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. say it isent, i would

a concern and we have less scope than i would like to see or would expect us to have in the longer run. i think -- we go play in addressing should they come. i mentioned specifically automatic -- that is an important way in which fiscal policy serves to send shocks to the economy. it would seem to me without getting into specifics that there are ways in which responses to policy to shifts in the economy could be which would help take some burden off monetary policy. >> new york times. in the run-up to the brexit vote earlier this year, policymakers

cited it as a reason they were reluctant to raise rates in june. in the run-up to the presidential election, i've not heard anyone give that as a reason in november. could you explain why the fed asen -- regards brexit as great danger to the economy than the presidential election happening here? second, explain with the cause of disagreement was and what was policymakers thought? yellen: we're focused on even evaluating what is the right policy and i will not get into politics. those are factors we do not consider and i will not get involved commenting on the election.

as i indicated, the notion that cut petition on the it is something we need to move over time. timing for removing active something we had discussions and there are a range of opinions. represents a judgment on the part of my colleagues that it is important to begin the process now. i have set myself there are risks and waiting too long to remove accommodations. we need to -- we have advocated for making policies raced on

forecasting where the economy is , and taking the accounts -- account of risks. there are particular risks we need to think about 10 balance and when is the risk that the economy runs too hot, that the labor market tightens too much and unemployment falls to a low-level. that we need to tighten policy in less gradual ways and in that is a difficult thing to accomplish, to create a bit more slack in the labor market, it could cause a recession in the process. colleaguesething my and i would not want to be responsible for.

we all want the labor market to this isd downsizing something we would like to avoid. and on the other hand, inflation is running below 2%. indicated anely number of measures and expectations running below the historical range and we are watching that as well. also, not seeing inflation move objectived a 2% exactly how to balance which is we are allous risk, struggling to understand the magnitude and nature of those.

>> rebecca jarvis, abc news. at a time when the public is losing faith in many institutions, was the importance of today discussed as an opportunity to dispel the thating that the fed is the compromised or beholden to the markets? janet yellen: the federal reserve is not politically compromised. politics inscuss our meetings. i do not recall any meetings when politics -- watching our meeting on tv aday, where they felt we had rich and serious intellectual debate about risks in the forecasts for the economy and we struggled mightily in trying to

understand one another's point and coming out of a balanced place and act responsibly, that is my commitment to the american to lead ant i want institution that is not political, and we are striving to do our best in what is assigned for -- assigned to us. concern you given what donald trump has said at this point about the federal reserve, that he could go back if he were president and look for signs of the fed being politically motivated? janet yellen: i've no concern about the fed being clinically motivated. i assure you we will not find motivationf lyrical when the transcripts are released in five years. important we were -- we

maintain the conference of the public. you know these are difficult decisions and everybody may not but i hope the, public will understand we are striving to do our best to pursue the goal that matter to all of us. >> you mentioned commercial real estate. are you bring about the bubble -- forming in the economy because of low interest rates? janet yellen: of course we are worried that bubbles could form in the economy. .e routinely monitor while no one can know for sure what type of valuation bubble, that is only something one can see in hindsight. commercial real estate

upuations, rents have moved over time, but still valuations are high. is something we are discussing in the monitor pulse , and we are in supervision with banks, as i indicated. supervisory guidance on these loans. something we look at, the larger banks, to see what sure thaten and make they hold sufficient capital. the banking system has improved substantially.

>> thank you. >> a quick question on regulation in the scandal at wells fargo over foaming -- phony customer accounts. you are a regulator of wells fargo. as the fed opened a separate investigation into the practices what you,argo and because they do involve issues of consumer protection, potentially of risk management and corporate governance? are you looking broadly across the banking system right now? in this specific case the abuses that occurred to place in the national bank, the currency has a responsibility there. on the consumer side, it is the cfp be that has the responsibility but we work

closely and innd terms of our overall supervisory responsibility to wells fargo and other large banking this will be a of ourlar focus supervision going forward in the sure the or so to make controls in management oversight involved with the boards of directors, are appropriate to control these kinds of risks. we have been distressed to see banking organizations responding to a particular problem arising in what we really want to see is robust procedures that ensure that employees are always acting

in a legal and ethical manner and that the incentives put in place are appropriate and do not serve to foster behavior that could harm the public. this has been and will be a focus. >> over the past year, we have beginmerican policymakers to have maybe our most serious discussion about terrorists in the last decades. if the tariffs were be -- were enacted, to the have an opinion on what that would do to growth in america? that is aen: political issue currently being debated that i do not want to get into. i am going to pass on that one. >> with american banker.

back to the questions related about wells. they concern the scandal has raised is that the bank itself says it does not know what was happening. thousands of employees were involved with this. some say the banks were too big to manage. leaving aside the question of wells fargo specifically, do you think it is possible for a bank to get so big it cannot be managed and that perhaps the best step would be to break it up? we have high expectations for what we expect to be in place in a large organization. we expect there to be a robust functions anddit the board of directors and

supervising and holding senior management accountable for throughout happened the organization and a strong compliance environment. i do not think these are impossible standards to meet. they may be challenging but i would not arrive at the conclusion of organization is so large it cannot live with those standards. responsible for putting in place that kind of compliance environment. so i am not endorsing a general orclusion that this bank banks of that size are too big to manage. i believe they can be challenged and that is what we expect.

>> erik schatzker from bloomberg television, thank you. while there is clearly a wide expectation is for targets to rise by about half of 1% by 2000 17, three quarters of 1% in 2018, and further into thousand 19, bringing us 2.5 and threend then two quarters percent to 3% in the long run. time, the media forecast for gdp growth is 2% and one pointears 8% thereafter. the most optimistic projection for growth is just 2.5% of all projections outlined here. if economic growth will be that slow for that long, where will inflationary forces emerge that will requiring death will require tightening of 250 basis points from where we are now and

if not inflation, is there another explanation? i agree the: projections for growth are slow. we have further written down our run,ate of the longer normal, and what that reflects is an assessment to productivity growth is likely to remain low for an extended time. also, it does not defy the expectation it will pick up from the miserable half of 1% pace overear that we have seen the last five years. growth is a factor and slow productivity growth is a factor that influences the ofger run, normal level interest rates.

running down the likely pace of productivity growth is one factor responsible for the downward shift in the path you see for the federal funds rate. reason forimportant revising down the rate. the part of your question about inflation. in spite of having such slow growth, disappointing productivity growth, we have a labor market that last year generated an average of 230,000 jobs a month. this year, has been generating about 180,000 jobs a month. pace of jobry solid sustainablekely not in the longer run. we are pleased to see people come back in market so it is sustainable for some further amounts of time.

ultimately drives inflation is the tightness in the labor utilizationesource we are sad fact is getting a healthy case of job market growth with very slow growth. it bears onthink the inflation outlook. shift prompted a downward in the projected path for the neutral and actual federal funds rate. it is a huge concern between -- because slow productivity growth ultimately means slow growth and living standards and that is a big concern policymakers should be focused on. >> with politico. fargo, this is a more consumer finance kind of you had mentioned this

would be a supervisory focus over the coming years. are there any adjustments that might be wanted given these revelations? we will focus on compliance risk management and board oversight. also across bank holding companies. issues andonsumer issues that involve harm of andumers can become issues one of the lessons from the financial crisis i think is that abuses of consumers of this sort we can see in subprime lending, did become safety and soundness issues.

we need to have that concern and we will focus their. i cannot really give you specifics beyond that. >> congressional democrats as well as the campaign hillary clinton would look for bankers removed from the board overseeing the fed banks. others would like to see the private ownership, the bank ownership be brought for the intergovernmental. i want to know what you thought of those two proposals? janet yellen: we have a system that congress did set up in the federal reserve act in which the governor's reserve banks involved banks and shipping capital and serving on the boards of directors. we have long recognized inside the federal reserve that when we

are charged with having bankers involved in that obviously presents conflict of interest. we have put in place very strong measures to ensure those conflicts of interest are not allowed to play out in any way, that bankers are not allowed to be involved in supervision. dodd frank changed the arrangement so that only classed b and c are nonbanking directors can participate in this election as well. sure the pollske have confidence that in spite of the fact that we do have this involvement in our boards of directors, it is not giving rise any conflicts in our actual cost of the policy.

if that setup has changed, it is up to congress to decide what to do here. in thees complex issues research banks and the federal reserve. that is looked at as congress , that we thinkdo through carefully what the ramifications of making changes would be. >> karen with market news international. you mentioned we need to be forward-looking but you also pointed to the economy not overheating as the reason you can hold off on this one. monetary policy is operated with long and very your leg --

variable lacks. do you think the timeline has changed since the financial ?risis unconventional tools. how does that factor into your decision-making? janet yellen: the notion that monitor policy operates with layouts,al -- variable that statement is one of the central things to understand about monetary policy and it is not fundamentally changed at all believe we why i have to be forward-looking. i am not in favor of that sort of approach. we need to operate based on forecasts. but the global and u.s. economies have changed a lot. history does not always exactly replay itself. many of those of us sitting we learn theble,

lesson that if policy is not forward-looking, inflation can levels to undesirable and can be dislodged upward and that can bence of higher inflation takes place, which it is very costly to reduce and number -- absolutely none of us want to live in episode like that. believe it is important to be forward-looking and we will not make that mistake again. things do change. the nation -- nature of the inflation process has changed significantly since the bed days hadhe 1970's, when the fed to chase this inflation problem. we have seen inflation respond

less to the economy, to movements in the unemployment rate, the curve has some desk becomes flatter, so it seems that is something we need to factor in to our decision-making, inflation expectations appear to be anchored and perhaps that has been a result of a long and enacted,flation something we do not have in the 1970's. we have to be aware of the fact we have a long time in which inflation is undershooting our 2% objective and we see signs that, i would conclude inflation expectations are well anchored at 2%. we see signs suggesting possible slippage there. a long way from facing the problems japan faces, but there should always be a reminder to us that we also would not want

to find ourselves in a time where inflation is chronically what running lower, inflation slipping, andre the rate becomes more important. things are changed, forward-looking, absolutely. >> patrick, cnn. you mentioned one of the major problems, low productivity growth in one of the solutions that has been proposed widely is better job skills. many economists say some workers are on the sidelines because they lack new job skills, the ones that would maintain employment. the fed would have the authority to finance or run its own job -- that you andting your colleagues know that one of the solutions, a major issue in the economy, you cannot take a concrete step to solve that

issue? i think job: training and job skills are important. developmentommunity trying in the local communities where the ups -- reserve banks and foster try further understanding of what hows of programs work and community organizations and state and local governments can put in place programs that will be helpful. i recently visited a program that was very impressive in philadelphia. it is possible to design programs that will help people overcome obstacles to getting jobs that are available. think while we can play a role in facilitating, understanding

what works and what does not, that can be helpful, it is worthwhile that policymakers at the federal and state and local levels to be focused on this because i think it is an area that would be helpful in making progress. >> thank you. as we have gone to a 4.9% unemployment rate, we have yet to see substantial pickup in wage growth. it seems as if the american middle-class continues to express disappointment about that. there better news on the river -- on the horizon? janet yellen: i think we have seen modest pickup in wage growth. it is running higher than it was by a number of measures.

growth pick income up recently. i think they report, we are encouraging showing there are income games -- games because of higher-paying jobs. that is occurring throughout the income distribution, but i do expect, we expect the unemployment rate to decline further. we expect labor market conditions to continue to isrove and the expectation we will see a further pickup and bee growth and it will broadly beneficial to american households. complex that is janet yellen finishing. tom keene,ght -- michael, special coverage of the

fed meeting. we could talk three hours about the press conference. we will not. we have bill gross coming up. not the bizarreness of the but as shee nuances struggles with the economy and the financial crisis. this cautious approach. i'm really taken by almost the of thec philosophy cautious approach. >> one line stood out to me when she said why the fed did not do anything. she said we are struggling to understand what is going on in the economy. asked why the fed has been so far away from the markets. it does not fit their models. trying to figure that out. they are really taking a democratic approach here. theeconomy is getting to point where you should move, but we do not have to quite yet and let's wait and see what happens. tom: a lot of nuance. the tone i saw was the idea this

was a more hawkish statement. bill gross did not get a rate increase. but before we go to mr. gross. it was clearly a more hawkish tone. they all wanted a rate increase. >> the last time we saw three different inwas that the fed is setting us up for a december move. no question. whether or not you get one will depend on the data and chair yellen said there are a lot of things that cap including a presidential election between now and then. tom: people talking about wells fargo and the presidential election. william gross puts money where mouth is. she was framing out at one point

the nuances of what they were stunned she said we could cause a recession. can the fed cause a recession? >> of course they can and they have. the past, almost necessarily in some cases than inflation is very high. the question is what policy , that is what they are quarreling with. some suggested is a neutral fed -- neutral fed funds rate. 1.5%. some suggested is higher. no doubt in a highly levered world and a highly levered financial economy, a basis point increase might tip an economy over into a recession. >> almost a pledge from janet yellen that they will raise rates in december, nothing untoward happens?

>> no. i do not take anything as a pledge from janet yellen anymore. it is all confusing. perhaps a few chickens. we do not talk about the chickens. there are birds there in the pan. of data dependent, they are market dependent and the markets meaning stock markets. no guarantees and a lot of confusing rhetoric not only today and in prior weeks. >> not between now and the december 12th meeting? >> i think so in terms of currencies.

to the extent one candidate or elected, they could be significant. i think they know policies motivate economic growth and the emerging market economy especially. whether or not november is, i am not sure. i've given up trying to determine when they will go, so to speak. tom: you mentioned confusion which i think is appropriate. i was thunderstruck by her confusion. she did mention the precise timing is the debate. timing, talkrecise

about what you just heard. >> the timing of a bond bear market is delayed. i think that in, nation with what happened in japan, the bank of japan, it was quite important in terms of bond yields and bond levels as well as stock levels. the decision last night was seemingly innocuous. the cap at 0%. it provides what i call a soft cap on treasuries and guilt. take the 10 year treasury. or 85ly a soft cap of 180

because of what is happening in japan. tom: let's bring it up now. mike mckee, jump in with bill gross. erik schatzker, moved again with his question. productivity, what do we do about it? why the fed is predicting low inflation but feels the need to raise rates. not -- do youo even care where they think they are going? >> i do not think institutional investors and i hope private investors do not really care.

they're uncertain in their ability to forecast going forward. other economists are in the dark in terms of where the policy should be. today, lower the dots , theworked against insurance companies and the banks, because they flatten yield curves. the fed will not raise rates as much as they thought during the last week. i question that minerva -- that maneuver. >> the bank of japan said today for awilling to run hot 2% target. janet yellen --

>> i would come down on the hot type of level. under target for 5, 6, 7 years time. inflation between 2% in the money is growing and growing and growing. why not in terms of inflation to get back to normal levels. philosophyterms of -- this is theeates memory in the middle of the last .ecade certainly in 1994, michael mckee mentioned this in our ago. what did you hear in the press comes today, the intellectual fear that we cannot raise rates because he could be wrong and

the ultimate fear would be we have reversed policy. >> i think that is right. you expressed it a question a few minutes ago. basically, the potential for a versus, 24 basis points 100. she is definitely a delicate -- the real interest rate territory normalizing wasn't .5 basis sad.s, very what did you observe? i saw a confusion. did you observe that? >> she outlined the fact that it was confused and i think she was more folksy than usual when she came out and said why didn't we

raise rates? before we let you go, you talked about a soft cap on possibly out of japan are you see with the fed is talking about any idea they are more hawkish. we would like to see the yield curve more flattened. >> is basically to look at that saw -- soft cap. basically upon current market levels. .o me, that is a soft cap i do not mean that i endorse what they are doing, but i'm not willing to do that and i think the central banks are willing to new terms of keeping interest rates low. quickly, do you have a

?evel where they begin is it substantially stronger than that? night thatazed last they weakened. they strengthened close to the 100 level. i got the positions and situations that basically say they will not go above 98 or 97. strong in this type of environment. boj will work to buy short-term rates. very weak it -- weekend. >> we welcome all of you on bloomberg radio on bloomberg television worldwide. i thought this was going to be boring. i was wrong.

i want to run through this quickly. this got more interesting. the yen, there it is moving 100.64, roughly, coming down to 150. ,nd then a question in the room erik schatzker. i sat here and watched the yen move off your question. what was it like to see jerry allen struggle over your observations on productivity? erik: they were her observations. to recap, i and others were having difficulty understanding in the space of four years, to a fed fund targeted to 75-3, while the fastest the

fed says the economy will grow his 2%. the central bank expects gdp growth of 1.8%. where is the inflation that a tightening of 250 basis points? we talk about the issue of productivity. janet yellen said that is the problem. it will remain low and it is a huge problem for living standards and the enormous challenges for political leaders. combined with low productivity, she says she is treating 180,000 a month and it will create pressure. tom: i wish you had been here. mike mckee, you are in the press conference whatever ago the phrase pre-much the same question as. did. what is the difference now? what is the difference now

versus erik schatzker asking somewhat the same question today? things have really changed. he is better looking and has a brighter tie on but seriously, things have changed and 12 months. formulation.e they are not suspecting inflation to rise or push it up fast enough, they need to raise rates. the question now is what will the fed do? they cannot do anything about it. waiting and watching. >> that is what the fed is stuck doing. also, the forecast has not come close to reality. to's rewind this and go back december of 2015 when the fed was looking for gdp growth. the fed was looking for core inflation of 1.6% and they are pretty on target. the fed was looking for an unemployment rate of one point

7%, 4.9, and the trend is down. we today? nine months later and we have not seen a single interest-rate hike. tightening by 100 basis points and now, as you can see, the median forecast for december is for an increase of 25 basis points. seen time and time again is the fed struggles to why things have not panned out the way they envisioned. the projections offered to they also raise questions about whether anything will materialize. whether it matters to the financial markets or not, some might say it does, it is important to understand things are evolving in that fashion. do you think they will let

erik schatzker back in again? >> the other elephant in the a lot of people try to get them to comment basically on janet yellen but she was having none of it. >> she said the fed is independent and not politically motivated. andcame back to it time time again. the question was raised three times. i am not surprised that i know you are not. i was surprised that she bit the wells fargo question. that surprised me. question yellen saying they would need to supervise banks more closely going forward. thank you very much. tom: michael, absolutely extraordinary. -- former mike -- vice chairman of the fed on

this press conference today, bill gross used the word confusion. is our academic economics today, our policy prescription of the central bank, is it confused? >> probably a little. the biggest reason, frankly, i just heard you talking about productivity. no one knows what to make of productivity. think the fed has planning a two to three-year horizon, not a three month horizon or a 30 year horizon or something, no one really knows what to project for productivity. the fed keeps coming down inch by inch and grudgingly. i think they are too high over a .wo-year horizon that is extremely germane to how much slack you have in the

economy, therefore, worried about inflation, and therefore what you do about interest rates. she did say they are struggling to understand why the economy is performing hazardous -- as it is interesting an admission from a fed chair. >> all of us are struggling to understand it i do nothing we should mark the fed down for that. everybody else understands what is going on and at the fed, they do not, that is not the case. >> let me to -- ask you about politics and not presidential politics. 3%, they had three before. this shows the pressure building for a rate increase to satisfy the hawkish wing of the fed. >> definitely. . would beh wing, shocked to be categorized in the hawkish wing. one of the most dovish members.

so yes, there is a great deal of division. issuef it is over the we're thinking about and some is over other issues. and a hawkish direction, to me, that is news. >> was this compromise? we put out a hawkish statement so janet yellen could hold off for another couple of meetings. >> it probably did not work. as is not the first time ever there have three dissents but those are rare. a 3% vote is very unusual. us, alan blinder with former vice chairman of the fed. german, we had a stanley fischer around altra point versus modestly, dating. i cannot believe that is in the

42nd edition of your textbook. explain whatase those mean? altraould lean toward though i do not think i would've used that word. the consensus of the fed seems to be the neutral real interest rate now is around zero. economy, state of the they seem to think it is around zero. inflation rates, 1.6%. so, you have got a negative and the actual nominal fed funds rate is 640. you're looking at about a -1.2% real federal funds rate, quite a bit low zero. i do not think i would call that ultra or modest, actually. i give deutsche bank huge credit for this, given the research capacity, the idea of

financial stability. i'm not sure that came up in the press conference today. how concerned are you about a central banks at that will have a at bank financials ability or instability because of negative interest rates? >> negative real interest rates. -- thereot seem to be was a lot of talk years ago remember that if we were ever to get the interest rates down to zero as they have more or less while, all hell would and finance as we know it would go out the window. nothing remotely close to that has happened. want to sit with you and say we're out of the woods

and nothing bad ever happens. that is not true. so far, so good. really low interest-rate's for a long time and nothing that is have. one camp says there are financial market locations being preston and the other says the .ed would be about inflation janet yellen says neither of those things would be true at the moment. >> i do not know. you make the best educated guess you can base all the information you have at hand. on the financials instability question, i cannot do anything but agree wholeheartedly with janet yellen, scary stories about the horrible things that happened with near zero interest

rates, they have not happened and look like they are happening. it does not mean we want to stay here forever. these are very abnormal and should straight i think the stronger argument if you want to and say the fed should have gone up or the fed really better start going up soon after the election, is kind of old-fashioned inflation reasoning. here we are with a labor market that is maybe not really fully a full employment, but it just got to be in the neighborhood of employment, in whole variety of indicators suggest that. it is still growing fast, at least we think so. the gdp has got a way of disappointing us in recent quarters. it looks fairly likely but not for sure that we will have an overshoot of potential gdp of the national rate of unemployment or whatever you

like to call it, a small one. relationshipspass which have been called into doubt lately and push the interest rate up. a few tenths of a percentage point below the target inflation. just imagine you took him back to 1987 and said, you know, we are within 40 basis points of our target inflation rate. he was 10 percentage points away from his target inflation rate. the fed is almost there. the argument is isn't it time to normalize interest rates? >> in terms of the yield curve, who is right here and is the fed being led around by the markets to it detriment? >> i think it is possible in the signaledt share yellen fairly strongly, by fed

standards, in jackson hole, that an interest rate hike in the near term was likely. it did not quite say september a lot of people the impression -- then we had a few the numbers but i think market greatly exaggerated the way they were, not nearly as much as market participants made them out to be. you can put two and two together and say, and i hope this is not the reason, well, because of the market reaction, that is why the fed changed its mind. that is not so good. it is sort of being led around by the market. thank you. very important to have you on. absolutely extraordinary today. a fascinating three-hour press conference.

>> at the moment, you price in a december move and wait for the data. tom: im with you. ua you wait for the data. absolutely. >> we are following and have a lot more details coming up on bloomberg television. the house committee on oversight and government is questioning executives, ceo heather being questioned on the business practice, especially the pricing of the epipen. tom: this is fun. are we going to do this tomorrow morning? nasdaq developed nicely, 100 64 points. scarlet fu will move the conversation forward. ♪

♪ we are moments away from the closing bell. i'm scarlet fu. joe: i'm joe weisenthal. matt: and i'm matt miller. ♪ [bell]

u.s. stocks closing decidedly higher. the dollar defined and an oil rally. joe: but "what'd you miss?" scarlet: the fed leaves rates unchanged but schedules -- but signals a right that rate hike is likely. joe: and we talked to andrew 11 -- levin. we talk about what is at stake for the u.s. and german elections. ♪ shot up fortraight the market as we begin the market minute and equities certainly credit when you look at the major indexes after the fed press conference began, it was a straight line up and major industries are closing up more than 150 points. and gains for the nasdaq and s&p 0,