capacity to grow. >> let's very quickly look at the markets ahead, ahead of the decision here. we've currently got the ten year at 2.63%, the dow only slightly to the down side. let's now get to steve liesman with the fed decision over to you, stevie. >> federal reserve taper by $10 billion brings down the mortgage-backed security down, treasury purchases now down to $20 billion. the total now $35 billion, now half of what the highest level was when the fed began tapering in december. the fed very much yew boilerplate language against when it comes to policy. it will continue reinvesting. the highly accommodative policy remains appropriate. the current target rain of zero to a quarter will remains appropriate for a considerable time. additional tapering is likely if

inflation and jobs continue to improve. the fed will take a balanced approach on removes stimulus when the time comes. the only real difference is we're an economic activity. the fed said economic activity rebounded, as opposed to picked up last time. the labor market generally showed further improvement. they left out a section where they said it was mixed. household spendings rising moderately as opposed to more quickly. and the language on inflation very much the same, noting that it's remaining below objectives, no mention of higher inflation in there. the federal research, the median forecast, when it comes to the outlook for interest rate did go up for 2015 by 0.125 to 1 at the 125. that's the median interest rate. says but the long range may be

reflecting this idea that the fed is say rates will remain normal. the long-range outlook falling by a quarter point now to 3.75. guys? >> okay. steve liesman, thank you very much for that. >> steve, can you address whether or not they comment on the new amazon fire phone, at least in their release? did they make a comment about the new phone? >> i'm going to have to look that over more closely. i did not see that in anything in my initial read, brian, but maybe there's hope. >> don't joke. electronics prices are a big part of that cpi number. >> maybe actual cup up in the q&a with yellen. >> boilerplate language, they framed it the same way. highly accommodative. up right now, what, 30 cents? so basically we got what we expected. at some point, mandy, and it's obviously not today, the fed will shock us.

>> today was certainly not that day. i don't think we were expecting it to be that day, but let's wring in david kelly and blackrock's russ -- i don't want to be too harsh here, about but is the fed's credibility a bit on the line in the fact that they maybe didn't acknowledge the inflation situation picking up as much as some people maybe were expecting? >> well, let's be clear about how much inflation we're facing. what we're really seeing is a stabilization rather than a real acceleration. headline inflation at 2%, most of the measures the fed prefers are still below that 2% threshold. really what we have seen is less about a real pickup in inflation, but the fact that we're no longer as worried about deflation, at least not in the united states, is perhaps as we were six or 12 months ago. i think these a normalization of conditions.

>> yeah, yeah, the fed is facing this interesting issue here, rising inflation. i know david is very concerned about that, but also lower growth. in 2014, it lowered by 0.7 down to 2.2. though very slightly raising the forecast to 1.6, up by 0.05. i wanted to point that out, that they lowered the forecast, leaving the acceleration into 2015, which, by the way. they've been wrong about for a very long time. >> i almost feel like, steve, you just read my mind. to be frank, guys, i've run out of the questions about the market or the fed. the fed has basically done the sang thing for three year. yada yada yada. to steve ace point, how much do you trust the fed?

to me there is news in this. if the federal funds forecast for the end of 2016 is now 2.5%, we went into this meeting with the federal funds futures market showing just 1.8%, so the markets were more dovish than the fed, and there was a growing continuity where the bond market is pricing in and even what this dovish fed is saying. so i think once people step back and look at this, i get the point about lower federal funds rate in the long run, because maybe we have slow economic growth, i agree with that, but it does involve a certain amount of fed typing. >> indeed talking to quickly wrap up -- steve, last word to

you. >> i just want to say quickly, david, the only thing about what you said is the market tends to discount the hawkish wing of the federal reserve. we did some work on this david, they basically throw out the higher end forecasts. my get is at least less difference between the market and the fed when you eliminate some of thousands hawkish forecasts that are out there. >> talking of the market, it is virtually unchanged from where it was going into the decision. steve, david and ross, thank you very much for joining us. we have bill gross on hold. he will be joining us as well, but right now two big stories, amazon announcing its first-ever smartphone. jon fortt has more headlines. jeff bezos is going through the stats on the phone. this is for prime members, he said, obviously to try to draw more people to prime, but also for people who are in prime already. it has a 13 megapixel camera on the back, unlimited photo

storage in the cloud, prime music, which has over 1 million songs to stream or download for free is built into this. they've just recently announced that service. video and reading services are a focus of this device for ease of use there, those features that allow you to cache a video, it anticipates what you want to watch. it has the cache for quick playback. also speakers for virtual surroundsound and mayday, that's the service they announced last holiday season with the new kindle fire hd. you can call for help if you need help learning to use the device. something shows up on the screen to walk you there you how to do things and can manipulate your screen if you ask them to on the device. that is how bezos and amazon are trying to differentiate this, saying it works over wifi or 3g, 4g. now they are giving a bit of a

demo of the phone as well. they're bringing out a table to do something else. we'll bring you updates to find out what else they're showing on this device, brian. >> i know we have to go, but who are they going after here? you said amazon prime customers, but microsoft has 3% market share, my friend. >> reporter: it's not about the market share. they have very little down side, even unlike microsoft in this situation, they're looking to drive loyalty from people who are buying digitally and physical goods from amazon. >> no, no, that's not what i'm saying. first off every business has to care about market share. >> reporter: not global market share. they're not interested in fighting in china. they're interested in getting customers where they are selling amazon goods today. it's a different game they're playing. >> whose business are they going to take? if every man, woman and child already has a phone, somebody new will have to buy the phone,

which i assume will come from an exists user. >> reporter: it would, but listen, apple and samsung don't have the entire smartphone market. they have the most profitable segment. many of these people already amazon customers who don't really care what brand is on it it, they just want to do certain things with it. he wants to increase the share of wallet in those customers from music, from video, from books and from things like groceries, which amazon is increasingly expanding into. >> it has its finger in almost every single pie. thank you, jon fortt. okay. we're going to be getting reaction coming up from pimco's bill gross. he may have more riding on the fed than anybody else out there. there he is. maybe he's the amazon phone purchaser. there he is. >> plus we're going to ask what he wants to hear from janet

yellen in the news conference in about 20 minutes' time from now. this is a very special edition of "street signs." we have five phones, bill gross hopefully on fire, janet yellen, all kinds of things coming up on "street signs." don't go away. we're moving our company to new york state. the numbers are impressive. over 400,000 new private sector jobs... making new york state number two in the nation in new private sector job creation... with 10 regional development strategies to fit your business needs. and now it's even better because they've introduced startup new york... with the state creating dozens of tax-free zones where businesses pay no taxes for ten years. become the next business to discover the new new york. [ male announcer ] see if your business qualifies.

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begin in 17 minutes -- >> and counting. in the meantime a quick check on the market. there's always a bit of a knee-jerk of reaction, but what we're seeing is the three indices, the s&p, nasdaq and dow, you can see on the screens. we've actually turned positive now. the ten-year is currently at 6.26%, very little change from where we are. all right. let's get the world's biggest fund manager. joining us is pimco's bill gross, or i should say lack of fed action, because the fed gave us what you probably expected.

but no inflation expectations. can we get that, no inflation? >> the natural unrate, i suspect the fed thinks is about 5.5%. as we approach 5.5%, that's the level at which inflation theoretically doesn't go up our down. maybe 5.5, but 5 would be pressing it. >> i'm going to ask you the same question i asked david kelly -- how much do you trust the fed? do you think they will be right in their projections? >> you know, brian, i trust in what they tell us. i don't necessarily trust in terms of how they get to the point that they tell us. you know, the fed is based historically on models, and modeling of cyclical types of

movements. the last 20 to 30 to 40 years in terms of neru and in terms of what they follow as the taylor model. john taylor from stanford produced a model in the early '90s that suggested the short-term interest rates should be 2% and with 2% inflation, the nominal rate should be 4. that's basically what they follow. we suspect with our new neutral that that has changed substantially. we saw a bit of that today with steve liesman's discussion on the blue dots on a long-term basis. we'll hear more from janet yellen, bur our suspicion in terms of why it's come down from 2% of real is basically that it's a highly levered economy, and levered economies can't take high interest rates. last point before we move on. we had 1% real fed fung in 2006, 2006, and that basically broke the back of the housing mart, so

to think we can get back to two with the day lord rule i think is a little specious. >> on a day with very little action from the fed, let's makes this segment actionable. for an investor, has anything changed? for a bond market investor? stock investor? anything changed from today? >> here's what i like, mandy, in terms of the long-term forecast, and it's not much, but it did change. it came down, in terms of fed funds, it came down from 4 to 3.75. that means the fed is beginning to believe again that the taylor model which says 4 xwaskly, you know should be reduced bit by bit. does that change markets? yeah, it does. if we have a 2% nominal policy rate, it basically means that stocks with pes of 16 to 17 times, it mining credit spreads, you know, basically can be

supported with those lot real rates, if we go higher, i think markets can be viewed as bubbly, in addition to, you know what we have seen up until this point. the fed is very concerned not just with unemployment and not with just inflation, but with financial conditions. they don't want to see a runaway here. they want to see a mild gradual increase. these are quite critical. >> how much do you watch iraq, bill? >> oh, just a little the mideast in terms of oil prices, of course i think that's the dominant decision. does it make a difference in risk types of assets? perhaps in emerging market countries that are related to that particular zone, but not -- not significantly. >> because we know you guys in

california hate to drive. there's a couple cars out there. is there a breaking point, seriously, for gas prices on the economy, a point at which oil continue toss go up, you would look at your team and say we have to adjust our strategy, the economy is going into the tank because of gas prices? is there are number you look at? >> well, you know it is gas pump, 4.5 for regular week a breaking point. you have a point that higher gas prices reduce consumption. it hikes inflation and strategies for bonds and strategies for stocks should change. i mean, tips, which are inflation related, you know, would benefit substantially from higher oil prices and have, and stocks, of course, in terms of slower growth and slower consumption would go down to the negative. i think it's important from that aspect, but we haven't seen a significant change yet. >> let's end on a lighter note, shall we, bill? let's talk about stamps and

stamp collecting, which i understand you enjoy very much. sotheby's just sold a very rare stamp from 19th century, fetched a record $9.5 million at the new york city auction, and the bidder and winner was anonymous. was it you? >> not yours truly. british guyana is a little far from my field of collecting. but it was a high price. mandy, it was nine times when it last sold in the early 1980s, which means, you know it's appreciated at about a 7% annual rate from that point. that's probably as good an investment as stocks or bonds from that point. >> stamp bubble? [ laughter ] >> do we have a stamp bubble that's going to burst? >> no stamp bubble yet, although that happened in 1981. so things can happen in tamps as well as commodities, stocks and

bonds. >> bill gross, thanks to have you with us. >> thank you. >> can't lick that interview. over to dominic chu for a quick market flash. >> here's something else on the rise. hertz, near session highs, reuters is reporting that the giant is looking to broaden out its business and could allow its cars to be rented via the uber app. and its controversial smartphone product. hertz currently up about 5%, back over to you. >> okay, dom dom. thank you very much. we're just moments away from janet necessarilien's news conference. will she say something to move the markets? at this stage what we're seeing is a positive spot. we're going to be carrying her news conference live with this special edition of "street signs" returns.

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[ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] ♪ my mom works at ge. ♪ welcome back to "street signs." amazon in seattle announcing more details on the fire phone. it is 3-d, as expected, and it has a perspective effect that you can actually show on a screen without wearing glasses, without having to put on any

special equipment. jeff besources is demonstrating that, towedi itouting it as one works with photos and maps. it looks to be up close to 1.5%, 2% after the fed news and after this announcement. >> thank you very much. mary barra facing the heat in congress again today over the ignition switch recall, but separately, regulators are opening an investigation into ignition switch issues in certain chrysler models as well. phil lebeau, is this just coincidence? are the suppliers the same? i don't know. there's a lot of questions. >> a lot of questions. it's not a coincidence. nitsa basically sell to all supplies saying there have been some complaints regarding a select number of chrysler models, include the jeep commando 05-06 grand cherokee,

as well as 2008-2010 grand caravan. it's simply an investigation into the possibility that the key could slip from the run position to the accessory position. , but this is what we're going to see in the industry. a lot of questions about what exactly is going on with all ignition switches. >> i was going to say, phil, are you surprised by the sheer extent of the recallings this year? we've talked about it before. >> no, not at all. >> another 3 million this week. >> no, because nhtsa was exposed for not being hard enough on the automakers, and result automakers are taking a zero-tolerance approach. anything close to a recall get it out. >> thank you very much, phil lebeau. >> janet yellen meets the press. we'll take you to her news conference when this special edition of "street signs" returns. the dow is up 22 points. not a big market reaction now,

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what are you looking at, folks? no one is there, but this is inside the fed, where in literally seconds from now janet yellen will sit down and make a statement. they'll then take questions from the press. why don't we do a quick check. what we've got here is a move into positive territory going into the decision, which of course was pretty much, you know, as expected at 2:00 pvm eastern. we were very slightly lower. now we've moved very slightly higher. the nasdaq up by 5:00, the s&p gaining by six. stocks may not be down for the first time in four days. >> i'm going to give you the three best performing stocks while we wait for janet yellen. congratulate your sleeve if you own these three best performers today. adobli up, fedex is up 6.8%, a solid piece of guidance there. and i'm going to be negative

nely and give you the worst performer, conagra. >> can i chime in on just an extra nugget, the shares at an all-time high, hoping the transports move higher as well. in the fiscal 2015 commentary as you say, they expect it to be even better. let's take a quick look dr there's the podium. >> we are long one podium and we are -- yeah. >> short one fed chair. >> neutral is what i was going to say. >> here she comes. let's listen in, see what she has to say. >> good afternoon. the federal open market committee concluded its june meeting earlier today. as was indicated in our policy statement, the committee decided to make another modest reduction in the pace of its purchases of

longer-term securities. the committee maintained its forward guidance regarding the federal fund trade target, and reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. today's policy actions reflect the committee's assessment that the economy is continuing to make progress toward our objectives. in the labor market, conditions have improved further. the unemployment rate at 6.3% is four tenths lower, and the broader use six measures, which includes marginally attached workers and those working part time, but preferring full-time work has fallen by a similar amount. even given these declines, however, unemployment remains

elevated, and a broader assessment of indicators suggests that underutilization in the labor markets remains significant. although real gdp declined in the first quarter, this decline appears to have resulted panly from transitory factors. final domestic private demand, continued to expand in the first quarter, and the limited set of indicators of spending and production in the second quarter have picked up. the committee thus believes that economic activity is rebounding in the current quarter and will continue to expand at a moderate pace thereafter. overall, the committee continues to see sufficient underlying strength in the economy to support ongoing improvement in the labor market. inflation is continued to run below the committee's 2%

objective, and the committee remains mindful that inflation running persistently below its objective could pose risks to economic performance. given that longer-term inflation expectations apt to be well anchored, and in light of the ongoing recovery in the united states and in many economies around the world, the committee continues to expect inflation to graduately move back toward its objective. 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 fomc participants. as always, each participant's projection are conditioned on his or her own views of

appropriate monetary policy. the central tendency of the unemployment rate projects is slightly lower than in the march projections, and now stands at 60 to 6.1% at the end of this year. from there committee participants generally see the unemployment rate declining to its longer run normal level by the end of 2016. the central tendency of the projections for real gmt dp growth is 2.1 to 2.3% for 2014. down notably from the march projections, largely because of the unexpected contractions shun in the first quarter. over the next two years, the projections for real gdp growth remain somewhat above the estimates of longer-run normal growth. finally, fomc participants

continue to see inflation moving only gradually back toward 2% over time, as the economy expands. the central tendency of the inflation projections is 1.5 to 1.7% in 2014, rising to 1.6 to 2% in 2016. as i noted at the outset, the committee decided today to make another measured reduction in the pace of asset purchases. starting next month, we will be purchasing $35 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 expand our holdings of longer-term securities, and we will also continue to roll over maturing treasury securities and reinvestment principal payments from the fomc's holdings of

agency debt and agency mortgage-backed securities in agency mortgage-backed securities. these 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 create and a return of inflation to the committee's objective. today's announced reduction in the pace of asset purchases reflects the committee's expectation, the progress toward its economic objectives will continue. if incoming information broadly supports the committee's expectation of ongoing improvement in labor markets, and inflation moving back over time toward its longer-run objective, the committee will likely continue to reduce the pace of asset purchases in measured steps at future meetings.

however, as i've emphasized before, 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. let me now turn to the framework we will be applying as we consider interest rate policy. in termses how long to maintain the current 0 to one quarter percent for the target range, the committee will assess progress both realized and expected toward its objectives of maximum employment and 2% inflation. this broad assessment will not hinge on any one or two indicators, but will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation

expectations, and readings on financial developments. based on its current assessment of these factors, the committee anticipates that it likely will be appropriate to maintain the current target 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 longer-term inflation expectations remain well anchored. further, once we begin to remove policy accommodation, it's the committee's current assessment that, even after employment and inflation are near mandate consistent levels, economic conditions may for some time warrant keeping the target federal funds rate below levels the committee views as norm at in the longer run. this guidance is consistent with

the paths for appropriate policy, as reported in the participant's projections, which show the federal funds rate for most participants remaining well below longer run normal values at the end of 2016. although f oeismt mc participants provide a number of explanation for the federal funds rate target remaining below its longer run normal level, many cite the residual effects of the financial crisis. these include restrained household spending, reduced credit availability, and diminished expectations for future growth in output and incoming, consistent with the view that the potential growth rate of the economy may be lower for some time.

it is contingent on the economic outlook. if the economy proves to be stronger than anticipated by the commit committee resulting in a more rapid convergence. then increases in the federal funds rate starts are likely to occur sooner and be more rapid than currently envisaged. conversely, if economic performance disappoints, resulting in larger and more persistent deviations from the committee's objectives, then increases in the federal funds rate targets are likely to take place later and to be more gradual. before taking your taking your questions -- on the stance and the conduct of policy. to be clear, these discussions are in no way intended to signal

any imminent change in the stance of monetary policy. they reflect the committee's intentions to communicate its plans to the public well before the first stems normaling policy become appropriate. the committee is confident that it has the tools it needs when it becomes appropriate to do so and to control the left of short-term interest rates thereafter, even though the federal reserve will continue to have a very large balance sheet for some time. and the associated implications for the degree of control over short-term interest rates, the functioning of the federal funds market.

transacts. the committee is constructively working through the many issues related to normalization, and will continue its discussions with the expectation of providing additional details later this year. thank you. i'll be happy to take your questions. >> reporter: is there any -- look likely to compete your 2016 consensus forecast next week? does this suggest that the federal reserve is behind the curve on inflation? and what tolerance is there the

same was you blew through the 6.5% target, in that they become these soft targets. thanks. >> well, thanks for the question. i think recent reading having on the high side, but i think the data we're seeing is noisy i think it's important to remember that broadly speaking inflation is -- in line with the committee's expectations. toward its 2% objective, and i think the recent evidence we have seen abstracting from the noise suggests that we are

moving back gradually over time to the 2% objective. i see things roughly in line with where we expected inflation to be. if you look at the s.e.p. projections that were submitted this time, you see very little change in inflation projections of the committee. >> well, the committee has emphasized that we have the 2% objective as a longer-term matter for pce inflation, and we would not willingingly see a prolonged period in which inflation persistently runs below our objective or above our objective. that remains true. that hasn't changed at all in terms of the committee's tolerance for permanent

deviations from our objective. we continue to see the data coming in, abstracting from the noise in line with what we had expected and continue to see a graduate pickup over the next several years toward or 2% objective. >> reporter: robin harding from "the financial times." madam chair, could you comment more on the decline on the long-run interrate projection? is that more to do with temporary headwinds from the recovery? or something more permanent? and is this it, this decline to 3.75%? or do you think there's potential for this rate to go lower yet? thank you. >> well, you do see a very slight decline this time in the committee's longer-term normal rate of interest projections. i would caution you, however,

we've had turnover in the commit xwree to new participants who joined and are submitting projections and to who departed, and that can create changes in the projections, small changes that are different to interpret. but i think it's fair to say there has been a slight decline. i think the most likely reason for that is there's been some slight decline, as i mentioned, in my opening statement of projects pertaining to longer-term growth, and typically estimates of the longer-run normal federal funds rate, or short-term interest rates would move in line with growth projects. projections.

>> reporter: my question is sort of the flip side of steve's, your predecessor has said the fed was persistently too pessimistic and you lowered your outlook good. can you tell me more how you see the unemployment rate evolving to meet your forecast? why you believe the rate of decline will start to level off? and what an unexpected drop might mean for the first rate hight? >> it's true that unemployment has declined by more than the committee expected, and you do see small downward revision in the committee's projections, at least the central tendency for the unemployment rate. now, first of all, i mean, the labor market i think has continued to broadly improved. we have seen continued job growth at a pace that is certainly sufficient to be

diminishing labor market slack over time. over the last three months, for example, employment, payroll employment has been rising around 230,000 jobs per month and we're running close to 200,000 over the last year. so it's in no way surprising to see a decline in the unemployment rate. that said, many of my colleagues and i would see a portion of the decline in the unemployment rate as, um, perhaps not representing a diminution of slack in the labor market. we have seen labor force participate rate decline, and while i think most of us would agree that there has been and will continue to be secular decline in the labor force participation rate for demographic reasons, i think a

portion of the decline we have seen in the unemployment rate probably reflects a kind shadow unemployment or discouragement, a cyclical part of labor force participation. now, if that's correct, we may see that as the economy picks up steam and we see further recovery in the labor market that those let's call them discouraged workers will return either to unemployment or to employment, and as labor force participation begins to stabilize, the unemployment rate will come down less quickly. i think for a number of people that's a component of the forecasts. you asked about implications for the path of policy. i would just say the guidance that we have given or forward

guidance states that the timing of liftoff will depend on actual progress we see and the progress we expect to see going forward in terms of achieving of our goals, namely, maximum employment and our 2% inflation objective. so, we're not going to look at any single indicator, like the unemployment rate, to assess how we're doing on meeting our employment goal. we will look at a broad range of indicators. that said, as i try to emphasize in my opening statement, there is uncertainty about monetary policy. the appropriate path of policy, the timing and pace of interest rate increases ought to, and i believe will, respond to unfolding economic developments. if those were to prove faster than the committee expects, it would be logical to expect a

more rapid increase in the fed funds rate, but the opposite also holds true. if we don't see the improvement that's projected in the baseline outlook, that the opposite would be true, and the pace of the timing and pace of interest rate increases would be later and more gradual. >> jon hilsenrath from the "wall street journal." chairman yellen, some fed officials and some market commentators have noted that market conditions recently have looked a little bit like they did last spring before a period of turbulence. volatility is very low in stock and bond markets, risk premiums are very low. and in particular, market expectations for interest rates, for short-term interest rates, have looked below even the fed's own projections as laid out in your dot plot.

two questions related to that. one, what is your read on market activity, and are you at all concerned about a sense of complacency in markets? and two, what is your view on market expectations for the rate hike cycle that the fed has laid out in its dot plot? or is the market where you think the fed is on that? >> well, i mean, i'd start by saying that volatility, both actual and expected in markets is at low levels. the fomc has no target for what the right level of volatility should be, but to the extent that low levels of volatility may induce risk-taking behavior that, for example, entails excessive build-up in leverage

or maturity extension, things that can pose risks to financial stability later on, that that is a concern to me and to the committee. i don't know whether there are a number of reasons that are being cited of what we're seeing in the marketplace. i don't know if overconfidence or complacency is one of those reasons, but i guess i would say it is important, as i emphasized in my opening statement, for market participants to recognize that there is uncertainty about what the path of interest rates, short-term rates will be, and that's necessary because there's uncertainty about what the path of the economy will be, and i want to emphasize, as i have, that the fomc will adjust policy to what it actually sees unfolding in the economy over

time and that necessarily gives rise to a certain level of uncertainty about what the path of rates will be. and it is important for market participants to factor that into their decision-making. you asked me about the dot plot. or our forecasts or our projections for the fed funds rate. and you do see a range of disagreement among the participants there, so by the time you get to 2016, there is a considerable range of opinion, and i think in part that reflects the uncertainty that i'm talking about, that participants do see different pace of recovery, different trajectories for inflation, and it's appropriate for them to adjust their thinking about what the path of policy should be to their own view of how the

economy will evolve over time. and around each of those dots, i think every participant who's filling out that questionnaire has a considerable band of uncertainty around their own individual forecast. >> "the new york times." you've spoken about the sense that the recession has done permanent damage to the economic output, and you've reduced gradually over time your forecast of long-term growth. i'm curious to know to what extent you think stronger monetary or fiscal policy could reverse those trends. are we stuck with slower growth? is there something you can do about it? if so, what? if not, why? >> well, i think part of the reason that we are seeing slower growth in potential output may reflect the fact that capital

investment has been very weak during the downturn and the long recovery that we're experiencing, so it diminished contribution from capital formation to growth does make a negative contribution to growth. and as the economy picks up, i certainly would hope to see that contribution restored. so, i think that's one of the factors that's been operative. of course, we've had unusually long duration unemployment, a very large fraction of those unemployed who have been unemployed for more than six months, and there is the fear that those individuals find it harder to gain employment, that their attachment to the labor force may diminish over time and

the networks of contacts that they have that are helpful in gaining employment can begin to erode over time. we could see what's known as h ii historesis, where individuals who haven't had jobs for a long time find themselves permanently outside the labor force. my hope would be, and my expectation is that as the economy recovers, we will see some repair of that that many of those individuals who were long-term unemployed or those who are now counted as out of the labor force would take jobs, if the economy is stronger and would be drawn back in again. but it is conceivable that there's some permanent damage there, too, to them, to their own well-being, their family's well-being and the economy's potential. >> thank you, madam chair.

i believe you mentioned in your opening remarks tighter credit? and i'm wondering what you think of the possibility that the federal reserve itself, with the regulations it has to impose under dodd/frank, is partly responsible for that. and second, the current trend toward litigation. i recently read something where just the three largest banks in the u.s. have paid $51 billion in fines so far. and obviously, the number's rising. so, why would anybody loan to a near-prime borrower? and in fact, if you look at federal reserve bank of new york research, here we are, five years into the xajs, and people below fico of 700 are having worse credit experiences. so, it probably isn't because, you know, unemployment's declining. it's probably because banks simply don't want to take the risk. so, as the nation's top bank regulator, what can you do to fix that?

>> so, i first would start by saying i really think it's essential in the aftermath of this crisis to strengthen financial regulation and to make the financial system more robust and to reduce systemic risk. we can see what the costs of the financial crisis were, and i don't think any of us should want to see that repeated. so, i think the regulations that we have put in place, most of which follow from dodd/frank, are highly appropriate to create a more robust financial system that will be a safer and sounder one for our economy going forward, and i think we're making progress on doing that. in putting regulations into place, we have tried to phase them in in a way that gives long

enough lead times to make sure that in strengthening the financial system we don't produce a credit crunch. and by and large, my own assessment is that credit is broadly available in the economy, but there are some exceptions. and i would agree with much of what you've said when it comes to mortgage credit. i think banks at this point are reluctant to lend to borrowers with lower fico scores. they mention in meetings with us consistently their concerns about putback list risk. and i think it is difficult for any homeowner who doesn't have pristine credit these days to get a mortgage. i think that is one of the factors that is causing the housing recovery to be slow. it's not the only one, b