principles in recent meetings. we expect those discussions to continue, and expect to provide appropriate information further t an appropriate time. the goals set out in the june 2011 remain applicable. one difference is worth mentioning. participants continue to think that in the long run the federal reserve's portfolio should be predominantly treasury securities, a strong majority suspects the committee will not sell securities in the process of normalizing monetary policy. although in the longer run sales could reduce or the maiden holdings. given the outlook of the committee policy guidance, these factors are unlikely to be relevant to actual all see for quite a while. let me turn to current policy issues. with unemployment still elevated and inflation below the committee longer run objective,

the committee is continuing its highly accommodative policies. as you know, in normal times the committee eases monetary policy by lowering the target for the short-term policy interest rate, the federal funds rate. however, the target range for the federal funds rate cannot meaningfully be reduced further. thus, we're providing policy accommodations through two alternative methods. first by communicating to the public the committee's plans for setting the federal funds rate target over the medium-term, and second by purchasing and holding treasury securities and agency mortgage-backed securities. let me discuss a few key points regarding each of these policy tools. first, the committee reaffirmed its expectation that the current exceptionally low range for the funds rate will be appropriate at least as long as the unemployment rate remains above six .5%, so long as inflation and inflation expectations remain well behaved as described in the fomc statement.

as i've noted frequently, the phrase "at least as long" in the guidance is important. the economic conditions we have set out as proceeding any future rate increase our thresholds, not triggers. assuming inflation is near our objective at that time, as expected, a decline in the unemployment rate to 6.5% would not lead automatically to an increase in the federal funds rate target, but rather indicate only it was appropriate for the committee to consider whether the broader economic outlook justified such an increase. all else equal, the more subdued the outlook for inflation at the time, the more patient the committee would like to be in making that assessment. in the projections submitted for this meeting, 14 of 19 fomc participants indicated they expect the first increase in the target for the federal funds rate to occur in 2015. one expected the first increase in 2016. moreover, so long as the economy remains short of maximum employment, inflation is a longer run objective.

inflation expectations are well anchored. increases in the federal funds rate are likely to be gradual. consistent with the committee's balanced approach to meeting price stability objectives. the purpose of the forward guidance is to assure households and businesses that monetary policy will continue to support the recovery even as the pace of economic growth and job creation picks up. as our statement notes, the committee expects a considerable interval of time to pass between when the committee will cease adding accommodation throughout the purchases and the time when the committee will begin to reduce accommodation by moving the federal funds toward normal evels. the second policy tool is asset purchases. the committee has been purchasing $40 billion a month in mortgage backed securities and $45 billion a month in treasury securities. when our program was initiated

last september the committee stated a goal of promoting a substantial improvement of the outlook for the labor market in the context of price stability. it would be taking appropriate account of the efficacy and cost of the program. the committee made no changes today to the purchase program. although the committee lefty pace of purchases unchanged at today's meeting, it is stated it may very the case of purchases as economic conditions evolve any such change would reflect data and implications for the outlook, as well as the curative progress made toward the committee's objectives since the program began in september. going forward, the economic outcomes the committee sees as most likely involve continuing gains in labor markets supported by moderate growth that picks up over the next several quarters as the near-term restraint from fiscal policy and other headwinds diminishes. we also see inflation moving back toward our 2% objective vertime.

if the incoming data are broadly consistent with this forecast, the committee currently anticipates it would be appropriate to moderate the monthly pace of purchases later this year. if the subsequent data remains broadly aligned with current expectations for the economy, we would continue to reduce the pace of purchases in measured steps to the next half -- first half of next year, ending purchases around midyear. in this scenario, when asset purchases come to a end, the unintended rate would likely be in the vicinity of 7%. a substantial improvement from the 8.1% employment rate that prevailed when the committee announced the program. i would like to emphasize that our policy is in no way predetermined and will depend on incoming data and the evolution of the outlook, as well as cumulative process toward objectives. if conditions improve faster than expected, the pace of purchases could be reduced more quickly. if the outlook becomes less favorable or financial

conditions are judged to be inconsistent with further progress, reductions in the pace of purchases could be delayed. should it be needed, the committee would be prepared to employ all its tools, including an increase in the pace of purchases or a time, to promote a return to maximum employment in the context of price stability. it is worth noting here that even if a modest reduction in the pace of purchases occurs, we would not shrink the federal reserve portfolio, only slowing the pace at which we are adding to the portfolio well continuing to reinvest proceeds for maturing holdings. these large and growing holdings will continue to put downward pressure on longer-term interest rates. to use the analogy of driving an automobile, any slowing in the pace of purchases would be akin to letting go on the gas pedal as the car picks up speed, not to begin applying the rakes. i will close by drying the important distinction between

the committee's decisions about adjusting the pace of asset purchases and the forward guidance regarding the total funds rate. the current level of the federal funds rate target is likely to remain appropriate for a considerable time after asset purchases are concluded. to return to the driving analogy, if the incoming data supports the view that the economy is able to sustain a reasonable cruising speed, we will ease the pressure on the accelerator by gradually reducing the pace of purchases. however, any need to consider applying the brakes by raising short-term rates is still far the future. in any case, no matter how conditions may have all, the federal reserve remains committed to fostering substantial improvement in the outlook for the labor market in a context of price ability. thank you. i will be glad to take your questions. >> i hate to use my question to use a car question. when you say gradually reduce

purchases beginning this year and ending next year, what is that? is that a decision by the omc? >> we had a good discussion of that issue today. we have not had, obviously there is no change in policy involved here. simply a clarification helping people to think about where policy will evolve. so it was thought it might be best to explain that to the group and answer questions. future policy statements may include elements of this, but it is not a policy change. i am trying to explain how we are making the substantial improvement in the labor market concrete, and how we are thinking about the potential future of the program given alternative policy and economic developments. >> there is no consensus on this? it is not a vote of the

opponents he or a plan written down -- of the fomc, or a plan written? >> it represents the consensus of the fomc. >> could you give us information nonsubstantive improvement? is that the unemployment rate coming down by itself to 7%, or other factors? is it substantial compared to he fall? >> many factors we look at when trying to judge the labor market. we look at participation and payrolls and a variety of other data. the 7% unemployment rate is indicative of the kind of progress we would like to make in order to be able to say we have reached substantial rogress. >> mr. chairman, there is an undercurrent of optimism in your forecast and statement. the policy statement today, the

on implement rate forecast, 6.8% next year. it is the case that the fed is overestimating the economy's growth rate very often in the past during this recovery. so we have gone through a time in the first half of the year with pretty subdued growth. i would like you to explain where this optimism comes from, and how confident you are that these expectations are going to be met. >> the fundamentals look a little better to us, in particular the housing sector, which has been a drag on growth since the crisis, is now obviously a support to growth. not only creating construction jobs, but as house prices rise, increasing household wealth. supporting consumption spending, consumer sentiment. state and local governments, who have been a major drag, are coming to a position where they no longer have to lay off large numbers of workers.

financial conditions generally peaking are improving. the main drag, the main headwind to growth this year is, as you know, the federal fiscal policy, which the cbo estimates is something on the order of 1.5% of growth. our judgment is that given that very heavy headwind, the fact that the economy is still moving had at least a moderate pace is indicative that the underlying factors are improving. so we will see how that evolves. obviously we have not seen the full effect yet of the fiscal policy changes. we want to see how that evolves as we get through that fiscal impact. but we are hopeful, as you can see from the individual projections. these are individual projections, not the official forecast of the committee. we will be interested to see if the economy picks up a bit and continues to reduce unemployment.

one thing that is very important for me to say is that if you draw the conclusion that i have just said, that our policies, that our purchases will end in the middle of next year, you draw the wrong conclusion. our purchases are tied to what happens to the economy. if the federal reserve makes the same error and we overestimate what is happening, our policies will adjust to that. we have no deterministic or fixed plan. rather, our policies are going to depend on this scenario to be true. if it does not come true, we ill adjust our policies. >> thank you, mr. chairman. financial conditions have tightened in the past few weeks. bond yields have gone up and gone up again today. why do you think that is? why don't you talk a little about whether that rise in longer-term interest rates could affect your economic outlook? particularly given that mortgage rates are now above 4%.

>> good question. yes, we have come up some. that is in part due to more optimism, i think, about the economy. it is in part due to perceptions of the federal reserve. the forecast, the projections that are -- that our participants submitted to the meeting, were done in the last few days. they were done with full knowledge of what happened with financial conditions. rates have tightened some, but other factors have been more positive. increasing house prices, for example. as far as the housing market is concerned, you want to watch that. but one important difference now is that people are more optimistic about housing. they expect house prices to continue to rise. he see that, for example, in the michigan survey. that compensates, to some extent, for a slightly higher mortgage rate. in fact, in terms of monthly payments on an average house the

change of mortgage rates we have seen so far is all that dramatic. so yes, our forecast, our projections to factor that in. and if interest rates go up for the right reasons, that is, both optimism about the economy and accurate assessment of monetary policy, that is a good thing. not a bad thing. >> robin harding from the financial times. you have always argued that it is the stock of assets the federal reserve holds that affects long-term interest rates. how do you reconcile that with the very sharp rise in real interest rates we have seen in recent weeks? do you think the market is correctly interpreting what you think is most likely to be the future federal reserve stock of assets? >> well, we were a little puzzled by that.

it was bigger than can be explained, i think, by changes in the ultimate stock of asset purchases within reasonable ranges. so i think we have to conclude there are other factors at work as well. including some optimism about the economy, maybe some uncertainty arising. so i am agreeing with you that it seems larger than can be explained by a changing view of monetary policy. it is difficult to judge whether the markets are in sync or not. generally speaking, though, i think what i've seen from analysts and market participants is they are not wildly different from what the committee is thinking. what i tried today to communicate. the most important thing that i ant to convey again is that it is important not to say this state, that date, this time. it is important to understand that our policies are economic

dependent. in particular, if financial conditions move in a way that makes this economic scenario unlikely -- for example, that would be a reason for us to adjust policy. >> washington post. on monday, president obama said in an interview that he believed you had stayed in your position as chairman for longer than you wanted to and maybe longer than you were supposed to. do you agree with that assessment of your term, and can you update us on any conversations you have had him about your future? >> we just spent two days working on monetary policy issues and i would like to keep the questions here on policy. i do not have anything for you n my personal plans. >> greetings, mr. chairman.

craig torres from bloomberg. we would like to push for a deeper explanation on thresholds nd triggers. the forecast and mysterious dots do not map into the unemployment forecast. we see more gradual rate rises. people moving to the right on when they expect the rate to increase. and yet unemployment is going to fall to 6.5% in 2014. also, labor force participation is not in great shape. you, in fact, have been a big believer in a lot of the exit from from the workforce related to weak demand, not structural factors. so here's my question. can you explain a little bit more, maybe is the threshold too igh? i will point out that the vice chair and two other people who have worked here have done

significant research that maybe you need to let the unemployment rate fall much lower to pull these people back into the labor force. i am wondering if you can expand on that. >> great question. what you pointed out, the difference between the dots and the forecast illustrates the point. her member, the 6.5% is the threshold -- remember, the 6.5% is the threshold, not the trigger. we will look at at that point whether an increase in rates is appropriate. among the things we will take into account, first of all is inflation. inflation is obviously very low and expected to stay low. secondly, we would be taking into account, does the unemployed and rate fairly represent the state of labor market? as you pointed out, we have underemployment, part-time work among people leaving the labor force, reduced participation, long-term unemployment, and number of factors suggesting the 6.5% is a little -- not exactly

representative of the state of the labor market at that point. first of all, since it is a threshold and not a trigger, we are free to take all that into account before we begin the process of raising rates. that is what the diagram success best suggests. -- suggests. people believe it will be 6.5% in late 2014 or early 2015, but increases in rates may not follow for several quarters after that. in terms of adjusting the threshold, that is something that might happen. if it did happen, it would be to lower it, not to raise it. >> new york times. i understand the 6.5% is a threshold, what you just talked about a 7% line for asset purchases. at that level you will stop with the asset purchases mid next year. you talked about wanting to see substantial improvement in the labor market before suspending

the purchases. it is easy to imagine us getting to 7% without visitation ncreasing. has something changed in your thinking about the value of asset purchases? why are you cutting them off before you see that potential -- substantial? >> substantial is in the eye of the beholder. one from 8.1% and a stagnant rate of improvement to seven percent and stronger economic growth is a substantial increase. it is important to explain that we have two tools. one of the miss rate policy, setting the -- one of them is rate policy, setting the rate. that is what central-banks have used forever. asset purchases are different. they are unconventional policy and, with certain risks and uncertainties that are not necessarily associated with rate policy. so our intent from the beginning is very clear -- use asset

purchases as a way to achieve some near-term momentum to get the economy moving forward into a sustainable recovery. then essentially to allow a low interest rate policy to carry us through. let me make two things -- points. the first, our target is not 7%, not 6.5%, it is maximum employment, which according to our projections most people think is between 5% and 6% unemployment. the 7%, 6.5%, they are guideposts to tell how we will shift our mix of tools as we try to land the ship in a smooth way on the aircraft carrier. the other thing i wanted to say was that stopping asset purchases, when that happens, and i think we are still some distance from that happening,

but when that happens it will not involve ending the stimulus from asset purchases. we will hold on to that portfolio. if the stock theory of the portfolio is correct, as we believe it is, holding all the securities off of the market and einvesting, rolling over securities, will still continue to put down pressure on interest rates. between now commitments to a low federal funds rate and a large portfolio, we will still be reducing a very -- producing a large meadow stimulus, an f to bring the economy smoothly toward full employment without incurring unnecessary costs or risks. >> dow jones newswire. you in your statement before the press conference and in a policy statement acknowledged that inflation readings have been low.

but you maintain the inflation -- longer-term inflation expectation raised -- expectations have remain stable. but certain measurements have fallen in recent weeks. is that of any concern? if not, why? what would you need to see for the committee to be more concerned that longer-term inflation expectations are following? - falling? >> this is something we watch very carefully. there are, as i mentioned, a number of transitory factors that may be contributing to the very low inflation rate. for example, the effects of the sequester on medical payments. that bond market prices are low right now. these are things we expect to reverse and see inflation come up a bit. first, on inflation expectations, it is true that break-evens from inflation-indexed bonds have come down.

we remain within the historical range we have seen over the past few years. moreover, other measures of inflation expectations, be it forecast by professional forecasters, whether it is survey measures from firms or households, those are all still pretty much in the same faces they were. that being said, as i said in my opening remarks, we do not take anything for granted. one of the preconditions of policy that i described, that inflation begin at least gradually to return toward a 2% objective, is that we will obviously have to take measures to address that if it does not happen. we are certainly determined to keep inflation not only -- not only avoiding inflation that is too high, but also inflation that is too low.

>> peter cook, bloomberg television. given the volatility we have seen in the market since your comments on may 22, the lengths to which you are stressing the forward guidance here today, it does suggest there are some -- you are somewhat worried you are not getting your message up. i am wondering, to what extent do you think your exit strategy will be that much more challenging because even in the small time where you have not been all that much you have seen this reaction? >> it is important for us to communicate. it is particularly important when we have an unusual economic situation where, i think, the standard relationships are not aligning the way they have. using unconventional tolls and forward guidance. i guess i agree with you that our communication will be very important. we hope that, again, the key point i have tried to make today

is that our policies are tied to how the outlook evolves. that should provide some comfort o markets, because they will understand that we will be providing whatever support is necessary. if the economy does not improve along the lines we expect, we will provide additional support. if financial conditions evolve in a way that is inconsistent with economic recovery, we will provide support. so again, your point is well taken that we are in a position where the simple adjustment by 25 basis points to be federal funds rate seems like a long ago experience. we are in a more complex type of situation. but we are determined to be as clear as we can and we hope that

you and your listeners and the markets will be able to follow hat we are saying. >> american banker. next month will be the three-year anniversary of the dodd frank act. as you know, there are a number of significant rulemakings yet to be finalized. the volcker rule, section 165, section 166, to name a few. can you provide us with an update on where we stand with the rulemaking? are you still optimistic we will see the rules completed by the end of this year? >> it is certainly true it has taken time to do these regulations. a number of reasons for that. first is that they are inherently, many of them, quite complicated. the volcker rule involves very subtle distinctions between hedging and market-making and proprietary trading. the second reason is many of them involve multiple agencies,

which have to coordinate and cooperate and agreed on anguage. one rule, six agencies are involved in making that rule. the third issue is we have to do our homework. we have to get these right. that means having extended comments, getting lots of information from the public, and reviewing those comments and doing all we can to make sure we are responsive to those many concerns and suggestions. it does take time. i think it is a little unfair to say only 30% of the rules have been completed. most of the rules, even if they are not completed, are very far anced. -- advanced. that is true. we are close to completing basel 3. we have made good progress on the volcker rule, and i anticipate that being done this year. we are making additional progress on the capital surcharges.

these are all things that will be coming relatively soon. at least in the current year. once they are out there, that it will still take some time to be implemented for financial institutions to change their practices and so on. i would emphasize is this is going on that we are not ignoring the health and safety of the banking system, for example. we have been doing these very rigorous stress test that are part of the dodd frank rules. the amount of capital u.s. banks hold has roughly doubled, the largest banks, since 2009. indeed, the largest banks now appear to be basel-3 compliant or pretty close to compliant. we are working with banks to move in directions they know they will have to be going.

even as the rules themselves are being finalized. it is an ongoing process, but i expect to see more rapid completion going forward in the next two quarters. >> peter, then steve. >> peter barnes, fox business. one of the highlights of the conference in jackson hole every year are remarks by the chairman, you. you are not going this year. we have heard it is because you have a conflict in your personal schedule. but some have taken that as a sign that you may not be staying on the job for another term. could you comment on that, and could you give us a bit more explanation as to why you will not be at jackson hole for the first time? >> as i said, i will not comment on my personal plans, but i will say this. there is a perception that the jackson hole conference is a federal reserve system wide conference. it is not.

it is sponsored by one of the 12 reserve banks. every one of the 12 reserve banks has conferences and meetings. this is the one i have gone to the most of any reserve banks. i think it is not inappropriate to go to different conferences and different meetings, and to essentially meet all the constituents i have indifferent reserve banks. that is one reason, certainly. >> mr. chairman, a number of your colleagues expect the unemployment rate to get down to 6.5% next year. which is your threshold for considering raising the funds rate. yet the fomc has also said that it expects to keep rates very accommodative for a considerable time after asset purchases end,

after the recovery has strengthened. yet here we are in the middle of 2013. you have not even begun to scale back asset purchases. so you partially addressed this, but could there be a conflict between on the one hand the asset purchase program and of the other hand the funds rate guidance policy? could they conflict? could you perhaps elaborate? >> i certainly hope the unemployment rate comes down so fast that this becomes a problem. i would point out a couple hings. one is that there is a range of estimates. they are all based on each individual's idea of optimal policy. policy assumptions may not be the same. it is true that some are as low as 6.5%. as i said in my earlier answer, that is a threshold, not a trigger. evidently, if you look at the policy expectations given in the

diagram, you will see that a very strong majority of fomc participants still expect rates to be quite low at the end of 2015. that is not inconsistent. that is just saying people are looking at a variety of factors tom a including inflation, which is predicted to be quite low. and other labor market factors, thinking when it will be appropriate to start increasing rates. >> cnn money. i should tell you first of all that your analogy to landing the economy on an aircraft carrier worried me a little that from personal experience. i find it is always a bit jarring to land on an aircraft carrier. but i want to talk about mortgage backed securities. you mentioned during your comments here, if i understood correctly, you are not going to dispose of mortgage backed

securities that you have on the books during this normalization. i have heard many people on wall street and elsewhere say that right now the federal reserve is the market for mortgage-backed ecurities. so, it is kind of a warped market right now. i am just wondering, how focused are you on mortgage backed securities and this larger market for mortgage-backed securities? i guess what i'm saying, has the ground shifted from under us in terms of mortgage-backed security world on a permanent basis, or it leased a long-term basis, because of the devastating nature of what appened a few years ago? >> we are still only a fraction of the total holdings of ortgage backed securities.

but more relevant, as part of our assessment of -- our ongoing assessment of the potential cost of various asset purchase programs, we pay very close attention to market functioning. our assessment is the mbs market is still a very healthy market in terms of spreads and execution times and the number of people on both sides of the arket. there are banks building up mbs portfolios. many investors holding mbs. if the market was breaking down in some way, that would be a factor we have to take into account. but our assessment -- and we are in that market quite a bit -- our assessment is that the market is still working quite ell. our purchases are not disrupting the normal price discovery and liquidity functions of the market. i think the events of five years

ago obviously do have a long-term effect. there are bills in congress that would change, reform the gse's and change the market for mortgage-backed securities. or have increasing the amount of private placements or changing the institutional structure of the market. we may end up holding some securities which are in some sense left over from a previous year a -- era at some point. nevertheless, for the time being, they are the mortgage-backed security market. fannie and freddie are basically it. we are legally allowed to buy and own the securities, so we have found it useful to do hat. we believe it has contributed to mortgage rates -- lower mortgage rates and a stronger housing market. that has been a rationale. to come back to your question,

we do not see any significant deterioration in market functioning. >> let me follow-up. in terms of government backing of mortgage backed securities, is there a concern, a legitimate concern, that without government backing of this market in some way that, because the private market seems to move with much more rapidity then government purchases, that moving the government out of this backup role on mortgage backed securities would be a real problem or change the nature of getting a mortgage in america? some people say if the government was not behind it it would be the end of the 30-year mortgage as we know it. >> these issues are being debated. a number of bills in congress which would change the gse's,

eliminate them or replace them with backstop government support as opposed to 100% government credit guarantees. these are the debates we are all having about the future of the u.s. mortgage market. i think it is entirely possible that there is major change in the government's role in the mortgage market that we might see a different structure in mortgages. other countries have different structures. they have in many cases the same or similar homeownership rates as we do. it is possible we may find with a different structure it is etter for some people. >> thank you, mr. chairman. marketwatch.com. i am wondering if you could go over your plans about tapering later this year. and why isn't tapering tightening? many people in the markets as

soon as you talk about tapering, it will push forward when they think the first rate hike will ome. >> as i tried to explain in my opening remarks, our plans depends on the economic scenario and how it evolves. have tried to explain how our purchases would evolve if the most likely forecast would likely take place. it will not exactly take place. something else will likely happen. but our basic forecast is one, as we pointed out earlier, a moderately optimistic forecast were growth picks up as we passed through this period of fiscal restraint and unemployment continues to follow the gradual pace it has since ast september. and inflation rises slowly toward 2%.

those are the conditions that define this baseline forecast. in that case, as i described, we would expect to slow or moderate purchases later this year. through the middle, the early part of next year and ending in that scenario somewhere in the middle of the year. again, it is very important to understand that if we do that that would basically say that we have had a relatively decent economic outcome in terms of sustained improvement in growth and unemployment. if things are worse we will do more. if things are better, we will do less. to answer your other question, i would draw the analogy of 50 federal reserve in normal times lowers the federal funds rate by 25 basis points but some traders think we are expecting 50 basis points, there might be a sense that the financial conditions have tightened somewhat.

but nevertheless i think you would say that the fed cut the funds rate by 25 basis points, that was an easing of policy. at the same token, as long as we are adding assets we are -- buying assets we are adding to her holdings. we do believe there is room for debate. the primary effect of our purchases is to the stock we hold. that stock is withdrawn from markets and the prices of those assets have to adjust to balance supply and demand. we have taken out some of the supply, so prices go up, yields go down. that seems to be consistent with the idea that we are still adding liquidity, still adding accommodation to the system. >> the economist. mr. chairman, i am trying to sort of understand the view with relation to these inflation figures. i am a little surprised at how

blasé the committee seems, with the exception of president bullard. inflation looks remarkably low. your projections have it rising at most 2% in 2015. you say inflation expectations have remained within the range the fed has traditionally been comfortable with. they have fallen by a good 0.5%. when interest rates are stuck at zero or lower bound, a decline in inflation expectations would translate to an increase in real rates. why is the fed not more concerned about this? it seems earlier they were more concerned in declines like this. wouldn't you say that even if you are happy with the pace of labor market recovery, things being equal, this performance is something you should be pushing harder on the accelerator? >> i do not disagree with anything you said. inflation that is too low is a problem.

it raises real interest rates, it means that deleveraging takes place more slowly. now, there are always issues about why is it low. there are a few reasons that are probably not that meaningful economically. for example, the temporary movement in medical prices, the temporary movement in non-market prices, things of that sort. we expect inflation to come back up. hat is our forecast. but i think it is entirely wrong to say we are not concerned about it. we are concerned about it. we would like inflation up to our target. that will be a factor in our thinking about the thresholds. it will be a factor in our thinking about asset purchases. and we have to do a mandate. maximum employment and price stability. there is a reason why we define

price stability as a positive nflation rate, not zero. we need to have enough inflation so there is some room for real interest rates to move. i do not disagree with your asic argument. >> since you have referred -- is he the real power behind the hrone? you mentioned on several occasions now quantitative easing is designed to spur economic growth and drive down the yield and force more risk-taking in the economy. there was a debate about whether or not it was inflating commodity prices. inflation as a whole is subdued, but oil prices are around $99. we were told when we had domestic production that would

be a single to bring prices down. it has not happened. result has people on the streets because of inflation. to what degree do you think quantitative easing is inflating commodity prices? have you been able to filter that out? and he thought on wage growth why that has been so flat when everything else seems to be doing good in the economy? >> as i recall, i believe when we introduced the second round of qe2 in november 2010, there was a lot of increasing commodity prices at the time. a lot of complaining that the fed is pumping up commodity prices. that is a negative for people round the world. we argued at the time that the effects of the federal reserve policy on global commodity prices was probably pretty small, and that it operated to the extent it did have an effect, mostly through growth expectations.

that is, a stronger global economy tends to drive up ommodity prices. this time around we have purchased and are in the process of purchasing a lot more than we did in so-called qe2. we have not really seen much increasing commodity prices. commodity prices are way off the peaks of last year. it was a little different from others. many other commodity prices have fallen further. he reason i would give is that the emerging markets -- china, the rest of asia, other parts of the world -- and europe, of course, are softer. global commodity demand is weaker. that explains the bulk of why commodity prices have not risen so much. think that is consistent with a story that the fact of asset purchases on commodity prices, i am not saying zero, but i do not

think it is nearly as big as some folks have suggested. in terms of wages, i think that is mostly consistent with our view that unemployment at 7.6% is still pretty far from where we should be satisfied. maximum employment is between 5% and 6%, although these are very different numbers -- difficult numbers to estimate. we have not seen wage growth except in a few narrow occupations. that is indicative of a labor arket that remains quite flat, and where that justifies why we are maintaining a highly ccommodative policy. >> the money market fund proposal is far less comprehensive than the plan you and the financial stability versight council endorsed.

should they differ to the sec or press for more to be done? >> i am glad to see the sec has taken up money market eform. it is by far the best outcome for the sec to do it. it is the area where they have the expertise and experience. in terms of the actual proposal they put out, it is just a proposal for comment. one of the two proposals, the floating net asset value, is of course qualitatively similar to one of the proposals that was in he fsoc suggestions. we have not yet reviewed this in enough detail to give a iew. but i hope that -- i know for sure that by putting out floating nav proposal, they are

moving in the right direction. i hope it comes out with something that is sufficient to meet the very important need of stabilizing money market funds. >> nikkei newspaper. mr. chairman, we have seen greater volatility recently in japanese markets. equities, jgb, and foreign exchange. some say this is due to uncertainty in the federal reserve monetary direction. others say it is lack of confidence in the bank of japan monetary policy. how do you view the bank of japan's efforts? do you still support bank of japan policy? the other question, how much do you pay attention to the spillover effect to international markets when you

consider exit strategy? >> i think the volatility is mostly linked to the bank of japan's efforts. which seems logical, since in earlier episodes when the fed was doing asset purchases and the doj was not doing anything, there was no volatility. it seems logical that the change here is the change in boj olicy. the boj is fighting against entrenched deflation. deflation has been a problem in apan for many years. expectations, public expectations are for continuing deflation. it takes aggressive policies to break those expectations and get inflation up to the 2% that the bank of japan has set. that's why it is difficult. they have had to be very aggressive. that aggressiveness in the early stages of this process where

investors are still learning about the d.o.j.'s reaction function 789 it is not all that surprising that there is volatility. also the j.g.b. markets are less liquid. it is something i think they need to pay close attention to, but on the whole, i think it is important for japan to attack deflation. and on the other hand, i agree with the three arrows, the idea that breaking deflation is important to affect fiscal and structural deflation as well. i support my colleague, mr. corona, and i am supportive of what japan is doing, even though it has some affect on our economy as well. there are a lot of reasons why emerging markets this capital inflows. we have seen changes in growth in the emerging markets, for

instance. some have to do risk-on, risk-off behavior. some also has to do with monetary risk policy which ncludes the united states. we do pay attention to that. i frequently meet with members of the g8, for example. as the g7 and g20 both noted, what the u.s. monetary policy is trying to do is help this conomy grow. global recovery depends very much on the u.s. on the whole, it is positive. i think my colleagues in emrging arkets recognize that.

that king said, anything we can -- that mize effects being said, anything we can do to minimize effects, we will do. >> you talk about being an uncharted territory with policy. we can remember these conferences just started two .ears ago as well how do you walk that line and how did the f.o.c. leave that to ?ou >> again, we lock don't look at this as a change in policy. what i was deputized to do was

to make clear the implications of our existing policy and to ry to explain better how the policy would evolve in different economic territories. i think going forward, some of these elements if we can make them useful are entirely possible. it seems like the right tactic in this case to explain these fairly subtle contingencies in a context where i could answer to any and respond misunderstandings that might occur. >> thank you. >> tomorrow on "washington commurnl, the president talks about his second-term agenda --

on rrow, jonathan alter president obama and his second-term agenda. and later we look at the witness protection program with its founder. >> next john boehner speaks at the national association of manufacturing in washington. this is about 50 minutes. >> may i have your attention please. that's what i love. rowdy manufacturers. i have a great privilege right now of introducing to you someone that is no stranger to any of us. probably the greatest friend that manufacturers have in the united states congress. john boehner has been a

representative from ohio since 990. we are so pleased that he is peaker of the house. i can tell you that just watching him, i have had the opportunity to interact not only with the speaker, but his incredibly talented staff. the job of speaker of the house, i believe, is the hardest one that exists in washington, d.c.. the drop of speaker of the house i believe is the hardest one that exists in washington dc. imagine if you had 435 cats, and anyone who had a cat knows knows there are no to cats the same personality. equally debt to the united states house are presented to us read the speaker is -- equally that to the house of representatives. the speaker has a great leadership team that's also focused on jobs, and we are really pleased that he's here to talk to us today about their platform. but i wanted to tell you a little about the speaker that

you may not know. first of all, one of the reasons that john boehner is one of the greatest people in washington, .c. is because he's from ohio. i appreciate that. he used her present my parents in the house. that was a nice little connection. he was -- when people come to washington, they come with the preconceived values that were instilled in them throughout their entire life. i want you to think about this when you think of john boehner. he was one of 12 children, and hose children shared two bedrooms and one bathroom. if you wonder if he can handle the art of compromise, all you have to know is how he handled the first years of his life.

i'm very proud that before he came to congress, he represented manufacturers. he's one of us. he gets us. some of those manufacturers are members of this organization, founded in 1985 in ohio. i do want to leave you with this. i think this is something i have never forgotten amitai my wife -- from the time i watched john boehner take the oath of office as speaker of the house. these were his remarks that he made during that time. "economic freedom, individual liberty, personal responsibility i hold these values dear because

i have lived them. i spent my whole life chasing the american dream." ladies and gentlemen, please welcome the speaker of the house of representatives, john boehner. [applause] >> thank you. thank you all. i want to tell all of you how glad i am to be with you today. i've been calming to these n.a.m. meetings for years.

when we look at where we are, we are still seeing growth. it is not just that right now. it isn't just that right now. in america, the people have always had a healthy skepticism about their government. lately they have had more reason than usual to be skeptical. they read about the irs abuse of power, and targeting americans for their political beliefs. they wonder about what happened in benghazi where americans were illed. they see report the journalists had their phones monitored, and they asked this could happen to them. they are -- in washington there as been no accountability. no buck stops here, only arrogance of power that puts politics ahead of doing the right thing. when government is out of control, and also the people it is supposed to serve, it m