but when you're looking for a smaller pool of people, you're actually trying to hired a skilled person i think those wages are beginning to go up and that is the root of internally generated inflation. i think the fed will have to pay attention to that. and remember, we've got super, super easy policy right now. the issue isn't moving to a tight policy but -- >> david and jack, sorry to interrupt but it is that time. let's get now to washington, d.c. and our favorite guy steve liesman. steve. >> the federal reserve tapering by $10 billion, bringing the amount of mortgage-backed securities it will purchase and total securities to 55 billion. 25 billion in mortgage-backed securities. 30 billion of treasuries. dropping the 6 1/2% unemployment target as a threshold for when the federal reserve might raise rates. the new language is that in determining how long to maintain low rates the committee will assess progress, both realized and expected toward its objective of maximum employment and 2% inflation. it's going to take into account

a wide range of information including, and here's the new test, measures of labor market conditions, inflation pressures, inflation expectations, and readings on financial developments. now, the fed saying it's appropriate to maintain low rates "for a considerable time after the asset purchases ends, especially if inflation is below the 2% target." even after employment and inflation returns to what they consider to be their manndate levels and economic conditions may warrant the levels of interest rate that is below normal levels, so this is a dovish statement by the fed in which they're saying even after we get some normal levels on employment and inflation we may have i lower than normal fed funds rate. saying he supports one part of the statement not the other. a couple quick statements saying looks like the economy slowed during the winter because of adverse weather conditions. labor market was mixed, unemployment rate remains elevated and the risks are balanced. so guys, back to you. going from that 6 1/2%

unemployment threshold to new language and adding some new dovish language about keeping rates lower for longer even after we get to economic conditions that suggest that they should be at normal levels. >> steve liesman, thank you very much. it's kind of interesting what's happening in terms of the market reaction. when you say it's a dovish statement in terms of keeping rates lower for longer. we've been watching the ten-year yaeld pick up. in terms of equities, the dow and s&p dropping down lower. we see this in terms of a knee-jerk reaction. we have to let the market digest that for a little bit. but certainly the knee-jerk reaction is the market is not taking it as dovish as people are saying. >> steve, you still there, buddy? >> i am, yes. >> could you lead into this in a good news way? i know the 6 1/2% unemployment target, people at home on the radio right now are saying who cares? the fed didn't want that hanging out there like an elephant sitting on the couch. right? so they have now eliminated

that. is there any way to read into that good news thinking the fed realizes we'll probably hit the 6 1/2% unemployment target sooner than they want and they don't want to be backed into a corner? >> the reason i can't answer that question is for the very reason the fed is dropping it. 6 1/2% unemployment rate in the current conditions doesn't mean what we'd hope it to mean. and that's the problem for the fed. it's the problem for everybody. the unemployed. >> participation goes down. but it's not everybody dropping out of the workforce that brings the unemployment rate down, is it? >> no, it's also employment. if it wasn't for some of these issues people leaving the workforce and really the existence of massive slack, i think if we were above it the fed would find this 6 1/2% threshold not very useful because of the labor market slack issues. i think that's a key issue. but i just want to go back to this issue, why i find this more

dovish. i think that new statement in there which says you know what, when we get back to what we consider our mandated levels, close to what we consider full employment, close to our inflation target, we're still going to have a funds rate we believe is lower than it normally should be. i believe that's a new and key part to the statement we got today, guys. >> just a very quick question to you, steve, before we get back to david and jack. i'm wondering by dropping that 6 1/2% threshold and using, i don't know how to put, it maybe a broader stage to the decision-making process as to when if how they're going to raise rates does it make it more opaque, more difficult for the market to be able to asset ex t exactly when it's going to happen because there are so many other qualitative things to assess now? >> i think all things being equal yes, mandy but i think the market because of a discussion that brian and i just had, what is 6 1/2% unemployment really mean in this context? that the market was having problems understanding the levels. yes, it is harder but it was always hard and it was always going to be something that was difficult to figure pouout.

by the way, the debate's not over. how much slack is out there is a key point. i want to mention one other thing i think is somewhat dovish about this statement. very surprised to see -- if my read is correct and maybe it's wrong. to see plosser and fisher on board with this statement which calls for a lower normal rate down the road. maybe i'm missing something but those are two hawks signing on to what seems to be a pretty dovish remark on the future for rates. >> let's bring david kelly and jack mcintyre. jack, your reaction to the fed's statement. i don't want to say news because they've been pretty much doing what they've been doing. >> at first blush i'm not that surprised because again, we've had the view that we think the fed is going to err on the side of keeping monetary policy biased toward being more stimulated. we've got to wring out the deflation. we don't want that to kind of take hold, the disinflation. paul voelker showed us how to break inflation.

we have a playbook for dpog that. i think the fed is going to err on the side of keeping rates low. and it certainly sounds like based on what steve was just reporting that's what the fed is thinking right now. >> is it status quo, therefore, for equity investors, david or is it something different that's been thrown into the mix here that would make you change your mind with regard to asset allocation? >> no, i think this is good for equity investors and it's not as bad for the fixed income market as it might have been initially. in terms of erring on the side of too much inflation i wish the federal reserve would decide not to err at all. you can move the goalposts but you can't move the end zone. falling unemployment is going to cause wage inflation. we are seeing wage inflation. >> there was one month, david, of higher wage inflation, and everybody got spooked and said

the fez is going to -- specifically because you had a weather event's, which is a typical hike you have in earnings when you have people stay home because of weather. i think we are just so far from a wage inflation issue. >> david? >> first of all, i do want to see higher wages. i agree. i want to see higher wages now. the problem is two or three years down the line the problem is when you push -- leave the rates too low you're going to end up with some bubbles, some asset price bubbles. you're eventually going to end up with wage inflation, which is undesirable. and i feel like they need to get their policy in line getting back to normal. i don't understand why they're trying to get back to an irpt rate which is below normal. they'll end up with inflation down the road. >> david, do you really think you have a handle on the wage inflation dynamic in the globalized world? if you have some rise in rates or wages in the united states, given the capacity of china, vietnam, africa, the entire world to meet the demand for u.s. consumption do you really

think people are going to have a problem with wage driven inflation if you have a rising wage in the united states? >> most of this -- you know what our exports as a percent of gdp and our imports are. this is mostly a closed economy compared to any other economy in the world and the truth is we're beginning to see -- i'm trying to hire someone right now. i see it every day in terms of you can hire somebody but if you want to hire somebody really good it's going to cost you. and i think we're running out -- if you look at short-term unemployment it's actually below average levels. >> 91 million americans. 91 million. 91 million americans are not in the labor force. a record. >> listen, it's a good debate. it's a good argument. steve, i'm annoyed with you because wage inflation dynamic was going tonight name of my new punk rock band. now i can't use it. jack, let's bring it back to the mom and pop on the radio driving down the new jersey turnpike right now probably with a flat

tire. why do they care about what the federal reserve has to say? what should they be doing? what should they be listening for? >> so keep in mind, brian, one of the key motivations for qe and the fed being stimulative for as long as they have been in our eyes is to create the wealth to wealth effect. asset inflation. because again, we don't have a lot of levers to pull right now. as long as the fed is biased toward accommodative monetary policy i think equity should do well. because we're going to get some growth. it's not inflationary. so to me that's sort of the best of both worlds where bonds -- treasuries aren't going to do much of anything. i think risk assets are going to do well. and i would include in that emerging market debt which we can certainly discuss. >> indeed we can discuss it later on. but in the meantime let's take a look at the market reaction. we're seeing some lows as we wait for chairman yellen's news conference at the bottom of the hour. but our reporters are standing by with their always incisive

commentary. bob, what we're watching here is equities moving lower, dollars and yields ticking higher. what do you make of this reaction? >> there's two things that everybody's talking about. one is the paragraph 1 which i looked at carefully. that's the economic commentary. fairly muted. economic activity slows during the winter months, partly reflecting weather conditions. last quarter they talked about economic conditions picking up. markets moving down a little bit. more importantly for what we've been talking about in the last couple years, they haven't replaced forward gienz on just employment. and now replaced it with this slew of indicators. pressures that are a little confusing to traders and hard to figure out at this point. now we've got a new slew of indicators that is not going to be so easy to understand exactly what they're doing. and if you look at the tlt a lot of activity in the exchange traded funds and the bond area. you can see the sort of drop we had. this is prices down, yields moving up there. i think that's part of a little bit of the confusion that's

going on, how do you part this new stew of forward gienz they got? >> that's something i know you were flagging as a possible risk of today's fed decision. rick, as we've been saying, yields spiking. what do you make of this? >> wow. okay. first of all, for 2014 a flattened yield curve and that's what mostly it's been doing, has meant lower rates. not today. today's yield curve is higher rates. listen to this. the two-year note before the statement was at 36. it's now at 41. that's up five. the three-year note was at 76. right now it's at 85. that's up eight. we're up eight on five -- we're up three on ten. we're unchanged at 3.65 on 30. from yields where we were right before the statement. curve flattening. what does that mean in english? it means something in the statement is causing traders to

think there is going to be a zero interest rate policy than there was before. stocks love it. it's the economy doing great. well, stocks don't love it right now. and the winner by far is the dollar index. up on every currency, swiss, aussie, canadian, peso and yen. holding up some very strong gains, almost a half a cent. back to you. >> rick, thank you very much. the dollar and the bond market. okay, guys, janet yellen is on the clock just in a matter of minutes. she will give her first news conference as chairman of the fed. we will carry that of course as soon -- i mean, literally, mandy, the moment it begins. >> moment. also jim cramer's going to be joining us live with his reaction to the fed statement and what his key words are he's looking out for for ms. yellen to stay. do stick with us here. a very special edition of "street signs." we're watching the market kick by tick. yields spiking, dollar spiking.

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the dollar here. and i want to bring back steve and rick because the first thing you said, steve, was that it was a dovish statement and yet it feels like the market is taking it as anything but. what do you make of this? >> you want to let it settle out a little bit, but i'm real interested in what rick's hearing down there. i went through this thing. there is one paragraph in there that does say that whatever we do here this doesn't mean a change in the guidance. so they're trying to say you know what? we went from 6 1/2% to this qualitative guidance, but it doesn't make you want to think about anything about the outlook for rates. i read it as more dovish but clearly somebody somewhere is reading it as more hawkish at least on the initial thing. it could be just to sell the news. i want to know from rick if he's hearing any specific statements down there that have spooked the markets into thinking that it might bring forward, when interest rates might go up. i don't see it. i see interest rates being lower for a longer reading this statement and i'm ready to be corrected. >> oh, no. no. i'm not hearing a debate about the statement. what i'm hearing on the floor,

especially from the options guys, is that the big funds have been in love with the shorter maturities, the 3s, the 5s, and they've been long and they are dumping this stuff. so what you're seeing is the rates for the shorter to the mid part of the curve stopping at right above the 5, maybe the 7. those rates have moved higher. the long end like 30s was virtually unchanged although it's creeping a bit higher in yield from where they were boff the statement. so you could flatten in a number of ways the flattening we're seeing now is by selling of short maturities and not as much action selling in long maturities. >> hey, rick, can i jump in for a second? >> sorry about, that steve. rick, only because you touched on something. i had drinks with a guy last night in the bond market and he said he had this feeling, rick, that the entire bond market was so much on one side of the boat that the bond market itself could get caught out on the wrong side of the yield curve. what do you think about that? >> i completely agree.

i think that the 10s and 30s are doing about what anybody would have expected especially considering the pace of the taper and who's going to replace that buying. tick data yesterday stayed said that's a question mark. but on the short end i think it's purely lojs t lly logistict of the big holders of treasury are caught offsides. your source is probably correct. >> what were you going to say, steve? >> just one more thing. all the commentary i've gotten so far is neutral to dovish. i haven't seen -- i've read four or five reports to this point. i don't know if you've seen anything that we might be missing here but i guess i have to stand by my initial take on this thing, is that it's a neutral to dovish statement. they went from 6 1/2% to the qualitative language. and i'm not seeing anything that should make you think you're going to be raising rates anytime sooner. if anything, it would be a little bit later than maybe you'd expect. >> hey, steve, just to give you an idea, the three-year note was at 76. it's now at 87. >> that's a big jum.

>> the ten-year note was 2.71. it's at 2.76. >> hey, rick, i'm not going to argue with the money. >> that's right. >> thanks, guys. >> we've got a guy that's well known who traveled a long way. so let's put him on television now. it's jim cramer. he's live in seattle. he has a huge "mad money" tonight. he is from seattle. he's been at starbucks all day, interviewed howard schultz. before we get to that in the promo of your show, jim, let's talk about the federal reserve. what do you make about the dow's drop right at the fed? is that some sort of anticipation of higher rates next year? >> well, to me it looks like the people are saying that in 2015 the short rates are going to -- the fed funds rate's going to go up perhaps in 2016 the fed's rate will go up maybe 1% to 2%. that's what this move seems to be saying. i respect what steve's saying when he looks at the statement but there's no disagreement with the action. the action is saying fed funds are going to go up and a lot of the bond market equivalent

stocks are getting killed because they will not do so good when short rates go to 2%. this is the story as i see it. i think it's just knee-jerk again. but i'm watching the bank stocks do better. and that's a good sign. bank stocks need rates to go around 3%. i have no qualms with 3%. everything's going down initially. that's always wrong. that's just stupid. that's algorithm. we've seen that time and again. but it does feel like the fed funds rate is going to go higher and that's what people freaked out about initially. >> just a moment ago we were talking with jack mcintyre from brandywine and one of the points he was making is the fed will stay data depend ept and even once they do start tightening don't assume they're on like a tightening trajectory from there on, that they could if the data warranted it still cut rates as the next move after that. is that a possibility in your mind? >> well, look, we're going to heart press conference. but janet yellen, uniquely like ben bernanke is saying we don't have ideology. we're not wedded to any particular position. we don't think that we're destroying the federal economy.

of course the economy a lot of people feel that they're doing that. we're going to look at the data and make decisions. this is such a healthy fed. what the fed says is we're not going to be like jean-claude trichet and decide what matters is -- we're going to look at how things are and act appropriately. how can you not like that? so many people just hate the fed and hate this idea that they don't have an ideology. i think we should be all grateful that they're looking at the numbers and they'll be adjusting if things get weaker. what's the matter with that? basically looking at announcement things are getting better we're not going to be just blind to that. i think this is business as usual but there are always people who think if they continue to get better the fed funds rate can't always stay down. they'll tell stocks that yield 3 with the idea in a year and a half they'll be buying short end that yields 2. >> you've confirmed my suspicion you have a seefrktd twin brother because i have no idea how you knew the financials, jim, were doing well given that you're basically in the starbucks headquarters. but you're right. if you look at the sectors, most are down with the markets. financials are up. we've got comerica, zion's,

charles schwab, bank of america, regions financial, metlife, state street, prudential, all higher today. so do you make the move out in the banks and financials to be a this is good news for them because higher rates mean greater net interest marge snin. >> look, you get a ten-year that's a 2.8 and suddenly everyone's going to rerate the banks right here, particularly because we're about to have a whole new group of -- remember, the banks are up against some tests from the federal gooft, and the tests are going to say listen, you can return money. certainly a lot of these banks have been waiting to return money to shareholders. you've got a unique situation where people have been holding off waiting to see a little inflection on the curve. they get it today and they say this is our chance to bite most undervalued group in the market and they're piling in. i think that's day one of that group. that group has been horrendous. i think money returns to it. >> for the market as a whole i know, jim, you've been out there and even you've been showing signs of a little nervousness with regards to how the market has been acting. we're very, very close to those record highs. i think even though we're

slightly down today for the s&p we're not far away from the 1878 historic closing high. are you still nervous? what would you do with regards to equity investing right now, especially taking into account today's statement? >> i think you can buy what's cheap. i think there's cheap growth all of a sudden because a lost growth money has gravitated toward froth. i think there's cheap bank stocks because people felt the numbers have to come down as brian mentioned because of the net interest margin. and you've got to stay away from the -- let's just say the -- i know that i use this too much as a rubric. but the plug powers. the fuel cell energies. because that is where the economy is not going. so i mean, i look at starbucks today. could that be a front-runner to what happens when growth gets better? i think there's a little froth right now in starbucks just because there's 4,000 people at this pilgrimage. but i think the classic growth is not that expensive. i think financials are not that expensive. i think semt conductor stocks aren't that expensive.

then there's this cohort, let's call it the tesla plug powers cohort where people say listen, it doesn't matter, i'm taking it anywhere. that's where all the strident anniversary are -- no, never mind. i shouldn't call them investors. they're speculators. >> we've been watching the plug -- >> gives me a headache. >> meteoric rise. stick around, very big show tonight, we'll get more details on the other side of the break. >> you want cheap, that's nordstrom's. >> all right. we are just moments away from janet yellen's first news conference as fed chair. this special edition. there's somebody waiting with what appears to be the last blackberry in america. we're back right after this.

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talk to a pnc investments financial advisor today. ♪ literally, in less than three minutes janet yellen will come to that podium we're showing you right now. and she's going to give her first news conference as fed chair. we will take it live literally the second that it begins. >> and let's get now back to jim cramer, who is live in seattle, washington. jim, i know you've got a massive show tonight, buddy. >> yeah, i do. obviously everything has to be put through the prism of what janet yellen says. speaking of nordstrom's they never talk and this is a department store i think is very undervalued.

we're going to spence jer rascoff from zillow. mortgage rates pretty much determine the next move of that stock. dr. clay siegall. this is all about seattle genetics and a potential cure for cancer. then obviously we're here at the 4,000-person pilgrimage with howard schultz at starbucks. a great growth stock that has gone up about 9% in anticipation of this meeting. >> wow. it's amazing, too, jim, your nordstrom guest has the same last name as the company. how does that happen? >> it's incredible. i've been trying to figure that out. maybe it's the only family-run company left in the country. >> thanks, jim, always amazing stuff. this may or may not work. into our screens at our desk i want to show what jim highlight ppd these are the financial stocks. i know it's hard to see. the point is this. they're all green. bank of america, bank of new york, suntrust. zion's, metlife, charles schwab. they're all higher on our screens, on our desk right now and as mandy points out they are

the best performing sector. >> yeah, they are the best-performing sector. what's the worst-performing sector? it is utilities, brian. and i think bob pisani has been really sort of mentioning a lot lately that interest rate-sensitive sectors like the utilities, like reits have been the best performers this year. utilities is the second biggest gainer on the year. today in terms of what we're seeing in terms of the reaction of the s&p has come back a little bit after the statement here. utilities, they're an interest rate sensitive sector. it is down by about 1% as we speak. >> again, here's where we're standing right now. i know, mandy, we took a turn. you know what's going to happen tonight. you know what's going to happen right now. and what's already happened, by the way. speculation of why the market took -- it didn't fall 300 points. nobody's out there -- >> we have to come back a little bit with that digestion that always happens. >> federal reserve statement was i think perceived as i'm trying to read and do live tv at the same time. pretty bearish. bearish for rates. bull bullish for the economy.

bullish for the u.s. economy. federal funds rate still historically very low. at some point rates will go up. or maybe it's just traders hitting a button. we'll have to wait and see. >> at this stage the dow is down by 37 points. you can get your pencils out and determine where we're standing going into ms. yellen's first news conference as the fed chair. why don't we go over to her right now? >> right on time. >> good afternoon. i'm pleased to join you for the first of my post-fomc press conferences. like chairman bernanke before me, i appreciate the opportunity

these press conferences afford to explain the decisions of the fomc and respond to your questions. the federal open market committee concluded a two-day meeting earlier today. as you already know from our statement, the committee decided to make another modest reduction in the pace of its purchases of longer-term securities. the committee also updated its guidance regarding the likely future path of the short-term interest rates. as i'll explain more fully in a moment, this change in our guidance does not indicate any change in the committee's policy intentions, as set forth in its recent statements. rather, the change is meant to clarify how the committee anticipates policy evolving after the unemployment rate declines below 6.5%. let me explain the economic

outlook that underlies these actions. despite some softer recent data, the fomc's outlook for continued progress toward our goals of maximum employment and inflation returning to 2% remains broadly unchanged. unusually harsh weather in january and february has made assessing the underlying strength of the economy especially challenging. broadly speaking, however, the spending and production data, while somewhat weaker than we had expected in january, are roughly in line with our expectations as of december. the last time committee participants submitted economic projections. in contrast, labor market conditions have continued to

improve. the unemployment rate at 6.7% is .3 lower than the data available at the time of the december meeting. further, broader measures of unemployment such as the u-6 measure, which includes marginally attached workers and those working part-time but preferring full-time work have fallen even more than the headline unemployment rate over this period. and labor force participation has ticked up. while the committee continues to monitor developments in global financial markets carefully, financial conditions remain broadly consistent with the fomc's objectives. in sum, the fomc continues to see sufficient underlying strength in the economy to support ongoing improvement in the labor market. inflation has continued to run

below the committee's 2% objective. given that longer-term inflation expectations appear to be well anchored and in light of the ongoing recovery in the united states and in many economies around the world, the fomc continues to expect inflation to move gradually back toward its objective. the committee is mindful that inflation running persistently below its objective could pose risks to economic performance. the committee also recognizes, however, that policy actions tend to exert pressure on inflation that is manifest only gradually over time. the fomc will continue assessing incoming data carefully to ensure that policy is consistent with attaining the fomc's longer-run objectives of maximum

employment and inflation of 2%. this outlook is reflected in the individual economic projections submitted in conjunction with this meeting by the 16 fomc participants, four board members and 12 reserve bank presidents. as always, each participant's projections are conditions on his or her own view of appropriate monetary policy. the central tendency of the unemployment rate projections has shifted down by about .2 since december and now stands at between 6.1 and 6.3% at the end of this year. the unemployment rate is projected to reach its longer-run normal level by the end of 2016. the central tendency of the projections for real gdp growth

stands as 2.8% to 3%. for 2014. and remains somewhat above that of the estimates of longer-run normal growth through 2016. meanwhile, as i noted, fomc participan participants continue to see inflation moving only gradually back to 2% over time as the economy expands. the central tendency of the inflation projections is 1.5% to 1.6% in 2014, rising to 1.7% to 2.0% in 2016. let me know return to a decision to make another measured reduction in the pace of asset purchases. starting next month, we will be purchasing $55 billion of securities per month. down $10 billion per month from our current rate. even after today's action takes

effect, we will continue to significantly expand our holdings of longer-term securities, and we will also ton roll over maturing treasury securities and reinvest principal payments from the fomc's holdings of agency debt and agency mortgage-backed securities and agency mortgage-backed securities. the sizable and still increasing holdings will continue to put downward pressure on longer-term interest rates, support mortgage markets, and make financial conditions more accommodative, helping to support job creation and a return of inflation to the committee's objective. the fomc views today's decision to reduce the pace of asset purchases as consistent with the decision-making framework laid out last december and still in

place today. as before, if incoming information broadly supports the committee's expectation of ongoing improvement in labor markets and inflation moving back over time to its longer-run objective, the committee will likely continue to reduce the pace of asset purchases in measured steps at future meetings. however, purchases are not on a preset course, and the committee's decisions about the pace of purchases remain contingent on its outlook for jobs and inflation as well as its assessment of the likely efficacy and cost of such purchases. today the fomc also updated its forward guidance regarding the path of short-term interest rates. as emphasized in the statement, the new guidance does not indicate any change in the policy intentions of the fomc

but instead reflects changes in the conditions we face. let me explain this more fully. in december 2012 the committee first stated its guidance in terms of economic freshholds, stipulating that the current low range for the federal funds rate target would be appropriate at least as long as the unemployment rate remains above 6.5%. inflation is projected to be no more than a half percentage point above our longer-run goal and longer-term inflation expectations remain well-anchored. since that time progress in the labor market has been more rapid than we had anticipated. while inflation has been lower than the committee had expected. although the thresholds served well as a useful guide to policy over the last year, last

december the fomc judged it appropriate to update that guidance, noting that the current target range for the federal funds rate would likely be maintained well past the time the unemployment rate declines below 6.5%, especially if projected inflation continues to run below the committee's 2% longer-run goal. today the committee has further revised its forward guidance to better reflect conditions as they now stand and are likely to evolve over coming quarters. the revised formulation starts with a general description of the factors that drive fomc decision-making and then provides the fomc's current assessment of what those factors will likely imply for the future path of short-term interest

rates. in particular the committee states that in determining how long to maintain the current zero to 1/4% target range for the federal funds rate it will assess progress, both realized and expected, toward its objectives of maximum employment and 2% inflation. in short, the larger the shortfall of employment or inflation from the respective objectives set by the fomc, and the longer any such shortfall is expected to persist, the longer the target federal funds rate is likely to remain in the present zero to 1/4% range. the fomc will base its ongoing assessment on a wide range of information including measures of labor market conditions, indicators of inflation pressures, and inflation

expectations, and readings on financial developments. as i've noted, the fomc's assessment of these factors at present is consistent with the characterization provided in previous forward guidance. the committee continues to anticipate the conditions will likely warrant maintaining the current range for the federal funds rate for a considerable time after the asset purchase program ends. especially if projected inflation continues to run below the committee's 2% longer-run goal and provided that longer-term inflation expectations remain well anchored. the fomc also supplemented its guidance pertaining to the period after the asset purchase program ends and the initial increase in the federal funds rate target has occurred.

the statement continues to note that in deciding on the pace for removing accommodation the committee will take a balanced approach to attaining its objectives. the statement now adds the committee's current anticipation that even after employment and inflation are near mandate-consistent levels economic conditions may for some time warrant keeping short-term interest rates below levels the committee views as normal in the longer run. this guidance is consistent with the paths for appropriate policy as reported in the participants' projections. which show the federal funds rate for most participants remaining well below longer-run normal values at the end of 2016. although fomc participants provide a number of explanations

for the federal funds rate target remaining below its longer-run normal level, many cite the residual impacts of the financial crisis and some note that the potential growth rate of the economy may be lower at least for a time. in summary, the committee's actions today reflect its assessment that progress in the labor market is continuing but that much remains to be done on both the jobs and inflation fronts. unemployment is still elevated. underemployment and long-term unemployment remain significant concerns. and inflation is running significantly below the fomc's objective. these conditions warrant the continuation of highly accommodative policy reflected in today's policy statement. the federal reserve's interest

rate guidance and its substantial and still increasing holdings of longer-term securities will ensure that monetary policy remains highly accommodative, promoting the fomc's objectives of maximum employment and price stability. thank you. i'll be glad to take your questions. >> marty and then john. >> madam chair, marty krutsinger with the associated press. could you give us a little insight in how the decision was made on dropping the 6.5% numerical target in the forward guidance? was there any concern expressed that there's been criticism on forward guidance, that it's confusing markets, not helping them in some ways? was there concern expressed that perhaps it would have been

better to go to just a lower target, say, 6%? and would you also address the concerns you raised in the dissent that by dropping this it lowers the commitment on fighting low inflation? thank you. >> thanks. well, as i mentioned in my statement, the reason the committee felt the time had come to revise the forward guidance is not because we think it has not been effective. i believe the committee does think it's been effective. i think it's had a very useful impact in helping markets understand our expectations and shaping their own. but it is becoming, as the unemployment rate gets closer and closer to 6.5%, to breaching that threshold that seems like the one that is likely to be breached, the question is

markets want to know, the public wants to understand beyond that threshold how will we decide what to do? so the purpose of this change is simply to provide more information than we have in the past. even though it is qualitative information about what we will be looking at as the unemployment rate declines below 6 1/2% in deciding how long to hold the federal funds rate at this 0 to a quarter percent range. and as i said, we've tried to give a general formulation of what we'll be looking at, which is how far are we, how large are the shortfalls in achieving our goals, and how fast do we expect progress to be. that will be the main factors we'll be looking at. we initially started with an unemployment rate as a threshold that was easy enough for the

committee to say with an unemployment rate above 6.5% we know we're not close to full employment, not close to an employment level consistent with our mandate, and unless inflation were a significant concern we wouldn't dream of raising the federal funds rate target. now, the committee has never felt that the unemployment rate is a sufficient statistic for the labor market. i think if i had to choose one indicator of the labor market, the unemployment rate is probably as good a one as i could find. but in assessing the real state of slack in the labor market and ultimately of inflationary pressures that might -- or deflationary pressures that could result from that, it's appropriate to look at many more things. and that's why the committee now states we will look at a broad range of information. so the closer we get as we

narrow in on coming closer to the target we want to achieve, we will be carefully considering many indicators of how close are we to our target. so those are the main -- the main reasons. now, you asked as well about the dissent. president lakota felt -- i believe he noted in his dissent that he endorses the new guidance about the likely path of the federal funds rate after we begin to finally raise it. and that indicates that it's unlikely to be back to normal levels for some time. but he questions whether or not the reformulated four-week guidance shows sufficient commitment of the committee to its 2% inflation objective.

and i will simply say on my own behalf and on behalf of the committee that we are fully committed to the 2% inflation objective and we do not want to undershoot inflation for a prolonged period of period of . as i mentioned, monetary policy operates with lags, so the policies we have in place we think will gradually move inflation back to 2%, but if the committee had real concerns that inflation were going to remain persistently below 2%, i feel confident that the committee would act to prevent that. >> john hill ren rath from "the wall street journal." chairman yellen in the interest rate projections made by fomc participan participants, there seem to be a slide upward drift in

expectations for rates going out to 2016. a majority of officials see rates at 1% or higher in this forecast round. in the last forecast round a majority saw of it less than 1%. i wonder if you could explain why there's this small upward drift and expected rates among committee members, whether these projections are a good guide for the public about where rates -- about the path of rates going forward and also how you reconcile this upward drift with the assurances that the committee makes in its statement that rates will stay below normal levels well into the future. >> well, to my mind there is only very limited upward drift. you know, the committee -- i think the committee in assessing the economy, if you compare today's assessment with

december's is virtually identical. almost nothing has changed in the overall committee assessment of the outlook. as i mentioned, unemployment has come down. the labor market more broadly, i think, has improved a little more than we might have expected, and that slightly more rapid improvement in the unemployment picture might explain -- i can't speak for why people write down what they do -- but a little bit of the upward shift. but more generally, i think that one should not look to the dot plot, so to speak, as the primary way in which the committee wants to or is speaking about policy to the public at large. the fomc statement is the device that the committee as a policy making group uses to express its

opinions, and we have expressed a number of opinions about the likely path of rates. in particular the committee has endorsed the view that it anticipates that there will be a considerable period after the asset purchase program ends before it will be appropriate to begin to raise rates, and, of course, on our present path, well, that's not utterly preset, we would be looking at next fall. so i think that's important guidance. looking further out, let's say if you look at toward the end of 2016 when most participants are projecting that the employment situation, that the unemployment rate will be close to their notions of mandate consistent or a longer run normal levels, what

you see i think if you look this time, if you gaze at the picture from december or september, which is the first year that we showed those thought plots for the end of 2016 is the massive points that are notably below what the participants believe is the normal longer run level for nominal short-term rates, and the committee today for the first time endorsed that as a committee view. so i think that's significant. i think that's what we should be paying attention to. and i would simply warn you that these dots are going to move up and down over time a little bit this way or that. the dots move down a little bit in december relative to september and then moved up ever so slightly. i really don't think it's appropriate to read very much into it. more generally, you know, the

end of 2016 is a long way out. monetary policy will be geared to evolving conditions in the economy, and the public does need to understand that as those views evolve, the committee's views on policy will likely evolve with them, and that's a kind of uncertainty that the committee wouldn't want to eliminate completely from its guidance because we want the policy we put in place to be appropriate for the economic conditions that will prevail years down the road. >> thank you, steve liesman, cnbc. i wish to look not to the dots but to the statement as you suggest, madam chair. and that one particular paragraph which says that the committee anticipates a lower than normal rate even once you return to the long run. just so i understand correctly, it means that once you hit the longer run unemployment rate

of -- which is 5.4%, once you get a 2% inflation rate, the market should not then anticipate the longer run 4% fed funds rate, and that would be question one. question two is doesn't that implicitly suggest a shallower glide path once you take off or once fed funds rates would -- when you first hike them, wouldn't that suggest a shallower glide path to the funds rate? >> yes, i think it does suggest a shallower glide path, and what the committee is expressing here i would say is its forecast of what will be appropriate some years from now based on the understanding that we've developed about what are the economic forces that have been driving economic activity. we've had a series of years now in which growth has proven

disappointing. now, members of the committee have different views about why this is likely to be true, that the funds rate when the labor market is normalized and inflation is back to our objective, they maybe have slightly different views on exactly why it's likely to be the case that interest rates will be a little lower than they would in the longer run, but for many it's a matter of headwinds from the crisis that have taken a very long time to dissipate and are likely to continue being operative. so some examples i would say is we have many households undergoing balance sheet repair. there are many underwater mortgage holders, difficulties therefor in gaining access to credit, for example, through home equity lines of credit.

for some that makes it difficult to finance small businesses. mortgage credit is very difficult for those still to get without pristine credit scores. that's improved somewhat over time, but it's not back to normal. for some fiscal policy is more tighter than would be expected over the next several years. for some it's headwinds from the global economy play a role as well. but the general assessment is that even after we've had an accommodative monetary policy for long enough to get the economy back on track in the sense of meeting our aobjective, the stance of policy that will be appropriate to accomplish that won't be easier or involve somewhat lower than would be

normal short-term interest rates. now, eventually years later most people think they will go back up. but as you said, that suggests the path will be gradual. but i do want to emphasize this is a forecast, and this is the committee's forecast based on its understanding of the economy at this time, and as we watch the economy over the next couple years, that could evolve. >> hi. elan from "the washington post." you mentioned in your testimony on capitol hill recently that the fed was trying to assess the balance of weather effects versus more fundamental weakness in the economy as the reason for the slowdown in growth in the first quarter, and you guys mentioned in the statement weather specifically. does that mean that the fed's analysis has come down on the side of weather or are you still concerned that there could be something else going on that

could be contributing to slower growth and you guys also lowered your forecast for gdp growth this year. >> so i'd say certainly the analysis that we've done, and we did spend a lot of time discussing weather and how it's affected businesses and households in various parts of the country, certainly weather has played an important role in weakening economic activity in q1. it's not the only factor that is at work in most projections for growth in the first quarter are weak. it's an important factor. it's not the only factor, but i would say it's likely in the view of most of the committee to the begin to wash out in the second quarter, and we can even see some rebound. now, i would say -- i know what we've said about weather is a little bit complicated and