participants in the committee think listening to speeches and commentary. agree the economy is making progress. so we are close to an unemployment rate that is one that is sustainable. we all agree we are undershooting the inflation goals and want to a on a course that raises that to 2%. a set ofruggling with issues about what is the new normal in this economy more explains why we

keep advising down the rate half. important that a views aree of expressed. that we have independent-minded people that gather together and discuss these issues. my colleagues do explain their own perspective. these are complicated issues. clear how to interpret the policy. sense is that market participants and the public more generally learn more about the issues we are grappling with as they listened to the set of speeches. i think it is a very good thing

the fomc does not suffer from groupings. you see this as a real worry in the organization that everyone thinks identically. there is a lot we share in common. we are debating and discussing issues pertaining to climate. >> john hilson from " the wall street journal." fedld trump has charged the is keeping interest rates artificially low to support the obama administration. i would like to hear what you have to say to that charge. i wanted to ask you about the next fed policy meeting. rate rate -- rate

strengthened. thank you. >> i think congress very wisely established the federal reserve as an independent agency in order to insulate monetary policy from short-term political pressures. i can say emphatically partisan politics plays no roles in our decision about the appropriate dance of monetary policy. what theying to decide best policy is to foster stability and maximum employment. risks manage a variety of that we see is affecting the outlook. discuss politics at her meeting and do not take politics into account in our decisions. as i said, we are generally pleased with the economy and the decision not to raise rates

today and rate -- wait for further evidence that we are continuing on this course that is largely based on the judgment that we are not seeing evidence the economy is overheating, and that we are seeing evidence that people are being drawn in larger numbers into the labor market. we do need to be forward-looking. appropriatewill be to raise the federal funds rate. in november, you asked about it as well. every meeting his life and we will assess incoming evidence in november. and decide whether or not a move is warranted. craig torres from bloomberg.

data would commence you and the committee the neutral funds rate is starting to move up? there is popular research that suggested is at zero. i am struck by your opening remarks that the economy is not overheating. the global reach for yield is very low cost to the policy. thanks. >> what evidence would suggest it is moving up? i think if you saw us revising up the growth forecast, revising , you would see revision in the fund freight half. were moving down faster than anticipated, if we

saw faster growth or put pressure on inflation, that would be sick justice -- that would be suggestive of whether the fed funds rate had increased. the downward revision reflects the fact that while the economy has made a lot of progress, it has only made that in the context of a monetary policy characterized by extremely low interest rates and negative yield for a very long time. then you asked about global factors. --bal factors >> the global reach for yield and whether the committee's all that as a task for policy right now. advanced nations now we have highly accommodative

policies and they seem to be necessary for countries to achieve inflation and employment objectives. that is characteristic of an environment in which the neutral rate. appears to be very low. that is an environment where we have to look at that for a long aware to ave to be reach for yield as individuals investors seek to perhaps take on risk or linkedin maturities. we should be concerned about that to the fact that it creates financial stability

risk. we are very aware those are possible. we engage in regular assessments of mantle's ability factors that bear on financial stability. fax i would characterize at this point is moderate. in general, i would not say as valuations are out of line with historical norms, but there are my colleague is poster -- focused on commercial real estate where price to rent ratios are very high or cap rate are very low. that is something that has caught our attention. we have a variety of tools, other than monetary policy to address such risk.

we have recently issued new supervisory guidance pertaining to commercial real estate. i would say in the area of commercial real estate, we have seen a tightening of lending that growthd associated with the rise in commercial real estate prices. we're not seeing signs of or maturitylding up transformation in the way that we saw the run-up to the crisis and keeping a close eye on it. earlier suggested political uncertainty in the u.s. may be business investment. i have wondered if you had seen any reason that businesses are holding back at the margin.

you presented a fairly optimistic scope of monetary stimulus. concerned there is an insufficient physical backup to the fed. but there is a fresh downturn. >> starting with the issue of political uncertainty and investment. forstment has been weak quite some time. we are really not certain what is causing that. part of it has been the huge contraction and activity associated with falling oil prices. beyond the sector. itm not certain what exactly lanes that. i am not aware that suggest political uncertainty.

certainly i would agree with this finding that has been weak. seeing growth in consumer spending. consumer sentiment seems to be solid. about scope of further monetary action. i was careful in jackson hole. i indicated we have a number of tools that we could use i did indicate that i do have concerns about the wealth it this point. .ur balance sheet is large what we see as the normal, longer running level of interest the rate isment, very low, below that level. at the moment, i would