policies that work alongside monetary policy to help get americans back to work. chairman yellen -- actions are affecting the economy and where the economy is heading. i now turn to ranking member crapo for his opening statement. >> thank you, mr. chairman. and welcome, also, chair yellen on your first appearance before this committee as the chair of the federal reserve board of governors. today's hearing is an important opportunity to examine the current state of monetary policy. since your confirmation hearing in november, the fed has begun the process of tapering its quantitative easing purposes. the pace of quantitative easing purchases has come down by $20 billion. this is a welcome development for those of us who disagree

with the federal reserve's quantitative easing policy and prefer to see qe purchases end entirely later this year. by the time the fed stops expanding its balance sheet it will hold over $4 trillion in treasury and mortgage backed securities. former chairman bernanke suggested the fed might maintain the size of the balance sheet for some time rather than reducing it. this would mean the balance sheets to purchase those assets would remain in the financial system. rich manned fed president lacker has called these tinder on the books of the banking system. the fed will have to be jij lent to ensure the tools they have identified to manage the wind-down are sufficient to prevent market disruptions. these unconventional monetary tools have in my opinion failed to produce the promised benefits. as noted economists recently

observed, over the last four years the share of adults working has not increased and gdp has fallen further behind potential as we would have defined it in the fall of 2009. all that is to say that despite unprecedented amounts of monetary intervention and record low interest rates, businesses have not responded by hiring new workers. dr. yellen, you commented on the need to monitor the costs and risks of financial stability that current monetary policy creates. you also stated you believe monetary policy is most effective when the public understands what the fed is trying to do and how it plans to do it. i appreciate your commitment to openness and transparency. i look forward to your thoughts on how it will return to monetary policy and how you will communicate that to the public. i look forward to learning more about your perspective on the implementation of the dodd-frank act and how different rules

interact with each other and their impact on the economy at large. because of the size and complexity of these rules, it is paramount that the regulators strike the right balance without unduly harming the economy. this was evident most recently in december with the final volcker rule and the unintended and disproportionate effect on community banks with respect to their holdings. the economic impact of the recent -- doing business in the united states is yet to be seen. earlier reports indicate some foreign banks are moving their assets outside the united states, taking their market activities to friendlier jurisdictions. as you continue with the rule making process, i encourage you to do so without placing the u.s. marks at a competitive disadvantage or putting out businesses of smaller firms that are no threat to our financial

security. i certainly hope you will work with congress to identify statutory ambiguities in dodd-frank that prevent the fed from doing the right thing. lastly, we still have the government conservative tore ship of fannie mae and freddie mac which will create a long-term market distortion in this crucial segment of this economy. i look forward to hearing your thoughts on the need for this reform and bringing this five-year or dedeal to a close. welcome chairman yellen. i look forward to your testimony. >> thank you, senator crapo. to reserve time for questions, opening statements will be limited to the chair and ranking member. i would like to remind my colleagues that the record will be open for the next seven days for additional statements and materials. i'd like to welcome chair yellen. dr. yellen is serving her first term as chair of the board of governors of the fastball system. she was sworn into office

earlier this month. before that dr. yellen served as vice chair and member of the board of governors of the federal reserve system. she was also previously chair of the council of economic advisors. chair yellen, please begin your testimony. >> chairman johnson, senator crapo and other members of the committee, i'm pleased to present the federal reserve semi annual monetary policy report to the congress. in my remarks today, i will discuss the current economic situation and outlook before turning to monetary policy. i will conclude with an update on our continuing work on regulatory reform. first, let me acknowledge the important contributions of chairman bernanke. his leadership helped make our economy and financial system

stronger and ensured that the federal reserve is transparent and accountable. i pledge to continue that work. the economic recovery gained greater traction in the second half of last year. real gross domestic product is currently estimated to have risen at an average annual rate of more than 3.5% in the third and fourth quarters up from a 1.75% pace in the first half. the pickup in economic activity has fueled further progress in the labor market. about 1.25 million jobs have been added to payrolls since the previous monetary policy report last july and 3.25 million have been added since august 2012, the month before the federal reserve began a new round of asset purchases to add momentum to the recovery.

the unemployment rate has fallen nearly a percentage point since the middle of last year and 1.5 percentage points since the purchase of the current asset purchase program. nevertheless, the recovery in the labor market is far from complete. the unemployment rate is still well above levels that the federal open market committee participants estimate is consistent with maximum sustainable employment. those out of a job, more than six months, continue to make up an unusually large fraction of the unemployed. and the number of people who were working part time but would prefer a full-time job remains very high. these observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the u. schs. among major compon

of gdp, household and business spending growth stepped up during the second half of last year. earlier in 2013, growth in consumer spending was restrained by changes in fiscal policy. as this restraint abated during the second half of the year, household spending accelerated, supported by job gains and rosing home values and equity prices. similarly growth in business investment started off slowly last year, but then picked up during the second half. reflikting improved sales prospects, favorable financing conditions. in contrast the recovery in the housing sector slowed in the wake of last year in the wake of last year's increasing mortgage rates. inflation remained low as the economy picked up strength.

with both the headline and core personal consumption expenditures or pce price indices rising only about 1% last year. well below the market committee's 2% projection of inflation over the longer run. some of the recent softness reflects factors that seem likely to prove transitory including falling prices for crude oil and declines in non-oil import prices. my colleagues on the fomc and i anticipate that economic activity and employment will expand at a moderate pace this year and next. the unemployment rate will continue to decline toward its longer-run sustainable level, and inflation will move back toward 2% over coming years. we have been watching closely the recent volatility in global financial markets.

our sense is that at this stage these developments do not pose a substantial risk to the u.s. economic outlook. we will, of course, continue to monitor the situation. mr. chairman, let me add as an aside that since my appearance before the house committee, a number of data releases have pointed to softer spending than many analysts had expected. part of that softness may reflect adverse weather conditions. but at this point it's difficult to discern exactly how much. in the weeks and months ahead, my colleagues and i will be attentive to signals that indicate whether the recovery is progressing in line with our earlier expectations. turning to monetary policy, let me emphasize that i expect a great deal of continuity in the fomc's approach to monetary

policy. i served on the committee as we formulated our current policy strategy and i strongly support that strategy which is designed to fulfill the federal reserve's statutory mandate of maximum employment and price stability. prior to the financial crisis, the fomc carried out monetary policy by adjusting its target for the federal funds rate. with that rate near zero since late 2008, we have relied on two less traditional tools, asset purchases and forward guidance to help the economy move toward maximum employment and price stability. both tools put downward pressure on longer-term interest rates and support asset prices. in turn, these more accommodative financial conditions support consumer spending, business investment

and housing construction adding impetus to the recovery. our current program of asset purchases began in september 2012 amid signs that the recovery was weakening and progress in the labor market had slowed. the committee said it would continue the program until there was a substantial improvement in the outlook for the labor market in the context of price stability. in mid 2013 the committee indicated that, if progress towards its objectives continued as expected, a moderation in the monthly pace of purchases would likely become appropriate later in the year. in december the committee judged that the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions warranted a modest reduction in the pace of purchases from $45

billion to $40 billion per month offer term treasury securities and agency backed mortgage securities. at its january meeting, the committee decided to make additional reductions of the same magnitude if incoming information broadly supports the committee's expectation of on going improvement in labor market conditions and inflation moving back towards its longer run objective, the committee will likely reduce the pace of asset purchases in further measured steps at future meetings. that said, purchases are not on a preset course and the committee's decision about their -- decisions about their pace will remain contingent on its outlook for the labor market and inflation as well as its assessment of the likely

efficacy and costs of these purchases. the committee has emphasized a highly accommodative policy will remain appropriate for a considerable time after asset purchases end. in addition, the committee has said since december 2012 that it expects the current low target range for the federal funds rate to be appropriate at least as long as the unemployment rate remains above 6.5%, inflation is projected to be no more than have a percentage point above our 2% longer run goal and longer term inflation expectations remain unanchored. crushing one of these thresholds will not automatically prompt an increase in the federal funds rate but will instead indicate only that it had become appropriate for the committee to consider whether the broader

economic outlook would justify such an increase. in december of last year and again this january the committee said that its current expectations based on its assessment of a broad range of measures of labor market conditions, indicators of inflation pressures and inflation expectations and readings on financial development developments is that it likely will be appropriate to maintain the current target range pour the federal funds rate well past the time that the unemployment rate declines below 6.5% especially if projected inflation continues to run past the 2% goal. i am committed to achieving both parts of our dual mandate, helping the economy return to full employment and returning inflation to 2% while ensuring it does not run persistently

above or below that level. i will finish with an update on progress of reg torry reforms and supervisory actions to strengthen the financial system. in october the federal reserve board proposed a rule to strengthen the liquidity positions of large and internationally active financial institutio institutions. together the other federal agencies, the board issued a final rule implementing the vom kerr rule which prohibits banking firms from engaging in short-term proprietary trading of certain financial instruments. in addition we recently finalized the rules implements enhanced prudent standards mandated by section 165 of the dodd-frank wall street reform and consumer protection act. on the supervisory front the next round of annual capital stress tests of the largest 30

bank holding companies is under way and we expect to report results in march. regulatory and supervisory actions including those leading to substantial increases in capital and liquidity in the banking sector are making our financial system more resilient still important tasks lie ahead. we're looking to financial lies the proposed rule, strengthening the leverage ratio standards for u.s.-based systemically important global banks. we expect to issue proposals for a risk-based capital surcharge for those banks as well as for a long-term debt requirement to help ensure that these organizations can be resolved. in addition, we're working to advance proposals on margins for

non-clear derivatives consistent with a new global framework and are evaluating possible measures to address financial stability risks associated with short-term wholesale funding. we will continue to monitor for emerging risks including watching carefully to see if the regulatory reforms work as intended. since the financial crisis in the depths of the recession, substantial progress has been made in restoring the economy to health and in strengthening the financial system. still there is more to do. too many americans remain unemployed. inflation remains below our longer term objective, and the work of making the financial system more robust is not yet been completed. i look forward to working with my colleagues and many others to carry out the important mission you have given the federal

reserve. thank you. i'd be pleased to take your questions. >> thank you, chair yellen. as we begin questions, i will ask the clerk to put five minutes on the clock for each member. chair yellen, with inflation low and unemployment so high, does that give the fed some room to continue promoting full employment? >> chairman johnson, yes, it certainly does give us room to continue promoting full employment. and we have committed to do so and have made clear that we see an accommodative monetary policy is remaining appropriate for quite some time. there's no conflict at all at the moment between the two goals that congress has assigned to us of promoting maximum employment

and price stability. inflation is running well below our 2% target. as you indicated, that gives us ample scope to continue to try to promote a return to full employment and we're committed the to doing that. >> chair yellen, what approach is the fed taking with respect to insurance companies under the new rules implementing section 165 of dodd-frank? how would this interact with rules and capital requirements for insurance companies under the collins amendment? >> senator, we are looking very carefully to design an appropriate set of rules for companies with important involvement in insurance. we recognize that there are very

significant differences between the business models of insurance companies and the banks that we supervise, and we are taking the time that's necessary to understand those differences and to attempt to craft a set of capital and liquidity requirements that will be appropriate to the business model of insurance companies. i would say, however, that the collins amendment does restrict what is possible for the federal reserve in designing an appropriate set of rules. so it does pose some constraints on what we can do and we will do our very best to craft an appropriate set of rules subject to that constraint. >> in what ways do the s sock make the sifi designation

process more transparent? >> on this one, senator, i would say fsoc has provided the public with a good deal of information about the criteria that its using, the general criteria that it has established for attempting to determine whether or not an institution, an organization should be designated as a sifi. and in the cases of those organizations where it has made a designation, it's really provided a wealth of information about those organizations. there are also opportunities for companies that want to contest designation, to have an appeals process. so there is really a well worked out process.

as the fsoc goes on to consider other possible firms for designation, if it decides to use a different set of criteria, i think it's completely appropriate that the fsoc should also make clear if new criteria are being used to govern designations. >> how has recovery impacted wages and income inequality? and if so, what can congress do to address this major problem? >> well, senator, i think the issues of income inequality, of rising income inequality in this country really date back many decades, probably to the mid '80s when we began to see a very substantial widening of wage gaps between more skilled and

less skilled workers. this is a trend that unfortunately is continued almost unabated for the last 30 years. economists have debated exactly what the causes are, but technological change in globalization play a role. however, i think it's clear that the recession has placed an extremely high toll, particularly in special burdens on lower income workers. those workers and less educated workers have seen their unemployment rates rise disproportionately during the downturn, and so households and segments of our population that had already been suffering stagnant or declining incomes for many years have seen the

recession take a large toll. so there really has been a very large burden and it is our objective to try to get the economy back to full employment to alleviate that portion of the burd burden. things like education and training i think are on every economist's list of actions that congress could take early childhood education training more generally. those things certainly and others congress could consider to address these important issues. >> senator crapo. >> thank you, mr. chairman and chair yellen, again, welcome to the committee. >> thank you. >> i appreciated your comments a couple weeks ago to the house financial services committee when you discussed gse reform. at that point you said we still have a ace stem that has systemic risk. reforming fannie and freddie is a priority for this committee.

i'd like you to take a couple brief moments to discuss the need to bring private capital back into the market. >> senator, i strongly support and would urge congress to address the issue of gse reform. we've gotten a mortgage system that in a way, be factor sense remains very highly dependent on government backing. and it fails to meet the very important objective of success. securitization without systemic risk. there are a number of different ways in which congress could proceed with gse reform, depending on your assessment of appropriate priorities. in my personal view it's very important for congress to decide explicitly what the role of the government should be in housing finance and there are a lot of

possible choices available i think many terms of bringing private capital back into the market, we now have a system where almost all mortgages that are being granted in this country have government backing associated with it, and i think to see private capital return in meaningful amounts to the mortgage industry clarifying the rules of the road is important. so i would certainly urge congress to proceed in this area. >> thank you. i agree with you and appreciate your observations at this point. as i stated in my opening statement, i'm very concerned about dodd-frank implementation. i certainly hope that you will clearly communicate with congress if there are statutory ambiguities or obstacles that prevent the fed from doing the right thing when promulgating regulations. in that context, i'd just like to ask if you agree -- when chairman bernanke was before

us -- last year i think it was -- i asked him the same question. i'd like to know if you agree with him that the areas of the end users, swaps pushouts and reducing the regulatory burden on community banks are areas in which we need additional statutory attention to getting it right. >> so the three areas that you mentioned are ones that are high on our list of concerns, areas that we are looking at ourselves as we design the dodd-frank regulations, in all of these areas we're doing our very best to address in these areas you've mentioned issues that have been raised and that we consider quite appropriate. it makes sense to me that congress should consider these areas as well. i want to assure you that we

will do our best in writing regulations in these areas, however, to address the concerns that have been raised. >> thank you. i appreciate your attention to it. i also believe that you need additional clarification and strength in the statute to do it right. i hope that we'll be able to provide that from congress. next, in numerous hearings last year it was revealed that we need better international coordination on cross-border issues to ensure there are no undue interceptiruptions many financial system. immediate after the fed adjusted the 165 proposal for foreign banking last year, european commissioner's office issued a statement that the fed's rule conflicts with the international standards on cross-border cooperation in bank resolution. what concrete steps are you taking to ensure effective coordination with your foreign

counterparts to create a complementary regulatory regime? >> well, cooperation with our counterparts globally has been a core part of our approach to strengthening the financial system and putting in place regulations under dodd-frank. so we are very actively engaged through the financial stability board, through the bozal committee, through the relations we have with insurance regulators, attempting to craft regulations in all areas that are consistent globally and that mesh together as a successful system. in the area of foreign banking organizations and our rule writing which we finalized i guess week before last on section 165, we faced important

tradeoffs. the role of large foreign banking organizations in our capital markets has changed dramatically over the last 20 years. these organizations are among the largest and most systemically important organizations in the u.s. financial system. and we try to write a set of rules that provide a level playing field for both u.s. organizations and foreign banking organizations doing business in the united states. the rules we put in place, i believe, are really quite similar to what our own banking organizations face when they do business abroad. so we have tried to construct a set of rules that preserve the opportunity for cross border international global capital flows, branches in agencies of

foreign banking organizations can continue to operate without separate capital requirements in the united states. but it was important to put in place a set of rules directed to financial stability of our own markets. >> thank you very much. >> senator reid. >> thank you very much, mr. chairman and welcome, madam chair. the open market committee has several times made the point that we seem to be operating in course purposes, as the federal reserve is pursuing an expansive monetary policy, we're pursuing a very restricted fiscal policy. it would seem to me that if we were in harmony or compleme complementary, it would be better for the overall economy. there are several examples. our current debate about unemployment compensation, most objective observers would suggest that could add from 180,000 to 200,000 jobs to our

economy and at the same time helping people who need help. we're in the throes of trying to figure out if we're going to actually fund our highway system after next accident which is another example of how fiscal policy could aid your efforts. can you comment on this apparent cross purpose activity? >> so fiscal policy really has been quite tight and has imposed a substantial drag on spending in the u.s. economy over the last several years. the cbo estimated that last year the fiscal policy drag probably subtracted a percentage point and a half from growth. the drag is likely to lessen substantially during the current year, but nevertheless, there remains some drag. of course, it is true that

because there has been fiscal policy drag, the burden on monetary policy has been larger. this is true knot only in the united states but in a number of advanced countries in europe and in japan as well. my predecessor has always urged congress recognizing that there are substantial long-term budget deficit issues and a need for a sustainable physical path for the country to focus to the maximum extent possible on fiscal changes that would address the longer run issues that will be associated with rising debt-to-gdp ratio over decades and to try to avoid doing harm to the recovery, and i would take the same general position. >> but in the short run there is a value of additional fiscal

stimulation in the economy that will complement what you're already doing and make it easier for you to withdraw the quantitative easing. is that a fair comment? >> i think the economy is beginning to recover and we have made progress. and, you know, at a minimum, i would hope that fiscal policy would do no harm. >> just one other quick question you have looked at an unemployment rate of 6.5% as a point of inflection if you will. but one of the aspects of the current employment situation is that labor force participation is falling that 6.5% might not capture the reality of the current economy and be an adequate sort of measure when you should begin or how you should begin to undertake fiscal

easing are you looking beyond a similar unemployment rate to gauge your actions. >> the range of views on that among committee members is substantially lower. the central tendency is under % 6%. >> we see no need to consider possibility of raising rates. below that we begin to look more carefully. as we do so, the unemployment rate is not a sufficient

statistic to measure the health of the labor market. an additional 5%, an unusually high fraction of our labor force is working part time for economic reasons which means they're unable to get full-time work but want it. that's an additional 7 million plus americans who are involuntarily employed part time. we have unusually high fraction of americans who are unemployed and have been for substantial amounts of time. so as we go to a fuller consideration of how is the labor market performing, we need to take all of those things into account. >> thank you, madam chair. thank you, mr. chairman. >> senator shelby. >> thank you. thank you, chairman yellen for being here with us and congratulations. i want to talk to you a little bit about the portfolio of the fed. it's been mentioned. i understand it's about $4

trillion at the moment. you've tapered off some of the fed board of governors. you're still buying at the current rate, about $65 billion a month. at that rate, if you don't taper substantially or stop, you'll be getting up toward $5 trillion end of the year, more or less. is that correct? >> we are, as you say, around 4 trillion. >> but getting up to $5 trillion at the rate you're buying. >> if we don't continue to taper. >> but even if you taper and you continue to buy -- if you taper down from 65 to 50, that's still substantial buying in the market, is it not? >> it is. we've indicated that if the economy progresses as we anticipate, we expect to continue reducing the pace of

purchases in measured steps which would mean ending completely the purchases, winding down and ending some time next fall. >> in your portfolio are they mainly treasuries and mortgage-backed securities? is that what the portfolio consists of? >> yes. >> what is the relative ratio of that one to the other, relatively, just educated guess. >> i believe we have a larger quantity of treasuries than mortgage backed securities. >> you want to look at it or do you want to furnish it for the record? >> i'd be happy to furnish the exact numbers for the record. >> to unwind a portfolio of that size which is unprecedented, chairman bernanke has told us before it would be a big challenge. do you agree with that? >> we do not need to and have no

intention of quickly winding down that portfolio. >> will you -- is it your plan to keep some of the mortgage backed securities and treasuries for maturity? >> we have indicated we have no intention of selling mortgage backed securities. they will -- i think when we begin the process of normalizing monetary policy, of wanting to tighten monetary policy, we are -- we will have a look at permitting runoff out of our portfolio as these securities mature, and allowing runoff, we would bring down our portfolio over time. >> slowly. >> slowly, even without sales. and i think my predecessor has emphasized, and i agree, there is no need to bring down the

size of our portfolio in order to tighten monetary policy. we have a range of tools that we can use to raise the level of short-term interest rates at the time that the committee deems it appropriate to begin to tighten monetary policy conditions. that's a way off. but we continue to develop tools to make sure that we have an arsenal of tools to be able to, as appropriate, tighten conditions, and not have to do asset sales or manage our portfolio in any way that would be disruptive to financial markets. >> if i can shift now to the regulatory side of your duties here as chair of the fed, board of governors. bozal three is supposed to be in

effect, is it not in '15, 2015? >> i believe so. >> adjustments for capital, flexibility, capital liquidity, so to speak. is that correct? >> i believe so. >> senator crapo mentioned the foreign banks and so forth. will you as a regulator make sure that the foreign banks comply with their capital standards just like our banks have to if they're doing business in the united states of america? >> yes. we have said that foreign banking organizations that have over $50 billion in size will have to form intermediate holding companies and to organize their activities other than branch and agency activities in an intermediate holding company that will be subject to the same regulations as u.s.-based banking organizations. that's the essence of the

proposal that we finalized, we finalized two weeks ago. >> thank you. my time is up. >> senator schumer. >> thank you and thank you, chair yellen. you're off to a great start as far as i'm concerned. i want to make one brief comment. i know some of the colleagues on my side of the ail express amazement -- some of the very same senators and congress members who blocked all further needed investments in infrastructure and other things that used to have broad bipartisan support complain that the fed is doing too much to help the economy and it's sort of incredulous to me. you don't have to comment on that. but what do they expect you to do, just stand here and let the economy get even worse, let job growth continue to slow?

fiscal is preferred, but it's not available because people have blocked it. my question, first one relates to tapering on the economy. i know you testified you were surprised -- those were your words -- by the data in the jobs reports in december and january, but indicated at the time the fed has no intention of altering its tapering program despite the fact that the economy may not be showing the growth you originally anticipated. in your analysis of the data since then, have you seen any trends or additional information that has led you to reconsider slowing or causing the tapering of the fed's bond buying? >> senator, as i mentioned in my opening remarks, we have seen quite a bit of soft data over the last month or six weeks. it was the employment report, relatively low -- below

expectation growth in payrolls and some of the housing numbers and retail sales and industry production. so it's really quite a range of data that has been soft recently. now, i think it's clear that weather has been -- unseasonably cold weather has played some role in much of that. there are many ways in which weather would have affected this. what we need to do and will be doing in the weeks ahead is to try to get firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook -- >> it's not mostly weather, would you consider pausing or changing the rate of tapering? >> as we have said in our statement, and i would agree, asset purchases are not on a

preset course. >> my next question talks about some of the qualitative versus quantitative guidance. fed reserve president lockhart said recently. i appreciate the fed's use of forward guidance as another tool to influence market conditions. i'd like to get your thoughts o. i would like to get your thoughts on how it's most effective. it seems the fmoc had significant discussion about revising down the fed's forwards f forward guidance which originally stated it would consider raising interest rates once employment fell below the threshold of 65.

in your testimony in the house you indicated that the 6-5 threshold would not be the only factor that's taken into account. policymakers would be looking at a broad range of day on labor market job creation and other indications. so it seems you're inclined to offer a more qualitative approach rather than the numerical threshold of 6-5. given the reality that to be effective, the guidance must be trusted by the market, would you agree with the president who said they would favor much more work towards a more qualitative approach, which would give you more flexibility and yet still give the markets guidance. >> so there are many different views in our committee about the right way is to cast forward

guidance. this is something we've been debating for a long time and will undoubtedly continue ch to discuss paz we get closer the to this 6.5% threshold. i think we are already clearly indicated and i emphasized in my testimony that the unemployment rate is not a statistic for the labor market. there is no hard and fast rule about what unemployment rate constitutes full employment and we need to consider a brong range of indicators. many members of f the committee have emphasized this point and it's one i agree with. it moves in the direction of qualitative guidance. we want to give markets as much of an indication of how we expect to conduct policy as we can. we did provide some additional information in december, which we reiterated in january. what we said was that the

committee based on the full assessment of all of the data on the labor market and inflation expectations, financial developments taking all of that into account, and we believe that we could only begin to raise our target interest rate well past the time that the unemployment rate had declined below 6.5%, and we said that that was true especially if inflation remained low. because an important factor is that inflation is running well below our 2% target. so i guess this is qualitative guidance, but i feel what we provided then was additional information. >> moving away from a quantitative measure and more towards the qualitative, which i think is a good thing thank you. >> thank you, mr. chairman. i was a little surprised at my friend's from new york partisan comment ls.

i can only assume he had too much coffee this morning. it's good to see you. >> it's not supposed the to be first. >> madame chairwoman, since this is a first, how would you like to be addressed? >> madame chair is fine. >> i met some of the nominees. we talked about that in the back room. and i want to say that i'm impressed. especially i want to make a reference to stanley fisher. i think you may have had something to do with him being nominated. the former chairman may have had something to do with that. but very impress i have person. and i think he's a very good compliment to your background. i look forward to him being confirmed. you and i, when we were having the confirmation hearing talked a little bit about financial instability in the hearing, and i know there's been a