at 1:30 eastern, also on c-span 2. >> fed chairman ben bernanke held the first news conference in the 97 year history of the fed. the fed has decided not to extend its $600 billion treasury bond buying program passed in june as planned. chairman bernanke talked about rising gas prices, inflation, and the federal budget debate. this is one hour. >> i will place the policy

decision to foster maximum employment and price stability and and i will take your questions. throughout the briefing, goal is to project the consensus of the committee while taking notes of the diversity of views as appropriate. my remarks and interpretations are my own responsibility. in its policy statement released earlier today, the committee announced first it is maintaining its existing policy of reinvesting principal payments from its securities holdings and that it will complete its planned purchases of $600 billion of longer-term treasury securities by the end of the current quarter. going forward, the committee will regularly review the size and composition of its securities holdings in light of incoming information and is prepared to adjust those holdings as needed to meet the federal reserve's mandate. the committee made no change today in the target range of the federal funds rate.

the committee continues to anticipate that economic conditions including low rates and -- of utilization and stable inflation expectations are likely to trend toward low levels for an extended period. in conjunction with the meetings, fmoc members projected growth, the unemployment rate, and the inflation rate for the years 2011-2013 and over the longer run. these projections are conditional on the participant'' individual assessment of the appropriate path of monetary policy needed to best promote the objectives. a table showing the projections has been distributed. i will focus today on the central tendency projections which exclude the three highest and three load projections for each variable in each year. variable in each year. i call your attention first to the committee's longer run

projections, which represent participant's assessments of the rate of economic growth, unemployment, and inflation will converge over time under appropriate monetary policy and assuming no further shocks to the economy. as the table shows, the longer run projections for outward growth have a central tendency of 2.5 to 2.8%, the same as in the january survey. the longer run projections for the unemployment rate have a central tendency of 5.2 to 5.6%, somewhat narrower than in january. these figures may be interpreted as participants current estimates of the economy's normal or trend rate of d it's normal unemployment rate over the longer run respectively. the economy's longer-term rate of growth and unemployment are determined largely by non- monetary factors such as the late did -- the late -- the rate of growth of the labor force in the speed of technological change. aestimates of these rates are

uncertain and subject to change over time. the central tendencies as measured by the price index is 1.7% to 2%. in contrast, the longer run outlook for inflation is determined almost entirely by monetary policy. consequently, given that these projections are based on the assumption that monetary policy is appropriate, these longer projections can be interpreted as indicating the inflation rate that pparticipants judge to the most consistent with the federal reserve mandate to foster maximum employment and stable prices. at 1.7% to 2%, the man the consistory of inflation is greater than zero for a number of reasons. most important is a hint -- making a rate of zero -- could

lead employment to fall below its maximum sustainable level for a protracted period. hence the goal of the zero inflation is not consistent with the federal reserve mandate. most central banks around the world aimed to set inflation above zero, usually at about 2%. i turn to the committee passed economic outlook. as indicated in today's policy statement, the economic recovery is proceeding at a moderate pace. household spending and investment in equipment and software continued to expand, supporting the recovery, but not residential investment, still weak, and the housing sector is depressed. in the labor market, overall conditions continue to improve gradually. for example, the unemployment rate will move down further and payroll employment increased in march. new claims for unemployment insurance to indicators of hiring plans are also consistent

with continued improvement. looking ahead, committee participants expect a moderate recovery to continue through 2011 with some acceleration of growth projected for 2012 and 2013. specifically, as the table shows, participants' projections for output growth have a central tennessee of 3.1% to 3.3% for this year, -- have a central tendency of 3.1% to 2.3% for this year. these projections are a little below those made by the committee in january. the markdown of growth in 2011 in particular reflects the somewhat slower than anticipated pace of growth in the first quarter. the outlook for above-trend growth is associated with the projected reduction in the unemployment rate, seen as edging down to 8.4% to 8.7% in the fourth quarter of this year, declining gradually to 6.8% to

6.2% in the fourth quarter of 2013, well above the central tendency of the long run projections of unemployment of 5.2% to 5.6%. the projected decline in the unemployment rate is relatively slow largely because economic growth is projected to be only modestly above the trend growth rate of the economy. on the inflation front, prices have risen significantly recently reflecting geopolitical developments and robust global demand among other factors. increases in commodity prices are in turn boosting overall consumer inflation. however, measures of underlying inflation, though having increased modestly in recent months, remains subdued, and longer-term inflation expectations have remained stable. consequently, the committee expects the effects on inflation and higher commodity prices to be transitory. as the increases in commodity prices moderate, inflation

should decline to its underlying level. specifically, a participant projections of inflation havene a tendency of -- that is noticeably higher than january projections, before declining to 1.2% to 2.0% in 2012, both about the same as in january. the committee economic projections provide important context for understanding today's policy action as well as the committee's general policy strategy. monetary policy affect output and inflation with a lag, so current policy actions must be taken with an eye to the likely future course of the economy. the committee's projections of the economy, not just current conditions alone, must guide its policy decisions. the lag with which monetary policy affects the economy provide that the economy focus

on meeting its objectives over the medium term, which can be as short as a year or to but could be longer depending on how far the economy is from the conditions of maximum employment and price stability. to foster maximum employment, the committee sets policy to achieve sufficient economic growth to return the unemployment rate over time to its long-term normal level. at 8.8%, the current unemployment rate is elevated relative to that level, and progress toward more no -- more normal levels of unemployment seems likely to be slow. the substantial ongoing slack in the labor market and the relatively slow pace of improvement remain important reasons that the committee continues to maintain a highly accommodative monetary policy. in the medium term, the committee also seeks to achieve a mandate consistent inflation rate which participants longer- term projections for inflation suggest is 2% or a bit less.

although the recent surge in commodity prices have led inflation to pick up somewhat in the near term, the committee continues to project inflation to return to a mandate of consistent levels in the medium term as i have discussed. consequently, the short-term increase in inflation has not prompted the committee to tighten policy at this juncture. importantly, the committee outlook for inflation is predicated on long-term inflation expectations remaining stable. if households and firms continue to expect inflation to return to a man they consistent level in the medium term, increased -- to a mandate consistent level in the medium term, inflation -- not commodity prices and in nominal wages. thus besides monitoring inflation itself, the committee will pay attention to inflation expectations and possible second round effect.

in the aftermath of the crisis, the committee has not only reduced its target for federal funds rate to a very low level, but has also expanded the federal reserve's balance sheet substantially. the committee at this meeting continues its ongoing discussion of the available tools for removing policy accommodation. at such time has actually become appropriate. the committee remains confident that it has the tools that it needs to tighten monetary policy when it is determined that economic conditions warrant such a step. in choosing the time to begin policy normalization, as well as the pace of that normalization, we will carefully consider both parts of our dual mandate. thank you again, and i would be glad to take your questions. >> mr. chairman, tomorrow we will get a premium first quarter gdp number. your own projections for the year have been downgraded at

this meeting. what do you see as the cause of the weak growth, even with the monitor of the payroll tax cuts? >> you are correct. we have not seen the gdp number yet, but we like the private sector forecasters that are -- most private sector forecasters are expecting a relatively weak number, something under 2%. most of the factors that account for the slower growth in the first quarter appear to us to be transitory. they include things like lower defense spending than was anticipated, which will presumably be made out in the -- be made up in the fourth quarter. other factors like the weather and so on. there are some factors that may have a long term implications. for example, construction, both residential and non-residential, was weak in the first quarter.

i would say that roughly most of the slowdown in the first quarter is viewed by the committee as being transitory. that being said, we have taken our forecast down just a bit, taking into account factors like weaker construction, possibly a bit less momentum in the economy. >> mr. chairman, given what you know about the pace of the economy now, what is your best guess for how soon the fed needs to begin to withdraw for normal stimulus to the economy, and can you say what is your definition of what "expanded -- "extended period" means? >> we are in a moderate recovery and we will look carefully first to see if the recovery is in need sustainable as we believe it is, and we will

also look closely at the labor market. we have seen improvement in the labor market in the first quarter relative to the latter part of last year, but we would like to see continued improvements and more job creation going forward. we are also looking carefully at inflation, the other part of our mandate. as i have noted, headline inflation is at least temporarily higher, being driven by gas prices and other commodity prices. our expectation is that inflation will come down towards a more normal level, but we will be watching that carefully and also watching inflation expectations, which are important that they remain well anchored if we see inflation remained under good control. to answer your question, i do not know exactly how long it will be before the process begins. it will begin on the outlook and on those criteria which i suggested. the extended period language, the condition on exactly the

same points, extended period, conditioned on resource slack, on subdued inflation, and on stable inflation expectations. once those conditions are violated or we are moving away from them, that will be the time that we need to begin to tighten. extended period suggests that it will be a couple of meetings probably before action but unfortunately the reason we use the vague terminology is that we do not know, certainty, how quickly a response will be required. therefore, we will do our best to communicate changes in our view, but that will depend entirely on how the economy evolves. >> mr. chairman, thank you for doing this. this is a tremendous development. there are critics who say that fed policy has driven down the value of the dollar in the lower value of the dollar reduces the american standard of living. how do you respond to the

criticism that fed policy has reduced the american standard of living? >> thanks. i should start by saying that the secretary of the treasury of course is the spokesperson for u.s. policy on the dollar, and secretary geithner had some words yesterday. let me just add to what he said first by saying that the federal reserve believes that a strong and stable dollar is both in american interest and the interest to the global economy. there are many factors causing the dollar to move up and down in short periods of time, but in the medium term, where the policy is aimed, we're doing two things. we are trying to maintain low and stable inflation by our definition of price stability, by maintaining purchasing value of the dollar, keeping inflation low. that is good for the dollar. the second thing we're trying to accomplish is get a stronger recovery and achieve maximum employment. again, a strong economy,

growing, attracting foreign capital, will be good for the dollar. if we do what is needed to pursue our dual mandate, it will also generate fundamentals that help the dollar in the median term. >> i cannot help but noticing it has been unsuccessful so far. >> well, the dollar fluctuate. one factor that has caught fluctuation has been quite extreme, the safe haven effect. for example, during the height of the crisis in the fall of 2008, money flowed into the treasury department. a lot of what you have seen over the last couple of years is the unwinding of that as the economy has strengthened and as

uncertainty has been reduced. that is indicative of the high standing dollar still retaining in the world. the best thing we can do to create strong fundamentals to the dollar in the median term is to keep inflation low, maintaining the power of the dollar, and second, to maintain a strong economy. >> many americans are upset that gasoline prices are rising so fast and that food prices are also going up. can you talk about whether there is anything that the fed can or should do about that, and can you also comment, elaborate on the increase we have seen in the inflation forecast that the fed put out today? >> sure. thanks, john. first of all, gasoline prices obviously have risen quite significantly.

we of course are watching that carefully, but higher gas prices are absolutely creating a great deal of financial hardship for a lot of people. gas of course is a necessity. people need to drive to get to work, so it is obviously a bad development to see gas prices rise so much. higher gas prices, higher oil prices also make economic developments less favorable. on the one hand, higher gas prices add to inflation. on the other hand, by draining purchasing power from households, higher gas prices are also bad for the recovery. they cause growth to decline as well, so it is a double win a coming from higher gasoline prices. ammy -- it is a double when t coming from higher gasoline

prices. on the one hand we have a rapidly growing local economy, emerging market economies growing very quickly. their demand for economies including oil is very strong. indeed, essentially all of the increase in the demand for oil in the last couple of years, the last decade, has come from emerging market economies. in the united states, our demand for oil, imports, have been going down over time. the demand is coming from a growing economy. on the supply side, as everybody knows who watches television, we have seen disruptions in the middle east and north africa and libya and other places that have constraints, supply has not been made up, and that has driven gas prices up quite significantly. this is a very adverse development. it accounts in the short run for the increase in our inflation forecast in the near term.

there is not much that the federal reserve can do about cast prices per se -- about gas prices per saye. after all, the fed cannot create more oil. we do not control the growth rates of emerging market economies, but what we can do is basically tried to keep higher gas prices from passing into other prices and wages throughout the economy and creating a broader inflation which will be more difficult to extinguish. again, our view is that most likely -- we do not know for sure but we will be watching carefully -- that gas prices will not continue to rise at the recent pace, and as they stabilize or even come down, as the situation stabilizes in the middle east, we will have to watch it very carefully. >> thank you.

mr. chairman, you stated several times this year that the recovery will not be fully established until we see a sustained period of stronger job creation. first, has it become truly established yet? if not, what is your definition of a sustained. -- a sustained period and stronger job creation? >> we made a lot of progress last august when we began to talk about another round of securities purchases. growth was very moderate, and we were quite concerned that growth was not sufficient to continue to bring the unemployment rate down. since then we have seen a reasonable amount of payroll creation, job creation, and that picked up in the most recent few months. together with the decline in the unemployment rate, from 10% down to the current rate of 8.8%.

the labor market is improving gradually, as we said in our statement. we would like to make sure that that is sustainable. the longer it goes on, the more confident we are giving it is encouraging to see the improvement we have seen in recent months. that being said, the pace of improvement is still quite slow and we are digging ourselves out of a very deep hole. we are still something like 7 million-plus jobs below where we were before the crisis, and so clearly the fact that we are moving in the right direction, even though encouraging, does not mean that the labor market is in good shape. obviously it is not, and we have to continue to watch and hope we will get stronger and increasingly stronger job creation going forward. >> robin harding from "the financial times." you say in your statement that maugre expectations -- that

major inflation expectations remain stable, and you expect that it to run to core inflation at some period. is there anything the federal reserve can do to prevent the public from may be in direand indirectly -- >> again, the inflation expectations that we are concerned about our median term inflation expectations, so we have seen, for example, in the financial markets, in the indexed bond market, or in surveys like the michigan survey, we have seen near-term inflation expectations rise significantly, which is reasonable, given the higher commodity prices, higher gas prices. for the most part, although there has been some movement here and there, i think it's fair to say that the medium-term inflation expectations have not moved very much. they still indicate confidence

that the fed will ensure that inflation in the medium term will be at the mandated consistent level. what can we do? we can communicate and try to make sure the public understand what our policy is attempting to do. to be clear what our objectives are and what steps we are willing to take to meet those objectives. ultimately, if inflation persists or if inflation expectations begin to move, there is no substitute for action and we would have to respond. while it is very important for us to try to help the economy create jobs and support the recovery, every central banker understands that keeping inflation low and stable is absolutely essential to a successful economy. we will do what is necessary to ensure that happens. >> mr. chairman, what will be

the impact on the economic recovery, job creation, and rates on mortgages and others when the fed ends its $600 billion buying program? a quick follow-up is -- will the fed -- how long will the fed to continue to allow for reinvestments? >> as i have noted, as you are all aware, we will complete the program at the end of the second quarter, $600 billion. we are going to do that pretty much without tapering. we are going to let the purchases and. our view is that based on past experiences, based on our analysis, the end of the program is unlikely to have significant effects on financial markets or on the economy. the reason being that, first, just a simple point that we hope that we have telegraphed and

communicated what we are planning to do, and the markets have well anticipated this step. you would expect that policy steps which are well anticipated by the market would have relatively small effect because whatever effects they would have had have already been capitalized in the financial markets. secondly, we subscribe generally to what we call here the stock view of the effect of securities purchases, by which i mean that what matters primarily for interest rates, stock prices, and so on, is not the pace of ongoing purchase but rather the size of the portfolio that the federal reserve holds. so when we complete the program, as you noted, we will continue to reinvest maturing securities, both treasurys and and b.s., and so the -- we should not expect

any major effect of that. put another way, the amount of these, monetary policy easing should essentially remained constant going forward from june. at some point, presumably early in our exit process, we will -- i suspect, based on conversations we have been having around the fomc table -- it is very likely that an early step would be to stop reinvesting all or part of the securities which are maturing, but take note that that step, although a relatively modest step, does constitute policy tightening, because it would be low in lowering the size of our balance sheet. that being said, we therefore

have to make the decision based on the outlook, based on our view of how sustainable the recovery is and what the condition of the situation is with respect to inflation. we will base that decision on the evolving outlook. it depends on the outlook. the committee will have to make a judgment. >> [inaudible] >> is it in the fed's power to reduce the rate of unemployment more quickly? how would you do that, and why are you not doing it? >> i should say, first of all, that in terms of trying to help this economy stabilize and then recover, the federal reserve has undertaken extraordinary measures. those include obviously all the steps we took to stabilize the financial system during the crisis. many of which were extraordinary

measures taken under extreme circumstances. even beyond the steps we took to stabilize the system, we have created new ways to ease monetary policy. we have brought the federal funds rate target close to zero. we have used for word guidance in our language to affect expectations of policy changes. as everyone knows, we have been through two rounds of purchases of longer term securities, which seem to have been effective in easing financial conditions and providing support for recovery and employment. going forward we will continue to make judgments about whether additional steps are warranted. but as we do so, we have to keep in mind that we have a dual mandate, that we have to worry about both the rate of growth to but also the inflation rate. as i was indicating earlier, i think even purely from an employment perspective, if inflation were to become

unmoored and inflation were to rise significantly, the cost in terms of unemployment loss in the future as we had to respond to that would be quite significant. so we have to make sure that we are paying adequate attention to both sides of our mandate. we have done extraordinary things to try to help this economy recover. >> mr. chairman, it is the view of the lot of economists that the second round of quantitative easing has not done much to help the economy. what positive effects can you point to directly, and if there are positive effects, can you really afford to in the program in june with the unemployment rate still around 9%? >> thank you. first, i do believe that the second round of securities purchases was effective. we saw that first in the

financial markets. the way monetary policy always works is by easing financial conditions, and we saw increases in stock prices, we saw it reduce spreads in credit markets. we saw reduced volatility. we saw all the changes in financial markets, and quite significant changes that one would expect if one was doing an ordinary easing of policy via a reduced federal funds rate. we saw the same types of financial market responses in the first round, which began in march, 2009. we were able to get the financial easing that we were trying to get. we did get very significant easing from this program. you would expect, based on decades of experience, that easing financial conditions would lead to better economic conditions, and i think that the evidence is consistent with that as well.

as i discussed in more detail in my humphrey-hawkins testimony in the beginning of march, between late august when i first indicated that the federal reserve was seriously considering this an additional step, and earlier this year, not only the federal reserve but many outside forecasters, upgraded their forecasts. we saw strengthening labor market conditions, higher rates of payroll, job creation, etc. now, the conclusion therefore is that the second round of securities purchases could only be validated if one thought that this step was a panacea, that it was going to solve all the problems and return us to full employment overnight. we were clear from the beginning that while we thought this was an important step, at an important time when we were worried about a double dip,

worried about deflation, we were very clear that this was not going to be a panacea, that it was only going to turn the economy in the right direction. we published some analytics which gave job creation numbers which were significant but not enough to completely solve the enormous jobs problem that we have. again, relative to what we expected and anticipated, i think the program was successful. why not do more? this is similar to the question i received earlier. the tradeoffs are getting less attractive at this point. inflation has gotten higher, inflation expectations are a bit higher. it is not clear that we can get substantial improvements in payrolls without some additional inflation risk, and in my view, if we are going to have success in creating a long

run sustainable recovery with lots of job growth, we have to keep inflation under control. so we have got to look at both parts of the mandate as we choose policy. >> mr. chairman, what is the right response is high oil prices persist? on the one hand they push inflation higher. on the other, they could hurt the economy by hitting spending. in the current environment, what is the best strategy? >> we are going to continue to see what happens. our anticipation is that oil prices will stabilize or tend to come down. if that happens, or if at least oil prices do not increase significantly further, then inflation will come down and we will have -- we will be close to our medium-term objectives. as we look at oil prices, as you

point out, we have to look at both sides of the situation. i do think that one of the key things we will be looking at will be inflation expectations, because if the medium-term inflation expectations remain well anchored and stable so that firms are not passing on at least on an ongoing sustained basis these higher costs into broader prices, creating a broader inflation in the economy, as long as inflation expectations are well stabilized, that will not happen, then we will feel more comfortable just watching and waiting and seeing how things evolve. if we fear that inflation expectations look like they are becoming less anchored, we would have to respond to that. >> you have talked a lot in the past about the problem of long- term unemployment. can the fed effectively reduce long-term unemployment?

>> first, you are absolutely right. long-term unemployment in the current economy is the worst, really the worst it has been in the post-war. . -- in the postwar period. we know the consequences of that can be very distressing, because people who are out of work for a long time, or their stskills can atrophy, they lose contact with the labor market, with other people working, the networks they have built up. we saw it in the european experience in the 1980's and the 1990's, that a high period of unemployment with long-term unemployment spells, can lead to launder unemployment for a more protracted period. that is one of the reasons the

federal reserve has been so aggressive. by getting unemployment down, we hope to bring back to work some of the people who have been out of work as long as they have. in that respect, try to avoid the long-term consequences of people being out of work for months at a time. that is part of the reason we have been as aggressive as we have. as the situation drags on and as the long-term unemployed lose skills and contact with the labor market or perhaps just become discouraged and stop looking for work, then it becomes really out of the scope of monetary policy. at that point, job training, education, and other types of interventions would probably be more effective than monetary policy. >> do you think that is out of the scope of what the fed can do? >> indirectly, if we expect that we can help the economy recover, and help job creation

proceed, some of the people who get jobs will be those who have been out of work for a long time. that being said, we do not have any tools for targeting long- term unemployment specifically. we can try to make the labor market work better, quality speaking. >> peter barnes of fox business network. last week standard and poor's put the united states debt on a negative watch for the very first time ever. what is your reaction to that, and are you concerned, are you worried that the united states will lose its aaa credit rating? >> in one sense, s&p's action did not really tell us anything because anybody who reads the newspaper knows that the united states has a very serious long- term fiscal problems. that being said, i am hopeful that this event will provide at least one more incentive for

congress and the administration to address this problem. i think it is the most important economic problem, at least in the long term, that the united states faces. we currently have a fiscal deficit, which is simply not sustainable over the longer term. if it is not addressed, it will have significant consequences for financial stability, economic growth, for our standard of living. it is encouraging that we are seeing efforts on both sides of the aisle to think about this issue from a long run perspective. it is not a problem that can be solved by making changes only for the next six months. it is really a long run issue. we are still a long way from a solution, obviously, i think it is of the highest importance that our political leaders to address this very difficult problem as quickly and as effectively as they can, and to the extent that the s&p action

gets a response, that is constructive. >> mr. chairman, john barry. in the past there have been times when fiscal policy has tightened and the federal reserve has chosen to ease its policy and response partly to the extent of the economy at the time. congress appears intent at this point in cutting spending significantly, might restrain the economy as it appears to be doing in britain where they are following a similar path. is there anything the fed can or should do if indeed there are large budget cuts sometime in the next 18 months? >> first, let me say that addressing the fiscal deficit,

particularly the long run unsustainable deficit, is a top priority, and nothing i would want to say would be construed as saying that anything other than a temporary. it is very important that our leaders address this issue. i would say that the cuts that have been made so far don't seem to have had very significant consequences for short-term economic activity. my preference in terms of addressing the long-term deficit is to take a long-term perspective. it's a long-term problem. if congress and the administration are able to make credible commitments to cutting programs or in the way changing the fiscal profile going forward over a long period of time, that is the most constructive way to address what is in fact a long- term problem. if the changes are focused entirely on the short run, they

might have some consequences for growth, and in that case the federal reserve, which is as always going to set monetary policy to meet our mandate, we will take those into account properly. but so far i have not seen any fiscal changes that have really changed our near-term outlook. >> thank you, mr. chairman. i would like to ask about the uncertainties in the global economy. in the meetings, the committee noted that the development increased uncertainties. what is the assessment of those risks for uncertainty such as the tragedy in japan or the crisis in europe, and the crisis in the middle east? what would be the potential effect on the u.s. and the world economy? >> one of the things that our

projections includes, we are only producing the forecast today with our -- within three weeks, we will include the detailed projections as we normally do. one thing we included the views of the participants on the amount of uncertainty in the forecast going forward. i think i can say without too much fear of giving away the secret that fomc participants see quite a bit of uncertainty in the world going forward, and a lot of that uncertainty is coming from global factors. i have talked about middle east, north africa developments, which affect oil prices. conditions in emerging markets which affect commodity prices and other things. european situation continues. we are watching that very carefully. obviously you asked about japan. let me first say that i have had a lot of contact with my

japanese counterparts, the central bank governor and other people in the japanese government. we collaborate with them on the foreign exchange intervention, as you know. we are very admiring of the courage of the japanese people in responding to these situations, and of the central bank of japan, which has done a good job in providing liquidity and helping to stabilize financial markets in what are very significant disturbances to the economy. the implications for japan have been discussed at some length, and i think the governor recently talked about them. in the near term there will probably be a decline in japanese public reflecting the destruction, reflecting electricity problems, etc. we believe that will be relatively temporary and that the economy will start to come back, but this is a major blow

and it will take a lot of effort on the part of the japanese people to restore the economy and to recovery for the united states we are looking at this very carefully. thus far, the main impact of the japanese situation on the u.s. economy has been through supply chains. we've noted some automobile companies, for example, that have had difficulty getting certain components which are manufactured mostly or entirely in japan. and that has led a number of companies to announce that they would restrain production for a time. there may be some moderate effect on the u.s. economy but we expect it to be moderate and to be temporary. again, the most important issue here is the recovery of japan and our good wishes go out to the japanese people and their

efforts to overcome the adversity that they're facing. >> mr. chairman, you have often stressed, as you indeed did again today, the importance of keeping inflation expectations low and stable, to keep inflation itself under control. but irrespective of inflationary expectations or psychology, isn't it possible that the fed's policy providing monetary tender, is that -- >> well, we view our monetary policies as being not that different from ordinary monetary policy. it's true we have used some different tools but those tools are being used through different financial conditions and we have a lot of experience understanding how financial

conditions, changes in interest rates, changes in stock prices and so on, how they affect the economy. so we're monitoring the state of the economy, watching the evolving outlook, and our intention, as is always the case, is to tighten policy at the appropriate time, to ensure that inflation remains well controlled, that we meet that part of our mandate while doing the best we can to ensure also that we have a stable economy and a sustainable recovery in the labor market. so the problem is the same one that central banks always face which is choosing the appropriate path of tightening at the appropriate stage of the recovery. it's difficult to get it exactly right but we have a lot of experience in terms of what are the considerations and the economics that underlie those decisions. so we anticipate that we will tighten it at the right time

and that we will thereby allow the recovery to continue and allow the economy to return to a more normal configuration at the same time keeping inflation low and stable. >> many of the commercial partners of the united states are very concerned about the evolution of your foreign exchange rate. if in one particular case the dollar would sink to a terrible level which would hurt the u.s. economy and in good prospect for the world economy because it effects so many people, would you consider changing your monetary policing according to that threat? >> as i said earlier, we do believe that a strong and stable dollar is in the interest of the united states and is in the interest of the global economy.

our view is that the best thing we can do for the dollar is, first, to keep the purchasing power of the dollar strong by keeping inflation low, and by creating a stronger economy through policies which support the recovery, and therefore cause more capital inflows to the united states. so those are the kinds of policies i think in the medium term will create the conditions for an appropriate and healthy level of the dollar so i don't think i really want to address a hypothetical, which i really don't anticipate, because i think the policies that we are undertaking, notwithstanding short-term fluctuations, will lead to a strong and stable dollar in the medium term. >> mr. chairman, anthony mason shes cbs. this is that rare news conference that actually makes news before it happens. can you talk a little bit about

your decision to take this historic step of holding a news conference after a fed meeting? what choices did you make? and facing the media comparing facing congress? >> thanks, mom. well, the federal reserve has been looking for ways to increase its transparency now for many years and we made a lot of progress. it used to be that the mystique of central banking was all about not letting anybody know what you were doing. as recently as 1994, the federal reserve didn't even tell the public when it changed the target for the federal funds rate. since then we have taken a number of steps, a statement with -- includes a vote. we have -- we produce very detailed minutes which are released only three weeks after the meeting which is essentially a production lag.

we now provide quarterly projections including long-run objectives as well as near-term outlook. we have substantial means of communicating through speeches, testimony and the like, and so we have become i think a very -- a very transparent central bank. that being said, we had a subcommittee headed by the vice chair of the board looking for different steps to take to provide additional transparency and accountability. and the press conference was -- came right to the top because this is an area first of all where global central bank practice includes now many central banks do use press conferences and we have some experience with them. and secondly, it does provide a chance for the chairman, in this case, to provide some additional color and context for both in this case both the meeting and the projections that are being made by the

committee. so we thought it was a natural next step. we're not done. we're continuing to look for additional things we can do to be more transparent and more accountable, but we think this is the right way to go. i have always been a big believer in providing as much information as you can to help the public understand what you're doing, to help the markets understand what you're doing and to be accountable to the public for what you're doing. now, of course, the fed didn't do this for a long time and i think the counterargument has always been that if there is a risk that the chairman speaking might create unnecessary volatility in financial markets or may not be necessary given all the other sources of information to come out of the federal reserve, it was our judgment after thinking about this for sometime that at this point the stay digsal benefits for more information, meeting

the press directly outweighed some of these risks and i think over time, you know, we'll experiment to try to make sure that this is an effective venue as possible. >> last question. >> mr. chairman. i wrote a book looking at 800 years of financial history. . i discovered when you have a financial crisis it takes a lot longer for them to recover. are people expecting toosm from the federal reserve in terms of helping the economy recover and has that hurt -- >> ken rogoff was a graduate schoolmate of mine. i played chess against him which was a big mistake. i enjoyed that book very much. i thought it was very informative. as you say, it makes the point that as an historical matter

recoveries following financial crises tend to be relatively slow. now, what the book didn't really do, though, is give a full explanation of why that's the case. certainly part of it has to do with the problems in credit markets and my own research when i was in academia focused a great deal on the effects of problems in credit markets on recoveries. other aspects would include the effects of credit problems on areas like housing and so on, and we're seeing all that, of course, in our economy. with that said, another possible explanation for the slow recovery from financial crises might be that policy responses were not adequate. that they -- that the recapitalization of the banking system, the restoration of credit flows and monetary and fiscal policies were not sufficient to get -- to get as quick a recovery that might otherwise have been possible.

and so, you know, we haven't allowed that historical fact to disswayed us from doing all we can to support a strong recovery. that being said, it is a relatively slow recovery. you can identify reasons for that. credit factors are one. another very important factor is that, you know, this was triggered by a bubble in the housing market and the housing market remains very weak, and under normal circumstances, construction would be a big part of the recovery process. there are a number of factors and now we're seeing high oil prices and a number of things, there are things which are holding the recovery back. so there are good reasons for why the recovery is slower than we would like. at the same time, it's very hard to blame the american public for being impatient. conditions are far from where we would like them to be. the combination of high

unemployment, high gas prices and high foreclosure rates is a terrible combination. a lot of people are having a very tough time. so i can certainly understand why people are impatient. i guess the only thing i can say is while the recovery process looks likely to continue to be a relatively moderate one compared to the depth of the recession, i do think that the pace will pick up over time and i am very confident that in the long run that the u.s. will return to being the most productive -- one of the fastest growing and dynamic economies in the world. and it hasn't lost any of the basic characteristics that made it the preeminent economy in the world before the crisis, and i think we will return to that status as we recover. thank you very much, and thank thank you very much, and thank you for coming.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> a couple of the events to tell you about happening on our companion network, cspan 2. in about 15 minutes, joint chiefs chairman mike mullen will give a speech to military leadership and talk about iraq and afghanistan. we will have that live at 7:15 eastern. this afternoon, former senator rick santorum will discuss the role of u.s. foreign policy. pennsylvania republican recently formed a presidential exploratory committee. live coverage begins at 1:30 eastern also on c-span 2. >> live, saturday, the

correspondence annual dinner and later remarks from president obama and saturday night live's seth myer. it will be streaming on c- span.org and live on c-span. >> "washington journal" is next. we will get an update this afternoon on the political unrest in syria from the damascus center of studies in syria and later, a preview of the 2012 presidential campaign and the iowa caucuses will go live to the jim fischer radio show at woc in davenport, iowa at 3:00 eastern here on c-span. coming up this hour, more about yesterday's news conference with german ben bernanke