were the salvation of the system, if you will. we are at a point where economy and earnings at least for a stock guy like me is far more important than the fed. they state their reputation -- >> i am going to interrupt you for a good reason. we are going to interrupt you. let's get to the fed decision. >> reporter: the federal reserve reducing the amount of quantitative easing by 5 billion for mortgage backed securities and bringing it down to 15 billion total. the fed saying that it intends to end quantitative easing next month. the phrase considerable time remaining in the statement as does the phrase significant under utilization of labor resources. the fed announcing a new set of prince pals for policy normalization meaning raising rates when it comes time to do so. more on that in just a second. the fed repeating phrase if

incoming information broadly supports expectation the committee will end the program. outlook for rates the so-called dots using a system that uses eight. maybe not comparable but it looks like they are up by 25 basis points in 2015 to 1.375 and by 0.375 to 0.2875 in 2017 in the long run. the gap between the market and the fed may be widening on the outlook for rates. on the economy activity expanding at a moderate pace maybe upgrading labor market a little bit saying it improved somewhat further. unemployment rate declined further. as i indicated remain significant under utilization of labor resources. business investment, advancing and housing recovery remaining slow. all of them very much as previously indicated.

a little change to the inflation numbers here. saying it is running below committee's long running objective. they said it was somewhat closer to the long run objective. fed seeing inflation moving further. risk to outlook for economic activity and labor market are nearly balanced. let me tell you what the principles are maintaining reinvestment of principle from their quantitative easing programs. the policy normalization saying we agree on a set of principals. they will adjust funds rate first as needed to adjust funds rate because of money in the system they adjust the interest on excess reserves and then use reverse only as needed and only to the extent necessary. the balance sheet they will reduce in a gradual manner by ceasing to reduce principle.

that is they don't intend to set assets pretty much. the fed will hold no more securities than necessary monetary policy efficiently and effectively. these are statements of the fed preparing to normalize rates while trying to say it doesn't mean we will raise rates sooner. >> thank you very much. the dow just turned negative. it was at 171558 and at 17,127. we have seen stocks fall off about 30 points. the ten-year yield up three basis points and gold unchanged at the moment exactly where it was when the market made its move. >> can i quickly ask you, steve, are you still there? >> i am, yes. >> going into thas you were tweeting out that potentially yellen could face three

descents. i believe there were two. >> usually a person who comes on the board right away does not necessarily dissent. mester thoughts were in line. she was the research director in philadelphia and went on to be head of the cleveland fed. unclear. something we may have a chance to ask her in the coming months. it is an excellent question. they are part of the issue in the debate around considerable time which some of the doves also had joined in. among those uncomfortable with date dependency rather than data dependency. >> the kind of reaction we are seeing right now in the markets will probably settle down once the markets have time to digest it. we see a knee jerk reaction. what we are seeing is the stock market is pairing gains.

dow is negative. is that the reaction we are seeing? >> the yield reaction is correct. we have drift here. the members realize that they are trying for a soft landing. they are a mile from the run way at 30,000 feet. you can see this in how they are adjusting up their expectations for short term interest rates and that should have an effect. >> it is almost like to maybe coin a traders phrase we are fading fisher. >> i think that is a good way to put it. in the con the point is the statement came out to say the fed will eventually become less important. it is about the economy and earnings. and the fed will just follow the curve. i think having staked the reputation on getting it right and not cutting this off too short they will eron the side of

let me wait. >> the dollar index spiking. do you expect dollar strength to continue which has been quite significant recently and putting a lot of pressure on other currencies around the world? >> i think it will. the other thing that is interesting is the assertion they will bring the balance sheet down to a level which is appropriate. in other words, they are not going to cling to huge volumes of treasuries and mortgage backed securities for years into the future. that i think is bearish for the bond market. i don't think this does matter that much for the equity market. i think the equity market can deal with this but i think the bond market has adjusting to make. >> no reason to bring "star trek" into it with the cling on. this has been a change from the federal reserve meeting. what is sticking out at you? >> i want to stick to what i talked about when i talked about the considerable time thing being up in the air. the fed is in the process of going to a new guidance regime. we are short on what was going

to happen with quantitative easing and that looks like it is about to play out. how they guide us and what the language is which is now uncertain. i thought i heard the suggestion that doves are fighting a weird guard action here essentially giving up everything they can without giving up the rate guidance here, putting out policy normalization, upgrading the economy to the extent they can. is that your sense of it? >> absolutely. i think the point is it is dominated by doves but they are essentially academics or at least realists. as the numbers prove they need to normalize policy they are gradually drifting in that direction. >> we will leave it there for the moment. >> the two descents and the great question of what happened to loretta mester and whether or not yellen would be willing to abide or is that something that

would cause her to change policy? >> thank you very much to all of you. >> let's go to rick santelli. we are seeing a little move about four basis points. your reaction, sir. >> i think the ten year yield is interesting because it snubbed to the high yield close shooting back over 180. the five year where most are paying most attention. you really are going to affect some selling by bringing in more selling. the dollar index wins more. the euro close to 1.29 even on that. and here is what it boils down to in the eyes of traders and i'm in a foreign exchange pit. it is not whether you believe the fed is going to tighten it is the relative value trade. the fact of the matter is we are further down the possibility of

that happening than the europeans or the japanese. i think that is why you are seeing so much of today's fed action play out on the foreign exchange markets. >> very quickly we have the dollar yen rate in front of us at 1.0793. >> i think the japanese will be pretty happy with the very weak yen. >> many bullish on the nikkei. russ yesterday didn't get to it but said we like the japanese nikkei market. >> he prefers it to the u.s. market does he not? >> at this point who wouldn't? >> the dow is up ten points. let's get to the world's biggest bond fund manager. coming up bill gross will join us with his take, his latest investment piece for waungs only. >> it is all leading up to janet

yellen's big news conference getting underway in less than 20 minutes time. of course we will carry it live for you. what a silly question when our special edition of "street signs" continues. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement. and save on taxes where you can. so you can invest in the life that you want today. tap into the full power of your fidelity greenline. call or come in today for a free one-on-one review. open port twenty-two-oh-one-seven on the firewall for customer db access. install version two-point-three of db connector and ensure verbose flag is set in case of problems. (clapping sound)

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jones which fell right after the fed statement is now higher than it was before the fed statement.

perhaps people are realizing that almost every change the federal made is to the dovish side. >> i think there was a sell off after that because of the way the dots were plotted. this is a good example. look at how you move down and then up. i think initially what happened was you could read this dovishly because people said did they include fed fund rates stay low for a considerable time? they did. did they include significant under utilization of labor resources. both of those are basically on the dovish side. generally that is fairly good news. then there were comments from the floor that on the dots it indicated that some members might be willing to raise rates earlier than anticipated and that was the reason we initially might have dropped. i think the basic dovishness

came through. we saw financials drop immediately and then also as you can see rebounding here we saw the dollar rally briefly and gold move down, as well. i will tell you something they didn't include and why i think the doves are right on this statement. a lot of people down here thought they might have rate guidance warning included, something to the effect that if there are increases in the federal funds rate that could occur sooner rather than later. some anticipation they had that kind of rate guidance warning in there and they never did that, either. it looks like the market is reacting i think correctly here. this is remaining fairly dovish. guys, back to you. >> thank you very much. let's get reaction from bill gross. your reaction to the fed. more dovish, what does it mean? nothing seems to be moving. >> i think it is more dovish.

let me jump into the point that you and mandy raised towards the end of the last segment and whether or not janet yellen would abide by three. mr. fisher and mr. plosser are hawks but virtually lame ducks. their term expires in the end of the year and replaced by mr. williams being a noted dove and lacquer in the middle. at the end of the year this is a more dovish fed as opposed to hawkish fed and i think that is important. >> what would you have voted to do with the considerable time phrase? >> i think they need a considerable time because the rest of the world and the fed is not in charge of the west of the world but are the reserve currency and what we do dictates a lot in terms of economic growth and interest rates

everywhere else. what we see in the rest of the world is a mild deflation. we see that in japan and south america in recession and we see in the united states that the cpi has come down to 1.7 and that suggests 1.5 for the core cpe. what would i do? considerable period of time. let's sort of stop and evaluate the evidence. let me speak if i have a moment to inflation. inflation and inflationary expectations i think will be the key for future fed decisions considering policy rate concerning macropolicies, as well. today's number is a significant drop and importantly what the fed follows is the five year forward break even inflation rate. basically that has come down

from 2.6 to 2.37 in the last 30 days. if i were a fed number i would say we are closer to disinflation than inflation. we may have not only considerable period of time but a significant period of time before rates should be raised. >> if we are in a disinflationary period what is the correct monetary policy? >> well, to my way of thinking the correct monetary policy would be positive interest rate. the problem is that it is only 25 basis points. i argued for a long time it doesn't help. it is supposed to factual that they should have stopped at one or two. if they raise interest rates at this point too quickly or too high a slope then there is a problem in terms of the bond market and a problem in terms of the stock market. we have gotten used to low

interest rates for a long period of time. what should it be? it should probably be 1% or 1.5%. how quickly it gets there they have to be very careful and that is why they use considerable period of time and labor under utilization and the fact that in order to get there they will have to see conditions far from being met. >> of course, those conditions will change. it will be a very transitional period and uncertainty for the markets. talking about the bond bring out the big crystal ball of yours. what does the bond market do? what does the yield on a ten year note look like this time next year? >> we have been on the mind that prices for all assets on stocks and bonds and speaks to prices and yields in the bond market they are artificially high and probably stay there because of the concept of new neutral.

instead of 4% fed fund rates over a long period of time those blue dots that janet yellen talks about going forward which they admit is 3.75 we are suggesting that has to come much lower. if that is the case, if neutral at 2% nominal is the key level then it means that it should be higher than they were historically and means the ten year at 2.5 plus or minus should probably stay there. is that a great yield and great return for the stock market in terms of expecting 4% or 5% in the future it doesn't suggest a bear market going forward. i think investors cannot be confident but can basically have a sense that bear markets until the new neutral goes higher than pimco expects probably presents for a mild asset market return.

>> very knickly what are you buying?uying the middle of the return and corporate spread risks. both of those yields and spreads are historically narrow but under the assumption that economy grows at 2% to 3% in the u.s. and corporate spread is as attractive as 2.5% treasury yield and lower five-year yield. we think 2% to 3% in the bond market certainly not wonderful but better than nothing. >> not going to set the world on fire. thank you very much for joining us. we should probably point out that the stock market is higher now than where it was going into the 2:00 p.m. decision from the fed. dow is currently up by 44 points or 41 points changing as we speak. knee jerk reaction and then came back up. always good to digest.

>> pretty much the scenario today is the same as yesterday. tomorrow the scottish independence vote will probably be at least in the short term a much bigger market aspect than this federal reserve meeting. not to take anything away from our excellent team coverage of the federal reserve but scotland is key. let's get you updated on nonfed stories. wait until you hear what one silicon valley titan said about twitter's top execs. more about the fed. we are minutes away from janet yellen's third news conference. the statement did not make a big splash. janet yellen and the press conference could. that is coming up live in about 8 1/2 minutes or so. we are back right after this. she's still the one for you.

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so ally bank really has no hidden fethat's right. accounts? it's just that i'm worried about you know "hidden things..." ok, why's that? no hidden fees, from the bank where no branches equals great rates. we are moments away from janet yellen's third news conference as fed chair. just to quickly recap what we have heard so far in the statement the fed to make

another $10 billion in the pace of purchases intending to keep borrowing rates low and plan to keep that key interest rate at a record low for a considerable time. those were two words we were watching today. >> i tweeted an earlier chart about the year to date and fed year to date. since the first fed meeting of the year which was late january the s&p 500 is up 12%. the fed year to date for stocks is 50% greater of a gain than the sort of normal year to date. does it mean anything? absolutely not. we love this kind of stuff or at least i do. >> we love those kinds of trivia. look at the rebound. the dow going into the statement was up by about 23 points. is it a huge move? no. it is not. it shows theentment coming out

of the market. >> here is a question looking ahead to tomorrow and friday. i had a viewer tweet me saying great way to move from one crisis to another. does scotland matter to you? what do you think? tweet mandy or me, do you think scotland and the vote, will it matter to u.s. equities, to your 401 k? some say yes and some say no. >> i think there are arguments on both sides absolutely. >> we are waiting for yellen once again. we will go for a very quick break. we will be back. when fixed income experts work with equity experts who work with regional experts who work with portfolio management experts that's when expertise happens. mfs. because there is no expertise without collaboration.

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we are higher than where we were going into the statement at 2:00 p.m. but not by a significant amount. why don't we check what is going on with ten year yields but precious metals. gold immediately dropped straight after the statement came out currently sitting at 12.34 still a little on the back foot. as for the ten year yield if we can bring that up here she is. let's go to janet yellen and have a listen to what she has to say in the very special news conference. good afternoon. the federal open market committee concluded its meeting earlier today and as usual released its monetary policy statement. the committee also released a

document describing the approach the committee intends to take when at some point in the future it becomes appropriate to begin normalizing the stance of policy. let me under score that our release of this information is not meant to convey any change in the stance of policy. as you know the views on policy are conveyed in the policy statement which i will now discuss before coming back to our normalization plans. as indicated in our policy statement the fomc decided to make another reduction in the pace of the asset purchases. the committee also maintained the forward guidance regarding the federal funds rate target and reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. let me discuss the economic conditions that under pin these

actions. the economy is continuing to make progress towards the fomc's objective of maximum sustainable employment. in the labor market conditions have improved further in recent months although the pace of job growth has slowed some recently job gains have averaged more than 200,000 per month over the past three months. the unemployment rate was 6.1% in august, 0.2 lower than the data available at the time of the june meeting. broaders measures of labor market utilization such as the u 6 measure have shown similar improvement and the labor force participation rate has flattened out. these developments continue the trend of gradual progress towards our employment objective.

but the labor market has yet to fully recover. there are still too many people who want jobs but cannot find them, too many who are working part time but would prefer full-time work and too many who are not searching for a job but would be if the labor market were stronger. as noted in the fomc statement a range of labor market indicators suggests that there remains significant under utilization of labor resources. the committee continues to see sufficient underlying strength in the economy gdp rose at an annual rate of only about 1% in the first half of the year that modest gain reflected in part transitory factors including a dip in net exports.

final demand that is spending by domestic households and businesses grew about twice as fast as gdp. indicators of spending and production for the third quarter suggest that economic activity is expanding at a moderate pace and the committee continues to expect a moderate pace of growth going forward. inflation has been running below the committee's 2% objective but with longer term inflation expectations appearing to be well anchored and economic recovery continuing the committee expects inflation to move gradually back towards its objective. moreover inflation has firmed some since earlier in the year and the committee believes that the likelihood of inflation running persistently below 2% as diminished. as is always the case the

committee will continue to assess incoming data carefully to ensure that policy is consistent with obtaining the fomc's longer running goals 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 which for the first time go through 2017. as always each participant's projections are conditioned on his or her own view of appropriate monetary policy. the central tendency of the unemployment rate projections is slightly lower than in the june projections and now stands at 5.9 to 6.0% at the end of this year. committee participants generally see the unemployment rate declining to its longer than normal level over the course of

2016 and edging a bit below that level in 2017. the central tendency of the projections for real gdp growth is 2.0% to 2.2% for 2014 down slightly from june projections. over the next three years the real projections for gdp growth runs a bit along the proejzs. the central tendency of the inflation projections is 1.5% to 1.7% in 2014 rising to 2% in 2017. as i noted earlier the committee decided today to make another reduction in the pace of asset

purchases. two years ago when the fomc began this purchase program the unemployment rate was at 1.6% and process of lowering it was slower. the intent of the program was to achieve a substantial improvement in the outlook for the labor market and to ensure that inflation was moving back towards the committee's longer run goal of 2%. in light of the cumulative progress towards maximum employment and the improvement in the outlook for labor market conditions since the inception of the program and with the likelihood of inflation running persistently below 2% having diminished somewhat we have reduced our pace of asset purchases again at this meeting. starting next month we will be purchasing $15 billion of

securities per month down 10 billion per month from our current rate. if incoming information broadly supports the committee's expectation of ongoing improvement in the labor market and inflation moving back over time towards its 2% longer run objective the committee will end this program at our next meeting. the committee will continue its policy of reinvesting proceeds for maturing treasury securities and principle payments from holdings of agency debt. the committee's sizable holdings of longer term securities should help maintain accommodative financial conditions and promote further progress towards our objectives of maximum employment and inflation of 2%. regarding interest rates the committee reaffirmed its forward guidance 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 projecced inflation continues to run below the goal and longer term inflation expectations remain well anchored. this judgment is based on the committee's assessment of realized and expected progress towards its objectives of maximum employment and 2% inflation, an assessment based on a wide range of information including measures of labor market conditions, indicators of inflation pressures and inflation expectations in readings on financial developments. further, once we begin to remove policy accommodation it is 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 that committee views as normal in the longer run. this guidance is consistent with the paths for appropriate policy as reported in the participants projections. as i will explain in a moment the fomc now anticipates it will continue to establish a target range rather than a single point for the federal funds rate when normalization begins and the dots in the chart i have distributed now show for each participant the mid point of this target range. notably although the central tendency of the unemployment rate in late 2016 is slightly below its estimated longer run value and the central tendency

for inflation is close to our 2% objective the median projection for the federal funds rate at the end of 2016 at 2.9% remains nearly a percentage point below the longer run value of 3.75% or so projected by most participants. although fomc participants run expectations for the rate running below level at that time many cite residual effects of the financial crisis which although slowly definishing are likely to continue to restrain household spending, constrain credit availability and depress expectations for future growth and output in incomes. as these factors dissipate further most participants expect the federal funds rate to move close to its longer run normal

level by the end of 2017. let me reiterate, however, that the committee's expectations for the path of the federal funds rate are contingent on the economic outlook. if the economy proves to be stronger than anticipated by the committee resulting in a more rapid convergence of employment and inflation to the fomc's objectives then increases in the federal funds rate are likely to occur sooner and to be more rapid than currently envisioned. conversely if economic performance disappoints increases in the federal funds rate are likely to take place later and to be more gradual. let me now turn to our statement on policy normalization principles and plans. the statement is intended to provide information to the public about the eventual

normalization process. it does not signal a change in the current or future stance of monetary policy. as is always the case in setting policy the fomc will determine the timing and pace of policy normalization so as to promote statutory mandate of maximum employment and price stability. since the crisis the federal reserve has been providing extraordinary accommodation using nontraditional tools of monetary policy. the fomc's intention has always been to return to a more traditional approach. and throughout this period the committee has been preparing for the normalization process. in june 2011 the committee set out broad principles and smoer specific tactics for how it envisioned the normalization

process to take place. in june 2013 we noted the conditions had changed significantly in ways not anticipated in june of 2011 including the size and composition of the fed's balance sheet and some revision of those earlier plans was appropriate. the document released today reflects our updated plans which readers of our minutes will know have been under discussion for the last few fomc meetings. the new approach retains many broad objectives and principles from the original but also has new elements. as was the case before the crisis the committee intends to adjust the stance of monetary policy primarily through actions that influence the level of federal funds rate and other

short term interest rates not through active management of the balance sheet. the federal funds rate will serve as the key rate to communicate the stance of policy. to begin normalization the committee will raise its target range for the federal funds rate. the committee expects that the effective federal funds rate may vary within the target range and could even more outside of that range on occasion but such movement should have no material effect on financial conditions or the broader economy. the primary tool for moving the federal funds rate into the target range will be rate of interest paid on excess reserves. the committee expects the federal funds rate will create below the rate while funds are

so plentiful. the committee intends to use overnight reverse repurchase agreement facility which by transacting with the broad set of counter parties will help ensure that the federal funds rate remains in the target range. i would like to emphasize that the overnight rrp facility will only be used to the extent necessary and will be phased out when no longer needed to help control the federal funds rate. in addition the committee will adjust the particular settings of these tools as needed and could deploy other supplementary tools to ensure that we achieve our desired stance of policy. turning now to our plans regarding the feds' balance sheet. the committee intends to reduce securities holdings in a gradual and predictable manner primarily

by ceasing to reinvest repayments of principle on securities held in the system open market account. regarding the timing for ceasing reinvestments the committee now expects this to occur after the initial increase in the target range for the federal funds rate. the committee currently does not anticipate selling agency mortgage backed securities as part of the normalization process although limited sales might be warranted in the longer run to reduce or eliminate residual holdings. the timing and pace of such sales would be communicated to the public in advance. it's the committee's intention that the federal reserve will in the longer run hold no more securities than necessary to implement monetary policy efficiently and effectively and that these securities will

primarily consist of treasury securities. as i stated earlier, today's release of the committee's updated normalization plans is in no way intended to signal a change in the stance of monetary policy. rather it is meant simply to provide information about how the committee envisioned the normalization process in light of the changes in economic and financial circumstances that have occurred since we put forth our original plans more than three years ago. that said, conditions could change further and we will learn about our tools during normalization. the committee has agreed that it is prepared to make additional adjustments to its normalization plans if warranted by economic and financial developments. thank you. let me stop there. i will be happy to take your

questions. >> thank you. chair yellen there was some debate about the phrase considerable time and whether it would remain in the statement. i want to know whether you can tell me about it. was it debated at the fomc? what does it mean timewise? is the statement of forward guidance and how do you square this idea of a date when you and others have continuously said you're data dependent to the point where if the data were to turn would it not necessarily be a considerable time until you raised rates? thank you. >> so, of course, the committee discussed its forward guidance today and it discusses what the appropriate forward guidance is at every meeting. this is part of our assessment

of economic conditions and the appropriate stance of monetary policy. in terms of what the term considerable time means the committee decided that based on its assessment of economic conditions, that characterization remains appropriate and it was comfortable with it. i think if you look, for example, at the projections of individual participants that are revealed in the sep, the view of each participant, again, i'd emphasize not a committee collective view, there's relatively little change in the assessment of the outlook by participants between this meeting and the assessment in june. so the outlook is little

changed, a slight decline in the anticipated path of the unemployment rate and a very slight uptick in the inflation projection but really quite minimal. so the outlook hasn't changed that much from june and the committee felt comfortable with this characterization. now, you said isn't this calendar-based guidance? i want to emphasize that there is no mechanical interpretation of what the term considerable time means. as i've said repeatedly, the decisions that the committee makes about what is the appropriate time to begin to raise its target for the federal funds rate will be dated depende dependent. and in my opening comments just now, i again emphasized something i've said previously

which is that in the pace in progress of achieving their goals were to quicken, if it were to accelerate, it's likely that the committee would begin raising its target for the federal funds rate sooner than is now anticipated and might raise -- might then raise the federal funds rate at a faster pace. and the opposite is also true, if the projection were to change. so there is no fixed mechanical interpretation of a time period. i think it would not be accurate to describe the committee's guidance about the timing of the federal funds rate and when it will move above zero as being calendar-based. the committee is started with a broad general statement of what determines how long it will keep the federal funds rate target at zero.

it is said that it will be looking at the actual and projected pace at which the gaps between are employment and inflation and our goals for those variables are closing. and then what the committee does at each meeting is after saying that the assessment will take into account many different indicators and take into account inflation pressures and other things, it goes on to provide at that meeting its assessment of the implications of its view of the data at that time. and that assessment really hasn't changed over the last several meetings. the committee, based on its assessment at each meeting, has felt comfortable saying that based on its assessment of those factors, it considers that it will be likely appropriate to

maintain the current target range for a considerable time after the asset purchase program ends, especially if inflation remains below the 2% objective. so i wouldn't describe that as -- i know considerable time sounds like it's a calendar concept. but it is highly conditional and it's linked to the committee's assessment of the economy. >> if you would, help us -- square the circle a little bit. having kept the guidance the same, having referred to significant underutilization of labor, having pushed gdp projections down a little bit, yet the rate path gets steeper and seems to be consolidating higher, so if it's dated dependent, what accounts for the

passing -- if the data aren't moving in those directions? >> the projections for 2014 are down a little bit. but the unemployment path is also marginally lower. so while the projected path of the labor market, unemployment and other measures of the labor market of course is partly dependent on the growth outlook, it isn't totally dependent on the growth outlook. and the committee assesses the labor market is continuing to improve and you see a small reduction in the path of unemployment this year and then over the rest of the projection period. so if you ask me -- you asked me why is the projected funds rate path moved up? well, each participant knows the reason they wrote down what they did. but as a guess, i would hazard -- first, i would say there is relatively little

upward movement in the path and i review it as broadly in line with what one would expect with a very small downward reduction in the path for unemployment and a very slight upward change in the projection for inflation. so most participants, in deciding on the path, i think look at as our guidance says how large is the gap between performance of the labor market and that associated with our maximum employment objective? how large is the gap between inflation and our 2% objective? how fast will those gaps change? and you see in the projections very modest reductions in the size of those gaps. modest, very small change of a

slightly faster pace at which those gaps would change. i would describe the change in the projections both for the economy and the path of rates as quite modest. but the fact that they move does illustrate the data dependence principle that i think is really so important for market participants to keep in mind, that what we do will depend on how the data unfolds. there's uncertainty about that. and as expectations and the actual performance of the economy change, you should expect to see movements in the dots. i think it's also notable that the further you go out in the projection period, the wider the set of dots. you see a big range out in 2017. and that reflects in part different forecasts by different members of the committee about

how rapid progress will be. what you don't see in the so-called dot plot is also the uncertainty that each individual, each participant sees around their own projection. so things will depend on how the economy evolves. that will change over time and there's a good deal of uncertainty associated with it. >> thank you. bloomberg news. the economy has been growing now for five years and some economists believe the expansion will last another five years. why, in your view, is economic growth not creating more inflation in wages and in pce? is this all about remaining slack in the labor market or are there other forces at play? >> well, to my mind, the very

slow pace of wage increases does reflect slack in the labor market. we had a very deep recessions a is raps to be expected in the aftermath of a very significant financial crisis. we've faced headwinds in the economy recovering. so the recovery has been slow. growth has been positive. and it's lasted for five years, but it's nevertheless been slow, relative to past recoveries that have not been associated with financial crises. and while unemployment has come way down from the slightly over 10% level it reached, at 6.1% it remains significantly above the

level that most fomc participants would regard as consistent with normal in the longer run, 5.2% to 5.5%. so there is significant underutilization of labor resources. we continue to discuss whether or not the unemployment rate itself is in an adequate measure of how much underutilization of labor resources there really is. and as i went into detail until jackson hole and won't repeat all of that there, there are other ways in which we see underutilization, high levels that have come down only very marginally of part-time employment for economic or involuntary part-time employment, perhaps some remaining shortfall of labor