president taft himself made the decision. were veryse accommodating and understanding and decided to send 3000 trees which arrived in 1912. it is those that we still have a few of around the tidal basin. >> watch our for graham on helen taft on our website www.c- or see itirst ladies saturday at 7:00 p.m. saturday. we continue our series next monday. span, we bring public affairs events from washington directly to you, putting you in the room at congressional hearings, white house events, briefings, and conferences and offering complete gavel-to-gavel coverage of the u.s. house. as a public service of private industry. we are c-span, created by the cable tv industry 34 years ago and funded by your local cable or satellite provider and now you can watch us in hd. >> following the quarterly

meeting at the federal open market committee, federal reserve chairman ben bernanke talks to reporters about the fed decision to continue its asset purchase program. mr. mackey's term as fed chairman ends in january andthis briefing is one hour. >> good afternoon. the federal open market committee (fomc) concluded a two-day meeting earlier today. as you already know from our statement, the committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and to make no change in either its asset purchase program or its forward guidance regarding the federal funds rate target. i will discuss the rationales for our decision in a moment. economic growth has generally

been proceeding at a moderate pace, with continued-albeit somewhat uneven-improvement in labor market conditions. of course, to say that the job market has improved does not imply that current conditions are satisfactory. notably, at 7.3 percent, the unemployment rate remains well above acceptable levels. long-term unemployment and underemployment remain high. and we have seen ongoing declines in labor force participation, which likely reflects discouragement on the part of many potential workers, as well as longer-term influences such as the aging of the population. in the committee's assessment, the downside risks to growth have diminished, on net, over the past year, reflecting, among other factors, somewhat better economic and financial conditions in europe and increased confidence on the part of households and firms in the staying power of the u.s. recovery. however, the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and

the labor market. in addition, federal fiscal policy continues to be an important restraint on growth and a source of downside risk. apart from some fluctuations due primarily to changes in oil prices, inflation has continued to run below the committee's 2 percent longer-term objective. the committee recognizes that inflation persistently below its objective could pose risks to economic performance, and we will continue to monitor inflation developments closely. however, the unwinding of some transitory factors has led to moderately higher inflation recently, as expected; and, with longer-term inflation expectations well-anchored, the committee anticipates that inflation will gradually move back toward 2 percent. in conjunction with this meeting, the 17 participants in our policy discussions-5 board members and 12 reserve bank presidents-submitted individual economic projections. as always, each participant's projections are conditioned on his or her own view of

appropriate monetary policy. also, at this meeting, we extended the horizon of our projections through 2016. generally, the projections of individual participants show that they continue to expect moderate economic growth, picking up over time, as well as gradual progress toward levels of unemployment and inflation consistent with the federal reserve's statutory mandate to foster maximum employment and price stability. more specifically, participant'' projections for economic growth have a central tendency of 2.0 to 2.3 percent for 2013, rising to 2.9 to 3.1 percent in 2014 and 2.5 to 3.3 percent in 2016. for the unemployment rate, the central tendency of projections for the fourth quarter of each year is 7.1 to 7.3 percent for 2013, declining to 6.4 to 6.8 percent in 2014 and, by 2016, to 5.4 to 5.9 percent-about the longer-run normal level for the unemployment rate.

most participants see inflation gradually increasing from its current low level toward the committee's longer-run objective of 2 percent; the central tendency of their projections for inflation is 1.1 to 1.2 percent for this year, 1.3 to 1.8 percent in 2014, and 1.7 to 2.0 percent in 2016. with unemployment still elevated and inflation projected to run below the committee's longer-run objective, the committee is continuing its highly accommodative policies. as you know, in normal times the committee eases monetary policy by lowering its target for the short-term policy interest rate, the federal funds rate. however, the target range for the federal funds rate, currently at 0 to 1/4 percent, cannot be lowered meaningfully further. accordingly, the committee has been providing policy support to the economy through two complementary methods: (1) by

purchasing and holding treasury securities and agency mortgage- backed securities, and (2) by communicating the committee's plans for setting the federal funds rate target over the medium term. i'll discuss these tools in turn, beginning with our program of asset purchases. in september 2012, the fomc initiated a program of purchasing $40 billion per month in agency mortgage-backed securities, in addition to the $45 billion per month in longer- term treasury securities that we were already acquiring as part of our maturity extension program. we stated that, subject to our ongoing assessment of the efficacy and costs of the program, purchases would continue until we saw a substantial improvement in the outlook for the labor market in a context of price stability. in december 2012, we announced that we would continue to purchase $45 billion per month in longer-term treasuries after the maturity extension program ended later that month. thus, our total purchases of longer-term securities were maintained at $85 billion per month, in addition to the

reinvestment or rolling over of maturing securities on our balance sheet. the committee the committee agreed today to continue asset purchases at that rate, subject to the same conditions that we laid out a year ago. because the committee tied its asset purchases to the outlook for the labor market, it is important to assess how that outlook has evolved. as i noted earlier, conditions in the job market today are still far from what all of us would like to see. nevertheless, meaningful progress has been made in the year since we announced the asset purchase program; example, the unemployment rate has fallen from 8.1 percent at the time of our announcement to 7.3 percent today, and about 2.3 million private-sector jobs have been created over the same period. over the past 12 months, aggregate hours of work are up by about 2.4 percent, weekly new claims for unemployment insurance have fallen by about 50,000, and surveys suggest that

households perceive jobs as more readily available. importantly, these gains were achieved despite substantial fiscal headwinds, which are likely slowing economic growth this year by a percentage point or more and reducing employment by hundreds of thousands of jobs. not all labor market developments over the past year were positive, however; notably, the labor force participation rate fell by about 0.3 percentage points over the past year, and real wages remained about flat. in light of this cumulative progress, the fomc concluded at our june meeting that the criterion of "substantial improvement in the outlook for the labor market" might well be met over the subsequent year or so. accordingly, the committee sought to provide more guidance on how the pace of purchases might be adjusted over time. the committee anticipated in june that, subject to certain conditions, it might be appropriate to begin to moderate the pace of purchases later this year, continuing to reduce the pace of purchases in measured steps through the first half of next year, and ending purchases around midyear 2014.

however, we also made clear at that time that adjustments to the pace of purchases would depend importantly on the evolution of the economic outlook, in particular, on the receipt of evidence supporting the committee's expectation that gains in the labor market will be sustained and that inflation is moving back toward its 2 percent objective over time. at the meeting concluded earlier today, the sense of the committee was that the broad contours of the medium-term economic outlook-including economic growth sufficient to support ongoing gains in the labor market, and inflation moving toward its objective-were close to the views it held in june. but in evaluating whether a modest reduction in the pace of asset purchases would be appropriate at this meeting, however, the committee concluded that the economic data do not yet provide sufficient confirmation of its baseline outlook to warrant such a reduction. moreover, the

moreover, the committee has some concern that the rapid tightening of financial conditions in recent months could have the effect of slowing growth, as i noted earlier, a concern that would be exacerbated if conditions tightened further. finally, the extent of the effects of restrictive fiscal policies remains unclear, and upcoming fiscal debates may involve additional risks to financial markets and to the broader economy. in light of in light of these uncertainties, the committee decided to await more evidence that the recovery's progress will be sustained before adjusting the pace of asset purchases. the committee will, of course, continue to monitor economic and financial developments closely. as noted in today's statement, in judging when to moderate the pace of asset purchases, the committee will, at its coming meetings, assess whether incoming information continues to support the committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective. however, as we have said and as today's decision underscores, asset purchases are not on a preset course.

the committee's decisions about their pace will remain contingent on the economic outlook and on the committee's ongoing assessment of the likely efficacy and costs of the program. let me turn now to the fomc's forward guidance regarding the federal funds rate. the committee again 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 6-1/2 percent, so long as inflation and inflation expectations remain well-behaved (as described in statement). as i have noted frequently, the economic conditions we have set out as preceding any future rate increase are thresholds, not triggers. for example, a decline for example, a decline in the unemployment rate to 6-1/2 percent would not lead automatically to an increase in the federal funds rate target, but would instead indicate only that it had become appropriate for the committee to consider whether the broader economic outlook justified such an

increase. the committee would be unlikely to increase rates if inflation were projected to remain below our 2 percent objective for some time, for example; and, in making its assessment, the committee would also take into account additional measures of labor market conditions, such as job gains. thus, the first increases in short-term rates might not occur until the unemployment rate is considerably below 6-1/2 percent. the projections of the path of the federal funds rate by individual committee participants are generally consistent with this guidance. although the central tendency of the projected unemployment rate for the fourth quarter of next year encompasses 6-1/2 percent, 12 of the 17 participants expect the first rate increase to take place in 2015 and two expect it to occur in 2016. most participants also see the funds rate target rising only very slowly after the process of removing policy accommodation begins. the median projected funds rate for the end of 2015 is 1

percent. and notably, although the central tendencies of the projections for both inflation and the unemployment rate in 2016 are close to the longer-run normal values of those variables, the median projection for the federal funds rate at the end of 2016 is 2 percent, well below the longer-run normal value for the federal funds rate of 4 percent or so projected by most participants. committee participants generally believe that, because the headwinds to recovery will abate only gradually, achieving and maintaining maximum employment and price stability will require a patient policy approach that involves keeping the target for the federal funds rate below its longer-run normal value for some time. let me close by noting that, although the fomc is employing two instruments of policy, asset purchases and forward guidance about short-term interest rates, the overall stance of monetary policy is what matters for

growth, jobs, and inflation. our program of asset purchases was set up a year ago to help achieve a substantial improvement in the outlook for the labor market in a context of price stability, relative to conditions when the program was initiated, and we have made progress toward meeting that criterion. however, even after asset purchases are wound down-which we will do in a manner that is both deliberate and dependent on the incoming economic data-the federal reserve's rates guidance and its ongoing holdings of securities will ensure that monetary policy remains highly accommodative, consistent with an aggressive pursuit of our mandated objectives of maximum employment and price stability. thank you. i'd be glad to take your questions. >> you cite rugrats in the labor market on the unemployment front and in terms of a role growth -- you cite progress in the labor market on the unemployment front and in terms of growth.

on the payroll front, some people would argue all while there has been growth, it has not been strong enough to keep up with population growth and make up the gap we had from the recession. how high do you think the jobless rate would be if it were not for the decline and participation? i have heard estimates of 11%. can you put the labor market in that context? certainly, i think there is a cyclical component to participation and in that respect, the unemployment rate understates the amount of sort of true unemployment, if you will, in the economy. on the other hand, there is also a downward trend in participation in our economy. which is arising from factors that have been going on for some time including an aging population, lower participation by prime age males, fewer women in the labor force, other factors which are not related to this recession.

over the last year, the unemployment rate has dropped by eight/10 of one percent. the partition -- the participation rate has dropped one percent. most of the improvement in the on employment rate but not all is due to job creation rather than to lower participation. i would also note that if you look at the broader measures of unemployment that the bls publishes including part-time work and discouraged workers and so on, you will see those rates have fallen about the same amount as the overall standard civilian unemployment rate. there has been progress and it is obscured by the downward trend in participation but i would agree with you that the perhapsment rate, while the best single indicator of the state of the labor market, is not by itself a fully representative indicator.

>> to what extent do you regard yourself as responsible for the tightening in financial conditions that you noted? was it a mistake to talk about tapering in june and do you stand by your guide is that it will be appropriate? to dialbe appropriate down asset purchases by the end of this year? to answer the first part of your question, i think there is no alternative and making monetary policy but to communicate as clearly as possible and that's what we try to do. as of june, we had made meaningful progress in labor market conditions and the committee thought that was the time to begin talking about how the eventual wind down of the program would take place and how it would be tied to the evolution of economic variables. in particular, i talked about a

proposed strategy that would take about a year for the total wind down to take place which in turn was also fully contingent on the ratification, so to speak, of our outlook which include continued improvements in the labor market. all that was very consistent with what we said when we began the program, our goal was to achieve a substantial improvement in the outlook for the labor market and we needed to communicate how that was going to be put into practice. failing to communicate that information would have risked diversionslarge between market expectations, public expectations, and what the committee intentions were and that could have led to much more serious problems down the road. i think communication was very important. framework under

which we are operating is still the same. we have a three-part baseline projection which involves increasing on the growth that is picking up over time as fiscal drag is reduced, continuing gains in the labor market, and inflation moving back toward its objective. we are looking to say date -- to see if the data confirms that basic outlook. if it does, we will take the first step at some point in the possibly later this year, and then continue so long as the data are consistent with that continued progress. that basic structure is still in place. what i want to emphasize is two things -- first, as i said, asset purchases are not on a preset course. they are conditional on the dates and have always been conditional on the data. secondly, even as we move from asset purchases to rate policy

as the principal tool of monetary policy, it is our intent to maintain a highly accommodative policy and provide support necessary for our economy to recover and provide jobs for our citizens. >> to follow up on that that you-- you said could pull back the purchases possibly later this year. you sound a little less certain that it will happen later this year. i would like to ask you to talk more about your conviction about whether the pullback is likely to start this year. where do you stand on that? i also don't think i heard you mentioned the seven percent unemployment number that you talked about back in june. that was the unemployment rate that was supposed to prevail when the fed was done doing this. is that no longer operative?

>> so, there is no fixed calendar. -- schedule, i have to emphasize that. basic data confirms our outlook and we gain more confidence in that outlook and believe the three-part test i mentioned is indeed coming to pass, then we could move later this year. we could begin later this year but even if we do that, the subsequent steps will be dependent on continued progress in the economy. we are tied to the data. we don't have a fixed calendar or schedule but we have the same basic framework that i described in june. for ending the asset purchases program is a substantial improvement for the outlook of the labor market. last time, i give a seven percent as an indicative number to give you some sense of where that might be. as my first answer suggested,

the on implement rate is not necessarily a great measure in all circumstances of the state of the labor market overall. example, last month, the decline in the on a raking about more -- came about more about the participation not about the increased jobs. what we will be looking at is the overall labor market situation including the unemployment rate but including other factors as well. in particular, there is not any magic number that we are shooting for. we are looking for overall improvement in the labor market. >> mr. chairman, one question with three parts -- have you indicated to president obama you did want to serve term and if so when? did president obama indicate that he did want you to survey three term -- to serve a third

term? >> it's convenient because i have the same answer to all three parts of your question. [laughter] a littledulge me longer, i prefer not to talk about my plans at this point. i hope to have more information butyou at a soon date today, i want to focus on monetary policy and preferred not to talk about my own plans. >> you mentioned that tighter fiscal conditions are a concern for the committee as you guys think about whether or not it's appropriate to reduce asset purchases. what do you all expect to be able to do in the future when you actually do begin to pull back asset purchases to manage expectations and managed the market reactions such that we don't see another increase in rates? >> what's the relationship between the pullback and fiscal policy? >> i'm sorry, i meant financial

conditions. sure, part of the reaction that we have seen comes from a number of sources. part of it comes from improved economic news. that's part of the reason why rates have gone up in other countries as well as the united states. to the extent that tighter financial conditions reflect a better outlook, that is a good thing, that is not a problem at all. the views reflects about monetary policy and that we want to make sure we get straight. that's why, to answer the earlier question again, that's why communication is so important. we need to explain as best we can how we are going to move and on what basis we will move. it's more difficult today than it was 20 years ago because the tools are more complex and less familiar but that is still very important. the other factor which was at ofy was an unwinding

excessively risky and leveraged positions in the markets and insufficiencies of liquidity in some cases meant those unwinding's lead to larger reactions in prices and rates than might otherwise have occurred. the tightening associated with extent, to some unwelcome, but, on the other hand, to the extent that some of the riskier positions have been eliminated, i think that makes the situation more sustainable and reduces the risk that their will be an over-strong reaction to announcements. we will be our -- we will do our best to operate clearly. the more clearly we communicate, the better the chance that markets will understand our intentions and we can avoid any sharp movements. again, we are dealing with tools that are less familiar, harder to quantify, and harder to

communicate about them the traditional funds rate. mr. chairman, the meeting two percentedicted rates at the end of the year and in the long run, they expect rates to arrive at four percent. can you give us an idea of when the committee expects interest rates to get back to four percent? restate the key point which is that the large majority of the participants at the fomc, voting and nonvoting members, who are asked to describe their own assessment of optimal policy -- the large majority of them estimate that the appropriate target for the federal funds rate at the end of 2016 will be around two percent even though come at that time,

the economy should be close to full employment according to our best projections. there may for that -- be several reasons but we discussed this today -- the primary reason for that low is that a low value number of factors including the slow recovery of the housing sector, continued fiscal drag, perhaps continued effects from the financial crisis may still prove to be headwinds to the recovery and even though we can achieve full employment, doing so will be done by using rates lower than the long run normal. in other words, in economic terms, the equilibrium rate, the rate that achieves full employment, looks like it will be lower for a time because of these headwinds that will be slowing aggregate demand growth. that's why we expect to see growth -- rates at unusually low levels.

i imagine it would take a few years after that to get to the four percent level. i could not be more precise than that. we are already stretching the bounds of credibility to talk about specific projections into auntie 16. -- into 2016. i think you would see rates rise gradually after that and ultimately get to four percent. indicatedairman, you you can see the fed lowering the pace of purchases once the economy starts to grow faster in line with what the fed has projected. for the past four years, the fed has been projecting that growth would quicken to about three percent and it never has. at what point are you going to decide that other costs and benefits are the reason you are making the decision? are we getting close to that having to be a deciding factor even if you do not get the growth forecast the way you have in the past four years and is the complication of this -- this

is a second question -- does the complication of this mean you need a press conference to make a tapering decision? well, you are certainly right that we have been overoptimistic about out your growth. -- out your growth. there are number of reasons for that. . one reason, though, is that it appears, and i talked about this in a speech last year, it appears that as part of the aftermath of the financial crisis, at least temporarily, the potential growth rate of the slowed, perhaps because new businesses are not andrmed at the same rate innovation might not be translated into new technologies at the same rate. investment is slower, etc. it appears, again, that the potential rate of growth of the economy has been slowed somewhat temporarily by the recession and

the financial crisis and you can see that in the productivity figures. not anticipated that slowdown in productivity and that is one of the main reasons why we have not anticipated the relatively slow growth. thatimportant to recognize what monetary policy affects is not the potential rate of growth, long run. rather, the cyclical part, the deviation of output and employment from its normal level. in predicting the amount of slack in the economy, so to speak, we have done a little better. our productions of unemployment, for example, have been better than her predictions of growth and, in particular, one thing has been quite striking is that we were too -- pessimistic on unemployment for this year. unemployment has fallen faster than we anticipated.

in that respect, we were too pessimistic rather than optimistic. we will continue to do the best we can. we are looking again to see confirmation of our broader scenario which basically is that we will continue to see progress in the labor market and growth will be sufficient to support that progress and inflation will move back toward target and that's what we've -- what will determine our policy decisions. in terms of press conferences, i think it's important to say there is an understanding on the committee that we have had, for a while, there are eight " real meetings" every year. every meeting is where any policy decision can be taken and should anything occur at a meeting without a scheduled press conference that requires additional explanation, we certainly could arrange public on the record conference call or some other way of answering the media questions.

>> you said that the committee would be unlikely to raise federal funds rates if inflation remains below target but your own projections have inflation below your two percent target through 2016. is that inconsistent with the federal funds rate? is there a case to be made that your threshold should be supplemented with a lower inflation rate? part, you areter seeing interest rate projections and inflation projections separately. you are not seeing them combined by individuals. i think you are right. we should be very reluctant to raise rates if inflation remains persistently below target. that is one of the reasons that

i think we can be very patient and raising the federal funds rate since we have not seen any inflation pressure. i'm having an inflation floor, that would be in addition to the guidance. we are discussing how we might verify the guidance on the federal funds rate. that is certainly one possibility. an interesting question there is whether we need additional guidance on that given that we do have a target. of course, implicit in our policy -- strategy is to reach that target for inflation. and inflation floor is certainly something that could be a sensible modification or addition to the guidance. >> many investors were expecting the fed to move at least a little bit in pulling back the bond buying program today.

decided notou all to do that, do you have any concerns that once again the fed is confusing investors and sending mixed signals? recall stating that we would do any particular thing in this meeting. what we are going to do is the right thing for the economy. ,ur assessment of the data since june, is that taken collectively, it did not quite meet the standard of satisfying or ratifying or confirming our basic outlook for increasing growth, improving labor markets, and inflation moving back towards target. to communicate to markets and will continue to do that. we cannot let market expectations dictate our policy actions. our policy actions have to be determined by our best

assessment of what is needed by the economy. you mentioned fiscal issues in the statement today. are you concerned about the government shut down? we hear more about that possibility. did that come up in your discussions at this meeting? what do you think would be the impact of a government shut down upon the economy and what could the -- would the fed be prepared to respond to that healthy economy with additional accommodation, for example, additional asset purchases? >> a factor that concerned us in our discussion was some upcoming fiscal policy decisions. i would include both the possibility of the government shutdown but also the debt limit issue. these are obviously part of a very complicated set of legislative decisions, strategies, battles, etc, which

i won't get into but it is the case, i think, that a government shutdown and perhaps, more so, a failure to raise the debt limit could have very serious consequences for the financial markets and the economy. the federal reserve's policy is to do whatever we can to keep the economy on course. if these actions lead the economy to slow, we would have to take that into account, surely. this is one of the risks we are looking at as we think about policy. ability tosaid, our offset these shocks is very limited, particularly a debt limit shock, and it is as true nearly important -- and it is extruded nearly important to make sure the congress works with the government and the government pays its bills and we avoid any kind of event like 2011 which had, at least for a

time, noticeable adverse effect on confidence in the economy. this week marks five years since the financial crisis began. you haveson, who worked closely with, said his biggest regret was he was not able to convince the american people that what was done, the bank bailouts, or not for wall street, they were for main street rate what is your biggest regret on the five-year anniversary? do you believe the fed, the housess, and the white has taken the steps to avoid a deep financial crisis? regrets, as frank sinatra said, i have many. reasonably, the biggest regret i have is that we did not forestall the crisis breed once the crisis got going, it was extremely hard to prevent.

did what we could given the powers we had it i would agree with hank that we were motivated entirely by the ,nterest of the broader public that our goal was to stabilize financial system so it would not bring the economy down and not create massive unemployment and economic hardship that was even -- that would have been even more severe by many times than what we actually saw. i agree with him on that. since you gave me the opportunity, i would mention that all the money that was used in those operations has been paid back with interest. costly eveneen a from a fiscal point of view. as far as progress, i think we made a lot of progress. we had the dodd frank law passed

in 20 10 and then we recently have come to agreement internationally on a number of measures including basel iii and other agreements related to the shadow banking system and other aspects of the financial system. today our large financial firms, for example, are better capitalized by far than they were certainly during the crisis and before the crisis. supervision is tougher, we do stress testing to make sure that firms can withstand not only normal shocks but very large shocks them a similar to those experienced in 20 -- 2008. very importantly, we now have a tool would not have in 2000 eight which would have made a significant difference if we had it which is the orderly liquidation authority that the dodd frank l gave to the fdic in collaboration with the fed. fdic that authority, the

with other agencies has the ability to wind down a failing financial firm in a way that minimizes the direct impact on financial markets and the economy. i don't want to overstate the case. there is more work to be done. in the case of resolution regimes, for example, the united states has set a course internationally and other international bodies are setting up standards for resolution regimes which are similar to those in the united states which will make for better cooperation across borders. we are still some distance from being fully geared up to work with foreign counterparts to successfully wind down a multinational financial firm. we made progress in that direction but we need to do more, i think so there is more to be done. there is more to be done on derivatives but much has been done to make things more transparent.

it will probably be some time before all of this stuff that has been undertaken, all of these measures, are fully implemented and we can assess the ultimate impact on the financial system. mr. chairman, a number of economists and some of your fed colleagues have argued that the effectiveness of quantitative easing has greatly diminished, if not disappeared. they point to the recent performance of the economy as proof of that. there have been a number of people who have argued that there are regulatory and other amphetamines to growth beyond the reach of monetary policy. to what extent are these valid arguments and if the economy does not speed up, if it does not reach your objectives, how will you ever get out of quantitative easing? on the effectiveness of our

asset purchases, it's difficult to get a precise measure. there is a large academic literature on this subject and they have a range of results print some suggest us is a powerful tool and some say it is less powerful. my own assessment it is has been affected. , youu look at the recovery see some of the strongest sectors like housing and autos have been enter -- sensitive sectors and these policies have been successful in strengthening financial conditions and lowering interest rates and thereby promoting recovery. i think they have been affected. you mentioned there has not been any progress. there has been a lot of progress as i said at the beginning. labor market indicators, while still not there we would like them to become are much better today than they were when we began this latest program one year ago.

importantly, as referenced in that happensement, notwithstanding a set of fiscal policies which the cbo said would cost 1.5 percentage points of real growth in hundreds of thousands of jobs. maintainedat we have improvements in the labor market that are as good or after than the previous year, notwithstanding this fiscal drag, is some indication that there is at least a partial offset from monetary policy. say, there are many things in the economy that monetary policy cannot address. they include the effectiveness policy,ation, fiscal developments in the private sector. and where we can do we can get help, we are delighted to get help from the policymakers in the private sector and we hope that will happen.

ending asset for purchases is not some very high rate of growth. you, the criterion is a substantial improvement in the labor market and we have made significant improvement. ultimately, we will reach that level of substantial improvement and at that point, we will be able to wind down the asset purchases. again, i think people don't fully appreciate that we have two tools -- we have asset purchases and we have rate holocene and guidance about rates. it's our view that the rate policy is the stronger, more reliable tool. when we get to the point where we are close enough to full employment, that rate policy will be sufficient. i think we will still be able to provide a highly accommodative monetary background that will allow the economy to continue to grow and move towards full

employment, despite asset purchases going away. >> the financial stability oversight council has already designated to non-bank firms and potentially a third one and others to follow. however, little has been set in terms of how specifically these firms will be regulated i the fed which has been getting criticism of the entire process. can you provide us any guidance in terms of how far along the fed is in terms of letting the banks now how they will be regulated besides tailoring the plan? >> the two firms that have been capital,d, aig and ge actually have been regulate by the fed because both of them are savings and loan thrift holding company so we already have experience with those firms and a lot of contact with those firms. i want to use the word tailored because we want to design a

regime that is appropriate for the business model of the particular firm. our other objective and what makes it is a nation by the fsoc noteworthy is that the primary goal of the consolidated supervision by the fed is to that the firm does not in any way danger the stability of the broader financial system. we will be looking at not just the usual safety and soundness matters or supervision which both can be tailored to the types of assets and liabilities the firm has, but also we will want to focus on things like , practicesauthority relating to derivatives and other exposures, interconnectedness, etc, to make sure the firm, in its structure and operations, does not pose a threat to the wider system.

that is what will be distinctive to our oversight not only of these designated firms but also the large bank holding companies that we already oversee and which we are already subjecting to tougher supervision, higher capital, stress tests, and all the rest. mr. chairman, one of my colleagues was remarking that we don't often get surprises from the federal reserve. this was a surprise. you talked about not telegraphing anything specifically but you have seen the market reaction. were you intending a surprise today? did you get the intended result judging from the market reaction? today,ng this action continuing the bond purchases, at what point to you believe you are starting to complicate the exit strategy simply by continuing to keep the feds for on the gas pedal, do you make life more complicated for the federal reserve down the road?

>> it's our intention to try to set policy as appropriate. for the economy, as i said earlier. we are somewhat concerned. i will not overstate it but we want to see the effects of higher interest rates on the economy, particularly mortgage rates on housing. policyextent that our makes conditions -- our policy decision today makes conditions a little bit easier, that is desirable. we want to make sure that the economy has adequate support and, in particular, is less surprising the market -- it is avoiding a tightening until we can be comfortable that the economy is in fact growing the way we wanted to be growing. as was a step -- it was cautionary step, if you will.

-- a precautionary step, if you will. the intention is to wait a bit longer and try to get confirming evidence to whether or not the economy is in fact performing to the general outlook we have. i don't think we are complicating anything for future fomc's. it is true the assets we have been buying add to the size of our balance sheet. but we have developed a variety of tools and we think we have numerous tools we can use to both manage interest rates and ultimately unwind the balance sheet when the time comes. i feel quite comfortable that we can raise interest rates at the appropriate time even if the balance sheet remains large for an extended period and that will be true for future fomc's as well.

chairman, do you think all the recent attention being paid to who will be your replacement has had any immediate effect on the fed and could have any lingering effect on your success or? do you think the process has become too politicized or is it a healthy debate? i think the federal reserve has strong institutional credibility and it is a strong institution, highly competent. it is independent. nonpartisan, i'm not particularly concerned about the political environment for the federal reserve. i think the fed will be -- will continue to be an important institution to the united states and it will maintain its independence going forward. >> mr. chairman, was there a

discussion among the committee today about changing the forward 66.5% -- of the .5% jobless rate? rate? 6.5% jobless >> the committee has regularly reviewed the forward guidance. there are a number of ways in which the forward guidance could be strengthened. example, an inflation floor was mentioned and there are other steps we could take like providing information about you get the 6.5% in those sorts of things. to the extent that we can provide precise guidance, that would be desirable. it's very important that we not take any of these steps lightly and make sure that we understand the implications and we are comfortable that any modifications to the guidance will be credible to markets and

the public. we continue to think about options. there are a number of options we today, --d about but as of today, we did not choose to make any changes to the guidance. >> as you may know, the census bureau reported yesterday that the poverty rate and the median household income saw no improvement last year. when you see the median income turning up and in light of the fact that people in the middle of the bottom have seen very little of the gains relative to higher income households, how would you assess the quantitative easing and fed policy? that's certainly the

case that there are too many people in poverty. there are many complex issues involved. there are complex measurement issues. i would have to mention that. that are a lot of issues are really long-term issues as well. example, it might seem a puzzle that the u.s. economy gets richer and richer and yet there are more poor people. is our economy is becoming more unequal, more very rich people and more people in the lower half for not doing well. there is a lot of reasons behind this trend which has been going on for decades. economists disagree about the relative importance of things like technology and international trade and unionization and other factors that have contributed. my first point is that these long term trends, it is important to address these trends, but the federal reserve does not have the tools to

address these long-run distributional trends print they can only be addressed by congress and the administration. it's up to them, i think, to take those steps. , we areral reserve doing our part to help the median family, the median american. goals -- werincipal have two principal goals -- one is maximum employment, jobs. the best way to help families is to create employment opportunities. we are still not satisfied, obviously, with where the labor market is. we will continue to provide support for that. the other goal is price stability, low inflation which helps make the economy work better for people in the middle and lower parts of the distribution. we use the tools we have. it would be better to have a mix of tools that work, not just monetary policy, but fiscal policy and other policies as well.

but we only have a certain set of tools and those are the ones we use. our objectives of creating jobs and maintaining price stability are quite consistent with helping the average american. there is a limit to what we can do about long-run trends. i think those are very important issues that congress and the administration need to look at and decide what needs to be done there. >> hi, some emerging countries are blaming the fed for the financial distress they are experiencing. i want your take on that. also, how did you judge the way the markets reacted to your tapering announcement back in june? thank you very much. little abouta

medication in june but let me talk about the emerging markets which is an important issue. -- i talked a little about the tapering announcement in june but let me talk about the emerging markets which is an important issue. looking a lot of time at emerging markets. i spent time talking to my colleagues about emerging markets and in emerging markets. the united states a part of the globally integrated economic and financial system and problems in emerging markets or any country, for that matter, can affect the united states as well. we are watching those development very carefully. inis true that changes longer-term interest rates in the united states but also in other advanced economies have some effect on emerging markets, particularly those who are trying to tag their exchange rates and can lead to some capital inflows or outflows but there are also other factors that affect inflows and outflows.

changes in risk preference by investors, changes in growth expectations, different perceptions of institutional strength within emerging markets across the different countries. there are a lot of factors that are there playing a role and that's one reason why different emerging markets have different experiences. they have different institutional structures and different policies. line, weo the bottom think it is very important that emerging markets grow and are prosperous. we pay close attention to what is happening in those countries as it affects the united states. the main point i would end with is that what we are trying to do with our monetary policy here is trying to create a stronger u.s. economy. a stronger u.s. economy is one

of the most important things that can happen to help the economies of emerging markets. again, i think mike collies in many of the emerging markets appreciate -- i think my colleagues in many of the emerging markets appreciate some of the fx they have experienced. economies come down to the global economy including emerging markets as well. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] >> on c-span today, "washington

journal" is next. then we begin our live coverage at the house of representatives. after morning business, members are scheduled to work on a short-term spending bill for the fiscal year that begins october 1. then a nutrition assistance bill that includes food stamps. in 45 minutes, we will talk with congressman scott garrett about raising the federal debt ceiling. then representative james mcgovern on the food stamp program. reporter on house hearings looking into last year's attacks on the u.s. consulate in benghazi, libya.

>> there should be no conversation about shutting the government down. that is not the goal here. our goal is to cut spending and to protect the american people from obamacare. as simple as that. no interest in our part in shutting the government down. thank you. [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] boehnerat was speaker addressing the issues of the federal budget and health care and the houseplants to push ahead on those issues. as ant to hear from you federal budget showdown looms in congress here in washington as well. host: if you have a comment on some of the federal budget proceedings going on here in washington, you