cheryl: when will the fed cut back the bond purchases? it will come down to the all-important wording of the 2:00 p.m. eastern time statement followed by 2:30 news conference, which we expect to be chairman ben bernanke's last. adam: will it be jawboning with a bite? chief economist and others on when they see the tape are starting. cheryl: amc entertainment making their trading debut. we will hear from the ceo as they go public on the new york stock exchange. adam: started growing at a breakneck pace. it took 90 days, $1,000,000.10 employees for online startup to spread to 48 states. delivering bulk size items a run for their money. nicole petallides to find out

what investors are thinking. nicole: this is a big deal because last time the fed met, popularly doing some tapering, which they are not. now the question is while we have seen some improved economic numbers, although they are not looking at the numbers, looks great, is it enough to stop the tapering? will they taper. the s&p 500 down by four. the fear index has had an interesting day, pulling back in the morning and moving to the unchanged line as we eagerly await on the fed. it will guide the market at least the next hour and a half or so. back to you. adam: cheryl. cheryl: lets get to our man who will bring us latest news and said the fed, peter barnes live

from the federal reserve. 55 minutes and counting, peter. >> this one is a coin toss. i have been reading so much research going into this meeting, starting yesterday, whether or not they will start to taper now or wait. the taper is going to come, just a question of will it come now or in the new year. the indicators are pretty mixed. we have had strong economic indicators. through the roof new-home sales, new-home permits. retail sales came in pretty solid for november, the jobs report have been better, financial conditions have kind of eased off, they are not as tight as they were before. the threat of the government shutdown is gone. these are things the fed is watching but the other thing they are watching is inflation.

2% inflation target, it is running at less than 1%. what is the harm in waiting to see how inflation is going to shake out. if we don't get tapering, we might get a plan for tapering elimite get a timeline for tapering. we might get some sort of change in the policy mix, they talk about tapering but they talk about how they may deal with the short-term fed fund rate and the so-called forward guidance on the course of interest rates. i have to go back inside and get ready. cheryl: peter barnes at the fed, he will bring us the decision live on fox business.

adam: don't is that anti-from the federal reserve until next year. joining us, one of the top economist honored by "usa today," all of the accomplishments, but right now the question is why won't they start the taper, as you believe, until we are into 2014, and it looks like march, correct? >> it is like early of next year. there is no black and white, it is shades of gray. 40% today, 60% early n year. adam: it could happen to investors because of the federal reserve. are the gains we have seen in the market this year all attributable to the fact qe has

not been pulled back, or are there real fundamentals driving the market higher this year? >> i think it is a little bit of both. growth has been good, the economy is starting to show signs of life. i think there are solid foundations for what has gone on in the stock market but maybe a little bit of froth in there because of the fed. adam: here's what i don't understand as a novice in all of this, even if we begin to taper, if we start to pull back it doesn't have that much of an effect on the 10-year treasury, and at the end of the day the fed reserve keeps saying we are not raising the interest rate, most people don't expect that to happen for another year, year and a half. >> you are absolutely right. the analogy is the difference between putting your foot on the brake versus putting your foot

gently off the accelerator. that is what we're looking at. adam: do you agree with people who say we will never get rid of qe? it is here forever more? >> i think we will get rid of it, but the process will be a gradual one. adam: to get rid of the bond purchases, does it accomplish with the fed had thought it would accomplish, or has it not been a success? >> look at the difference between the u.s. and europe. the u.s. has been much more forthcoming with monetary stimulus than europe has. we have grown, they haven't. it says a lot about the difference and the effects the fed program has had. adam: any language you would look for when it is released in about an hour that would signal to you what is actually going to happen? >> other than them saying we're

going to start tapering now, i will look for any guidance they will give about when they will start and what it will take for them to start the process, what kind of indicators they are looking at and will be looking at to start that process. adam: thank you very much for joining us, all the best to you. cheryl: you were at ups yesterday, take a look at fedex today. this company failing to deliver. second-quarter earnings coming in before the bell. disappointing the street. moving into the transportation sector to show you how other names in this space are doing. they hit by a decline express shipping, more grounded deliveey, they slightly raised their full-year outlook. cyber monday not included in the second quarter, so we will have to look at that. here is the chart, strong

performance for a one-year story on them. again, as you can see, these two are moving in correlation. kind of taking a higher play. the epitome of the u.s. economy and kind of this concerning the mac two this concerning when you take a look at express shipping are pulling back. we will keep the ma keep an eye. adam: we will t tell you who the cfo thinks will lead the company next year. cheryl: turning an empty parking lot into a selling point. the commercial that hopes to drive shoppers into its stores by using the prime parking spots. adam: inside amc debut on the new york stock exchange. we will hear from the ceo.

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adam: so we have a stock alert for you. shares of four tumbling at the automaker warned north american profit will be lower next year. this comes about growing speculation regarding the ceos future, jeff flock is in chicago with more on that story for us. jeff. jeff: the market may be overreacting to the ford news. but that is the ford cfo with a briefing for analysts and reporters, he was asked at the end of the briefing what about alan malawi? saying he expected there would be no announcement until 2014. he has said he will stay until the end of 2014. he told liz claman that they unveiled the mustang last week but a lot of people concerned the speculation is still in focus from the big product launch they have this year. let's take a look, if we can come at the good, the bad, and the ugly from ford.

the good news is the profit will be up in 2013. gains and operating margins and cash flow, cap the unfunded punchepensions in half. 16 launches in u.s. alone in 2014. the bad, pensions are still $10 billion unfunded, underfunded. 2013 profit margin is lower on recall costs. north america will be less profitable in 2014 but only by about a billion dollars. you have problems in venezuela had the ugly part of it, they have $7 million worth of cash in venezuela they cannot get out and make it devalued. big restructuring costs of about a billion dollars, and 2014 a long-range outlook volume will be up in the industry, but ford volume will be down mainly because of all of the new launches. there's a lot that goes into

that, take the factories down to retool, but long-range, for it is still a good buy. adam: they have been successful in a lot of ways. i make a big investment in china not fated to any of this yet, is it? jeff: they have new plants over there. in the long-term i think it is a good move. adam: thank you very much. cheryl: what a positive attitude he has. somebody will snatch them up. better-than-expected housing data lifting homebuilder stocks today. nicole petallides on the floor of the new york stock exchange. the good news on housing as we are now 45 minutes away from the fed decision because they will talk about housing.

nicole: there is no doubt. they have had stimulus in place for some time. up 1.6%. some profit numbers that beats the street. the housing numbers that came out really showed some strength up almost 23%. they move them to the highest level we have seen it almost six years, so that is why we're seeing these homebuilders doing well. continue to keep an eye on the 10-year bond. effective the mortgage rates and as people may be less likely to run and jump and buy homes. right now at 2.87%. adam: take a view at the new ad from sears. cheryl: have you seen this?

it is hysterical. adam: there is no audio? cheryl: i don't think there is. these two girls going to the movies and start talking, always empty parking spots at sears. they find themselves shopping and going to the movie. adam: they always have parking. they're questioning is this good for sears advertising, how empty are the parking lots. the stock took a beating, down 28%, but the other problem sears faces is you walk into the store there's a website that talks about this, they take photographs of the displays and there is nothing that says he wants to buy me, it almost looks like you're walking into a discount store. cheryl: it was a cute commercial. thinking outside the box.

putting costco on your smartphone. one of the hottest startups of the year. we will talk to the founder and ceo coming up next. adam: links so you don't miss it. the new update letting users take a photograph with a wink of your eye. ya know, with new fedex one rate you can fill that box and pay one flat rate. i didn't know the coal thing was real. it's very real. david rivera. rivera, david. [ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. and this park is the inside of your body. see the special psyllium fiber in metamucil actually gels.

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>> 21 minutes past the hour. your fox news minute. a former bp engineer found guilty on a charge stemming from the 2010 gulf oil spill. a federal judge convicting a jury, convicting one count of obstruction for deleting messages with contractors weeks after the tragic spill. facing up to 20 years in prison and a fine of up to $250,000. egypt's state tv saying morrissey will be tried on charges. muslim brotherhood topped three leaders conspiring former foreign groups and carried out military training in acts that

undermine egypt's stability. the five permanent members of the u.n. security council plus germany, after tehran stalled negotiations over a sanctions move. representatives are designed to outline a plan to put the interim agreement into action. those are your headlines. get you back to adam and cheryl. cheryl: thank you. growing your business from two tuesday's 248 states in just 90 days with $1 million. an online shopping app welcome. >> thank you very much for having me on the show.

>> it was essentially a problem that we have developed as a company. that technologist ful foolish eh to think we could solve our own problems. luckily enough we were able to. adam: you only have at this point about 600 different items that you can buy. this is really with moms and dads diapers, paper towels. will you expand? >> we will expand to a little bit of a different thing. we thought it would be a lot of guys sharing apartments using the service. it has evolved over time. many are female now. we are at a more cosmetics, green products, green cleaning products, organic food. it has shifted over time. we're 100 some days in the business, so the growth has been pretty incredible. cheryl: at the same time, do i pay more for the box of diapers

then i would if i went to costco? >> depends on what product you choose. we don't want to compete as a bargain basement retailer. there's a real opportunity there, so there is a disparity between traditional retailers that are lots more expensive, traditional warehouse very inexpensive, and we fill the gap in between. adam: you are controlling your cost. you cannot get it on the pc. you don't have to have two different editions. what about warehouse in? you could essentially contract with ups to have them do all the warehousing and the shipping. why didn't you do that? >> it goes back to what i said in the beginning, we wanted to build a service for ourselves as

customers. we know when we have a good experience. a lot of times when we receive goods from a company you think you have a good experience with, they literally do a tizzy. for us at least in the beginning wanted to do it all ourselve ourselves, we wanted to be the ones to correct it, we do not want to rely on anybody else. cheryl: what have you learned from this experience? >> we have learned how important mobile is. if you look at mobile gaming, four years ago or three years ago everybody was like mobile gaming relegated to the basement. when that tide shifted, it would have a big everybody plays these days, it has shifted so fast and so hard to mobile, lot of gaming companies didn't catch the tide

and were washed up. adam: next time we have you won, we will pin you down for an exit plan. maybe one day an ipo. >> next time i will bring some diapers in. adam: just like that, google updated google glass in the wink of an eye, and the new feature allows them to take a photo by the wink of their idea eyes. it works even when the camera display is off. it has the ability to upload and share videos on youtube, google says the feature could have many other uses in the future. google shares are trading down, actually, in today's session.

you had to delete all of those, and it takes forever. easier than trying to get stuff off of facebook though. cheryl: good point. investors are rolling out the red carpet as amc makes its debut on wall street. what the ceo credits to the success of the business. adam: will they dial back stimulus? what the fed action today will mean for the next three months of next year.

adam: time for stocks again. we'll head back to the floor of the new york stock exchange. nicole petallides is there and everyone waiting for the fed decision, 2:00 p.m., nicole. >> no doubt the dow jones industrials are flat, down just one point. the vix is higher. s&p and nasdaq are slightly lower the nasdaq is the worst of the bunch down half a%. everybody is waiting for the fed. interesting for the fed, bond buying programs they have underway, $85 billion of stimulus each month there are ideas what they could do the next hoor. they could taper off the bond buying in increments by 10 billion or say we'll only buy a certain amount of bonds up to this amount. they could change the lending rate from .25 from zero. they have on a array of topics

what they can do. thank you. adam::nicole petallides, thank you. cheryl: we are less than 30 minutes away from one of the most important fed meetings of the year. this could be ben bernanke's last press conference before he steps down as chairman. what do the markets need to hear from the fed? jeff klinetop, chief market strategist at lpl financial. good to see you again. we say this could be because there is speculation out today potentially the fed may give us, here is how we'll lay out the guidance and from now on starting in january there will always be a press conference after the meeting and statement is released. what do you make of this new thinking by the fed if we hear about it today? >> well that makes perfect sense, to communicate more frequently. if the fed is testing a taper and thinking about, gee, how much will we cut it this time, how much will we cut it next time, it make sense to be communicating more every meeting what their thinking is and what that is based upon. i don't think we'll get a taper today. so i do think that those meetings will be very important

next year in the first half, somewhere when they begin tapering. that kind of communication will be very important. eight press conferences next year. not just four. cheryl: that actually might be kind of a good thing. we look at things moving the market. there was a sale on the five-year treasury today and interest was next to nil, very flat. what do you make of that? >> yeah. nobody wants to buy ahead of the fed. you could certainly see a big move in interest rates today. you saw some of the data that came out this morning on housing. that helped to lift bond yields. there was not a lot of interest in the auction. probably a one-day event that demand will probably come back tomorrow. listen, the market has been prepared for something coming from the fed. interest rates gone up. protection purchased in the options market is certainly taking place of the you see that in the vix index. cheryl: which is flat right now. >> not back to november highs. right. there is a little bit of trepidation as we get past this, no matter what the outcome and stocks move higher and bd

yids mht me down ltle bi cher: doou tnk ts is a possilit certnly ere aiffence opion whe t ecomys stng eugh tak the ter no evertimee tesoigna it he wl do it, sethi bd ppenin t enomy hoing da, jf, i w allyood dta. th tls horehan er w to have tools to begin the taper. they say it is data depend end. you agree on that point, corrects. >> i think it is past due when the fed begins to rein in the stimulus. listen what they're talking about. financial conditions, ben bernanke has been talking about for months now. they have gotten tighter if you look at chicago fed index of financial conditions. it has gotten a little bit worse. inflation they often cite. core inflation is 1.4% versus the 1.5% back in september. janet yellen talks about the quit rate or high hire rate. and they are not going in the

right pace they would like a see. key metrics are not improving rapidly as other data -- cheryl: you're liking calling for march. we have the jury out until we find out the deal 25 minutes from now. don't you agree when you look at other central banks around the world they're already beginning to pull back? austerity measures beginning to be tapered back. do you think the fed is talking to other central bank chiefs around the world and saying he it has to be part of the global pullback in liquidity? >> very difficult to do this in isolation. this is a global financial, you know, interconnected world we live in. it is very difficult for one central bank to decide what it will do on its own without thinking what everyone else is doing. the bank of japan continues to keep its foot on the gas pedal and european central bank may be brought back to the tableehere in 2014 with adding some additional stimulus. but you're right, right now the fed would stick out a little

bit, perhaps, with a taper or if they didn't taper, to some degree, given at least europe and other major central banks started to rein it in. cheryl: 25 minutes to go and the guessing game ends. good to see you, jeff. >> good to see you. adam: entertainment is changing way we watch movies and adding reclining chairs and dine-in experience. what about sticky floors? where will that go? they are bringing in an initial public offering. jo ling kent with mo on the movie mowing full's ipo. >> the stock is currently up more than 7% right now, performing nicely, hit a high of $19.79 earlier. the stock opened at eight teach dollars a share which is at the low end of 18 to $20 range. amc trying to generate buzz allowing star clients to reserve 100 and 125 bucks in stock without fees.

regular customers were elgible for 110,000 shares ahead of the debut as well. last year chinese property giant bought amc for $2.6 billion. chairman billionaire ling became china's richest man according to "forbes" worth a cool $14 billion. we asked amc how they will distinguish themselves from some of the competition they're changeing? >> our perspective more is not necessarily better. what matters is the experience, quality of the experience. in our business for the investor community what we've been talking about is the productivity of the existing asset bates. we can increase the productivity of each customer business. >> let's look how other theater stocks are doing today. regal, imax, cinemark. imax is up 2.4%. overall a strong start for amc today a few hours into the first

day of trading adam. adam: jo ling. let's all go to the lobby. jo ling kent. thank you very much. don't miss liz claman's entire interview with amc entertainment and ceo, gerardo lopez. he is ready for his close-up, mr. today mill. that is liz claman 4:00 p.m. eastern on fox business. cheryl: bitcoin is under attack. the price of the virtual currency is crushed as they are forced to stop accepting deposits. adam: the budget deal in washington, d.c. is closer to becoming law but there is another one brewing, this one on the debt ceiling. on republican demand that president obama is unlikely to negotiate. ♪ life's an adventure when you're with her. and i. but your erectile dysfunction - it could be a question of bod flow. cialis tadalafil for daily use lps you be ready anytime the moment's ght.

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and the optics industry in germany? at t. rowe price, we understand the connectio of a complex, global economy. it's just one reason over 70% of our mutuafunds beat their 10-year lipper average. t. rowe price. invest with confidence. request a proectus or summary prospectus with investment formation, risks,ees and expenses to read and consider carefully before investing. >> i'm dennis kneale with your fox business brief. boeing promoting dennis mullen berg to chief operating officer, signaling a possible ceo succession plan. he is the current head of boeing's defense position. he will share oversight of boeing's day-to-day operations with ceo jim mcinerney. reports of the iphone in china are premature. china mobile's chairman is still in talks to sell apple's iphone but has no deal to announce to access to china mobile's 759 million customers to bring in extra $3 billion in

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adam: bitcoin is falling to almost half its recent value in just one day on fresh reports that china is going to restrict its currency. the world's largest bitcoin exchange, btc china, says local companies are blocked with providing it with clearing services. meaning it can no longer accept yuan-based deposits. virtual currency not backed by any centraa bank is extremely popular in china but the chinese government is cracking down. far from its only critic, this price dive is providing skeptics

all over the world with plenty of ammunition today. let's see what the winkelvoss, how do you say the names. what they have to say about it. they're still worth millions. cheryl: i saw that. in half today. budget votes coming up tonight but that is not the only fight happening in d.c. senator mitch mcconnell says the next battle is upon us over the debt ceiling. the gop planning to demand something for a debt ceiling lift and the administration isn't likely to cave. rich edson standing by in washington with the latest. >> cheryl the white house is quick to remind that congress did raise the debt ceiling in october and did so without caving to republican demand. the republicans failed to put an offer on the table last time. this time they say will be different. budget committee chairman paul ryan says republicans will soon meet to figure out the debt ceiling demand. senate minority leader mitch mcconnell says you doubts congress will give president increase in the debt ceiling

without other policies attached. white house reiterated position is unchanged. he refuses to negotiate over the debt ceiling. one said congress will likely raise the debt limit without visiting the brink. >> they will try to push for policy reforms perhaps for that famous now john boehner cliche, matching spending cuts dollar for dollar spending cuts. i think ultimately they will relent. run the risk after default on the debt, certainly not in election year. >> so congress raised the debt ceiling through early february. though the treasury department says it can extend deficit spending for about another month with what is calls extraordinary measures. that is largely spending certain maturing investments instead of reinvesting them. back to you. cheryl: ceo of dunkin last hour, rich. he said same thing. that fight will be crucial to the economy. rich, thank you so much. >> thanks. adam: bad news for new jersey. there will be no fist pumping in new jersey tonight. raid ratings agency moody's lower outlook on the state

citing the sluggish economic recovery and rising costs of its underfunded pension plans. outlook on the state's general-obligation bond falling to negative from stable. although new jersey's rating remains at a very investable aa-3, still comfortably in investment grade territory it is nonetheless a downgrade. the bearish view comes as new jersey struggles to lower unemployment which stand at 8.4%. at least that's what it stood at in october, which is the 8th worst unemployment rate in the united states. cheryl: wow. here we go. 15 minutes away. we're counting down to the fed decision. that is coming up, 2:00 p.m. eastern time. adam: first perspective from the trading floors ahead of the announcement of ben bernanke's news conference. cheryl: it is the question investors are asking all year long. will the fed tapeer? you will find out coming up. ♪

adam: we're just minutes away from the fomc decision. fox business will bring you that announcement as it happens but first we want to get a lock where markets stand. the major averages have been pulling back from earlier gains this morning. the dow is clinging to green, up roughly five points. oil is up but off its high of the day. gold is sticking slightly higher as well. we want to go to the trading floors. mark newton from gray wolf execution partners joining from us the new york stock exchange and phil flynn in the pits of the cme. mark, i will start with you. i have to ask, i thought the markets already priced in taper. why do we keep talking about swings in the markets based on what the fomc is going to do? everyone expects they will taper

eventually? >> that is right. not much between doing it now or in march. i'm not sure it is priced in. it is unexpected it would happen today. i would say it is in the minority. if they do taper i would expect to see move higher in 10-year and 30-year treasury yields and market probably does sell off rule of that. people expect nothing happens today but they offer more upbeat assessment of growth and keeping taper on the front burner and market probably rallies as a result after that. adam: let me go to you, phil. impact on oil. why is il paying so much attention to this. >> i think because it is priced in dollars and really, but not as much as it would have a few months ago. because of rising supply of oil i think some markets you really want to look at commodity side will be like gold and silver. if you see what gold and silver are doing right now, they're kind of telling you right now they're leaning toward the fact that the fed probably won't taper today and the question you asked whether it is important? we know they're going to do it

eventually. why is it important when they do it? because the secrets to trade something timing. secret to commodities is timing. it will really matter you start projecting business, your trades going forward. if you don't know when they will do it, that has all impact. when they do it and how the markets react after they do it. adam: mark, should an investor putting most of their invests in a he can with quits should pay attention to commodities for some kind of signal with will happen with tapering? >> i think so. commodities markets have been falling since 2011, since the spring. you have a little bit of a bounce in gold and crude oil. more so in crude. i still think gold moves lower in my opinion. i think we get to 1180 or 1150 before we see a meaningful bottom. any sign of taper that should happen where gold moves lower. i think it is premature. adam: phil, will you let him get

away with that. >> i will not let him get away with it. we have been anticipating tapering for a long time. every time we talk about taper gold goes down. have we priced that in? everybody has a false sense that tapering is necessarily bearish for gold. because we haven't tapered and keep pumping up the stock market, the stock market is a one-way ticket, why do you buy gold? start tapering a little less than one-way ticket. adam: wrap it up with this. i will start with phil and mark, you jump in. what do i if i'm a retail investor and seen them coming back into equities, what should i be doing? how do i prepare with what will happen with the fed, phil? >> oh for me? i'm sorry. for retail investor why do you care? you might not care for the short term but for the long term it is very, very important because it could determine how well the economic recovery is going. if the fed acts too quickly and there's a nervousness in the stock market, hiring could

contract. you could see the prices of commodities start to rally a little bit. so what the fed does is extremely critical as we move forward. adam: mark? >> you have to have a well-diversified portfolio. one of the biggest moves we've seen in the last 100 years. probably second largest or third longest rally. up 150% from 2009 lows. you have to be more selective in this environment. everyone knows interest rates will eventually move higher. investing in well-diversified portfolio of stocks versus treasurys makes more sense. >> i will have the last word, plastics, gentlemen, plastics. we have the fomc decision coming up in a few minutes. fox business television's best coverage of the fed continues including big ben's final news conference as fed chairman. what would you ask him? tweet us. lou dobbs weighs in on that as tracy byrnes and ashley webster take you through a can't miss

hour of "markets now," next. [ female announcer ] there's one thing dave's always wanted to do when he retires -- keep working, but for himself. so as his financial advisor, i took a look at everything he has. the 401(k). insurance pies. even money he's invested elsewhere. we're building a retirement plan to help him launch a second career. dave's flight school. go dave. when people talk, gre things can happen. so start a conversation wh an advisor who's fully invested in you. wells fargo advisors. together we'll go far.

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before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade. tracy: welcome back. i'm tracy byrnes. >> i'm ashley webster. it is the moment wall street has been waiting for for months, let's face it. will the fed start tapering its bond buying or signal changes to come in the near future. we're moments away from finding out. right at the top of the hour. ben bernanke meets media in about half an hour for very last time as fed chairman and asking about policy and outlook and oh so much more. tracy: we have an all-star panel to guide you through the much awaited fed decision. with us on set, bob pavlick, so glad you're here. in washington, former fed economist, steve olinner at aei. and nicole petallides on floor

of the new york stock exchange and sandra smith in the pits of the cme. bob, do to you first, what do you think will happen? >> they come out and say the economy is improving and we're not there yet. i don't think they make announcement to reduce the asset pprchases. we're just not there yet. we moved along the track but we're just not there yet. ashley: lee's go to steven. your thoughts. what is going to happen? >> i think it will be a really close call by but i agree with bob, i don't think they will taper at this meeting. i think they will wait for more evidence the economy is strengthening and probably go in the first quarter. tracy: bob, one of the things people are looking for is the language, right? what are they saying about the economy. >> the economy i will proved. definitely come off the lows. we've seen improvement in manufacturing, up tick in housing. we have seen improvement in the service sector. seen improvement in the employment space. improvement in the initial unemployment claims, but, we are still faced with extra slack in the overall economy.

so the fed really doesn't want to come back to this program once they start to stop it. ashley: steve, what about inflation, how much does that play into the decision or lack thereof? >> i think it's going to be a real factor in their discussion today and i think it will be a factor that keeps them peng. inflation is low. it is really far below here they would like it to be. so i think that will be a restraining factor today. >> that's a good point because you are still faced with almost deflationary circumstances. there was an article in today's "wall street journal" talking about how inflation is so low they can't get it off the ground. so where is all this money going? it is sitting at banks. the banks have to start pushing this out. ashley: let's take a look at markets now. we're less than 30 seconds out. the dow up 44 points. very quickly, nicole, what are you hearing on the floor? >> first thing watch how the market is running up llst five minutes. we were flat. up 44 points. interest rates are sinking but

people think the fed may do something. ashley: may do something or may not do anything. market is sure to react one way or other. peter barnes with all the details. take it to peter right now. >> the fed will start the taper in january. the fed will start the taper in january. it will be cutting bond purchases from $85 billion a month to $75 billion a month. citing improving economic conditions and prospects. right to the statement now. quote, information received since the federal open market committee met in october indicates that economic activity is expanding at a moderate pace. labor market conditions have shown further improvement the unemployment rate has declined but remains elevated. household spending and busiiess fixed investment advanced while the recovery in the housing sector slowed somewhat in recent months. fiscal policy is restraining economic growth although the extent of restraint may be

diminishing. inflation has been running below the committee's longer-run objective but longer term inflation expectations have remained stable. skipping ahead now, the committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced. that is the critical phrase, more nearly balanced. the committee recognize that is inflation persistently below its 2% objective could pose risks to economic performance and it is monitoring inflation developments carefully, taking into the account the extent of the federal fiscal retrenchment since the inception of its current asset purchase program the committee sighs improvement in labor and economic activity in conditions as consistent with growing underlining strength in the broader economy. in light of the cumulative progress towards maximum employment and the improvement in the outlook for the labor market conditions the committee decided to modestly reduce the pace of asset purchases, beginning in january, the committee will add to its

holdings. mortgage-backed securities at a pace of $35 billion a month rather than 40 billion as it is currently. and it will add to its holdings of longer term treasury securities at a pace of 40 billion per month rather than $45 billion per month. so a $10 billion taper. so the committee sizable and still increasing holdings of longer term securities should maintain downward pressure on longer term interest rates, support mortgage markets and help to make broader financial conditions more accommodative which in turn should promote a stronger economic recovery and insure inflation over time is at a rate most consistent with the committee's dual mandate. again skipping over some redundant language from last time, this language. asset purchases are not on a preset course. and the committee's decisions about their pace will remain contingent on the committees outlook for the labor market and inflation as well as its assessment of likely efficacy of

and costs of such purchases. the federal fund rate remains at zero to a quarter percent. want to say that. there is no change in the thresholds for, starting to lift the fed funds rate over time. those thresholds are still six 1/2% unemployment, two .5% or so inflation but also this new line and critical line in the statement. quote, the committee now anticipates that it likely will be a appropriate to maintain the current target range for the federal fund rate, short-term interest rates, well past the time that the unemployment rate declines below 6 1/2% especially if projected inflation continues to run below the committee's 2% longer run goal. we heard chairman bernanke say that but now it is actually in the statement. this was a 9-1 decision and this time, eric rosengren is the dissenter. he is a dove, federal reserve bank of boston. and the statement says that he believes that with the unemployment rate still elevated and inflation rate well below the federal fund target, changes

in qe are premature until the incoming data more clearly indicates that economic growth is likely to be sustained above its potential rate. guys, back to you. tracy: peter more nearly balanced will be the catchphrase going forward. i guess we'll dissect that six ways till tuesday. what does the fed gdp and unemployment going forward. what do they look to see? >> they got the new numbers and show a better unemployment rate outlook and that's the main headline from this. start first with gdp. they, gdp rate unchanged from the september forecast. still at 3% around still about 3% going out to 2016. this is starting, for 2014. we're skipping 2013. we're done with 2013, right? so for 2014, 2015, 2016, about 3% gdp growth. unemployment rate for 2014, 6.5%. that is the average of projections. that's slightly better than the

6.6% it was forecasting in september. and it sees it going down to about 5.5% by 2016. on inflation, it see that is still under, under control. 1.5% for 2014. is the pce, price deflator. 1.for 2015. 1.9, i'm muching up to 2% target by 2016. show you the super chart again, the blue dot chart we always talk about on the expectations anticipation of the appropriate timing of policy firming, not much change in that either from the september chart. this is the 19, well, this is all the members of the fed bank presidents and the members of the board of governors. we now a hair more harshish with -- hawkish, with three members, participants expecting to increase short-term rates, fed funds rate in 2014. 12, most of them is unchanged in

2015. ann now two anticipating increasing rates in, starting in 2016. back to you. tracy: peter barnes. that was a lot of stuff. thank you, sir. ashley: a lot of information. we're back now with the panel for reaction. above pavlick, steven olinner and sandra smith. i need to get to nicole. before the announcement, nicole. we were up 45 points on the dow. when we got the announcement dropped down to losing 60 points. now we're up 13points, my, oh, my. a lot of volatility in a short amount of time. >> volatility is the understatement. we broke the lows of the day as the fed made its announcement and broke the highs of the day moments later. traders take this ultimately as good news. taper is 10 billion. obviously slow-going, right? it is not a big move. it's a move wall street anticipated. also talked about fiscal policy, at least improving some. fiscal policy was a hurdle for the fed. they have showed that has improved. economic conditions showed some improvement as well. there are many people on

wall street who didn't think you should have had the fed doing this, all this stimulus in the first place. what it tells you ultimately things are getting better. however, right, there is that wildcard that this is not a set course. they will make decisions based on their assessments going forward. tracy: sandra, let's get down to you. last time we met it was crazy down there. what is going on there now? >> yeah yeah. definitely a pickup in volume in the future trading pits down here in chicago. i will have cameras go into the trading pit here. this is the euro-dollar options pit. the highest volume pit in the exchange. lots of activity right now. guys i want to point out, not only is the dow up 177 points, oil prices which had been down, have popped on this news up 40 cents, right below $98 a barrel. gold prices which had been down prior to the announcement, they're up about 11 bucks. but guys, the big focus down here for stock traders, for commodity traders, is the u.s.

dollar. we saw the dollar spike on this report and, guys, anything that trades down here, the stock market, is based on the u.s. dollar and we're getting a big action to the upside. and by the way, that fear gauge, the vix as we all watch it down here, down. fear getting sucked out of the marketplace right now and they're buying them. remember, guys, bank of america put out the huge survey beforee3 this announcement saying big conclusion from economists and analysts that the taper would happen in january and they're estimating about 10 billion. so this, the market was prepared for what was just announced and now they're buying it. so this is being viewed as a rather bullish move by the fed. certainly interpretation from the markets right now, guys. back to you. ashley: sandra, thank you very much. as sandra mentioned the dollar now definitely gaining strength. euro hitting one-week low against the dollar. 10-year treasury yield is key component, at one point hitting 2.9%. hasn't been high since that

september 13th of this year. retreated back below 2.9%. bob pavlick, your comments and your reaction what we just heard. >> takes a lot of uncertainty out of the market. market knows what the fed will be doing. we know the course going forward. i say it is right move. i would say it is right move back in september. the fact that the economy can move ahead is probably a good signal to the overall market. you're seeing it above 60. things are progressing in the right direction. traders are taking heart with that i still think there's going to be a lot of volatility associated with the beginning of the year. i wouldn't be rushing into this market right here right now just because we got this announcement from the fed. tracy: but, steven, we know when it will happen. we know exactly what is going to happen. apparently things are more nearly balanced. so that being said, wouldn't you think that the market would kind of smooth it way through this? >> well i think like bob said the fed's really trying to reduce uncertainty which is a good thing for the market the

other thing fed did in the statement was to harden their forward guidance when the funds rate is going to rise. they're really trying to tamp down expectation that is the taper will also bring forward the beginning of increasing in the funns rate. they really don't want the market to think that at all. they tried to harden that message in the statement today which i think was a good strategy. ashley: to that point, we're getting five million cut from the mortgage-backed side of it and five billion from the treasurys. that is pretty much what people expected. i guess the next question is, how gently do they start to turn off the spigot? do they do this in increements and does that continue how long into next year? >> like they said it will be dependent on the data. they're not on a preset course. they will evaluate the data at every meeting. they could taper further every meeting and pause or reverse if things weaken. my guess by the latter part of

next year they will be done purchasing entirely. tracy: sandy, were you trying to jump in there? >> yeah. just looking at the vix, we talk about what a move in the stock market right now. the vix is down 150 right now. before this announcement it was above 16 showing there was major fear and uncertainty going into this announcement. as i said earlier the fear is getting sucked out of the marketplace. the vix is down considerably right now, guys. just a sign that there was a lot of worry, a lot of concern and the market is taking this move by the fed in stride. everybody thought it would be a huge selloff the moment they said the "t" word or announced the taper. this is market looks like it was, tracy and ashley, prepared for what the fed just announced. ashley: certainly we've been set up. to bob's point it shows the economy is in better shape, right? >> absolutely. if you're a long-term investor this is short-term aberration. i wouldn't get overly wrapped up in this. economy is improving.

manufacturing is improving. unemployment is improving. people are going back to work albeit slowly. companies are making money. that is good news for a long-term investor. do you buy this if you're long-term investor? not necessarily. there is nothing there to drive you in. if you want exposure to overall equity markets, if you have cash on the sidelines you wait to see if there any kind of a pull back next year of. there will be that potential. anybody put off taking capital gain in 2013 will take it in early 14. if that puts downside pressure on market. make sure you're diversified. tracy: good stuff. we will be back with more from our all-star panel after the break. the fed says it will taper in january. stocks are soaring. the dow is up about 125 points right now. ashley: we're just a little more than 15 minutes away from ben bernanke's last news conference as fed chairman. we'll bring that to you live of course. don't go anywhere. this is the quicksilver cash back card from capital one.

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little earlier. ashley: yes. it has been a real roller coaster last five minutes. our panel is here. bob, steven, nicole on floor of new york stock exchange. let's get back to nicole. see what the markets are doing. it has been a wild ride. what are you hearing, nicole? >> traders were expecting this. one thing i said is possibilities of what fed could ultimately do. one of the things i said is $10 billion in tapering and that is exactly what we got. don't forget at last fed meeting everybody was expecting some tapering. that was surprise when we didn't get that. today you're seeing better economic numbers overall. you got that. the other thinggthe vix there was going to be volatility and we did see that the vix was running up. now you see the vix down about 10%. our swing today has been 246 points from top to bottom. right when the fed statement peter barnes delivered for us so succinctly showed the markets moved to the downside at first

and break down and make new lows. then dramatically moved to the top of the day's action and break through session highs and make new highs. here we are now at 16,000. it really just shows confidence ultimately in a recovery that we have seen. again they hold the cards and anything can happen going forward but at least for now you know what is going on. tracy: steven, let's say you're in the meeting what would you ask big ben for his last final hurrah today? >> in the press conference or meeting? tracy: in the press conference. >> in the press conference. would i ask him if they have a sense of the timetable for how long the taper will take. and i would ask him also whether they envision further guidance about where the fund rate is going to go in the future because forward guidance in the communication now is going going to become even more important as

the qe program wind down. as we've seen, the fed has had, kind of a mixed record at communicatings over the past year or so. so i would like to hear a little bit more about what additional information they could conceivably provide to the market. ashley: bob as we look back to the legacy of ben bernanke, has qe been successful? the balance sheet of the fed will go past $4 trillion. i don't think the success of qe has been maybe up to his expectations. the alternative doing nothing is worse, right. >> absolutely. look at article in the paper and people are coming to a conclusion whether or not it has been successful there is really little chance that i have that ability to tell you. i can say that i think the economy would have been able to sort of weather the storm without quantitative easing. and i think it is a good thing that the economy is moving forward enough and think what viewer at home should take out of all of this. that the economy is healthy enough, that the fed can reduce these asset purchases.

that's a good thing. that's what is going to sort of power you towards the equity markets in 2014. tracy: what is your final question to ben bernanke at his last conference? >> i think the real question that needs to be figured out, and i don't think ben has this answer, how do you get those excess reserves out of the banks balance sheet and into the hand of the public? explain that. where does all that $85 billion a month go? the general public really wants to know. tracy: ongoing question, right? >> absolutely. tracy: we have to shout out and big thank you to bob pavlick, steven olinner and nicole pettalidess. thank yous for you guys. ashley: coming up, lou dobbs and. liz: join us to preview ben bernanke's last news conference. as fed chairman what would you like to ask him? we'll be right back.

ashley: markets are rallying. the dow is up 160 points. the fed says it will begin to taper in january and markets are rising surprisingly on the news. tracy: ben bernanke will take questions in just under 10 minutes. this is the final meeting of 2013. we go to liz macdonald and lou

dobbs. both of you are in the conference room. lizzie mack, reporter extraordinaire what would you -- >> extraordinaire, might be an overstatement. watching ben bernanke full labor force participation rate. long-term unemployed was a problem in back in september when you didn't announce taper. why is it a problem low. still at 1978 levels. are we going to hear more fed officials trying to anchor expectations about interest rates? rate spikes, rate rises are kryptonite to the market. ashley: right. -@>> you will see more fed officials out en masse to anchor inflation expectations. more to your point, before the break, ashley, where will the banks park reserves. that is when you talk about inflation, right? that is when banks start lending again and true inflation could possibly pick up steam. ashley: lou, same question to you. you're sitting there. mr. bernanke says, mr. dobbs, you've got the next question, what do you say? >> i don't know that i would form it as a question but rather

say, mr. bernanke, well-done, because the, they have managed the, fed in one taper, if you will, to take two elements out of the market. one is they have taken ideology out of the market. you won't hear much discussion now from the hard right, if you will, who suggest that the fed is an evil, bastion of incompetence and must at any, at any costs remove stimulus from the financial system. that discussion is gone. secondly he has taken uncertainty out of this market and laid out a clear, straightforward path and compare this to where we were in june of this year with suddenly, 50 basis point rise in the 10-year because people were talking out of all sides of their mouth. the other thing is, i don't think you will see as much, and this is the bonus, you're not going to hear as much attention paid or see as much attention

paid to fed bank presidents who don't have a place on the fomc and who don't understand that there is a program at work here. you know, the little chorus of doves, they need to go silent for a while. >> there is certainly no lonesome doves at the federal reserve, right, lou? we like to get back to the idea that ceos giving forward guidance, it is not federal reserve officials giving forward guidance. ashley: fundamentals. >> back in the day fundamentals. but the question is, is this a premature move? will it choke off recovery because next around the corner are rate spikes? what i would ask mr. ben bernanke, besides what letter grade he would give congress on understanding of monetary issues is the moving of goalposts. we have a debt ceiling fight coming up. i'll tell you something, sort of like the raising of the debt ceiling and stimulus spending going on because the fed does note, fiscal policy is still a restraint on u.s. economy and how the u.s. con must have give

gets back on its feet. moving goalposts is raising blood level of alcohol to cure drunk drive something way they spend in congress. tracy: does timeline matter to you, how long this process will take? >> i think it does and i think it matters a great deal to the fed. i can't tell you how thrilled i was to hear such balance in the approach that the fed has taken. we're talking about $5 billion a month out of both the bond purchases and mortgage purchases, at treasurys and the mortgage bonds. it couldn't be more solomon-like. and in fact announcing at the same time that the fed would immediately desist from any further tapering should conditions surprise them. but as it stands now, they see strong growth, 3% growth in this economy, forward, as far as one can reasonably expect the fed or any other group of economists to look. i think this is a balanced,

reasoned, prod don't, intelligent group of people making a solid policy decision. if we could get that kind of, descriptors for fiscal policy mavens we would have quite something. ashley: wouldn't that be something. very quickly i want to ask you both on the legacy of ben bernanke, he had his critics because those say he never how the housing bubble being formed. he was criticized being slow to react but when he did he reacted aggressively. do you think history will be kind to him. >> i think history will be very kind to him. i think history is moving in that direction, near history we can say. those who clamored for desisting from stimulus in the financial system, trillions of dollars, over $3 trillion injected into the system, think it has made all the difference because imagine this. where would we be without that $3 trillion had it not been for the fed pushing that money in? we're sitting here without an,

without inflation. ashley: yeah. >> above 2%. that's extraordinary. >> yeah i think you're right. i agree with lou about ben bernanke's legacy. it will be a positive one. it will be a negative one for the next person who doesn't, who mismanages unwinding that $4 trillion balance sheet which is a about a third of the u.s. economy. janet yellen. or anybody after that. maybe they don't unwind. maybe it sits there. i tell you he is one of the few federal reserve chairman to openly admit mistakes while on his watch, while sitting in the chair. often after the fact, you know, in hindsight. tracy: what about critic that is say $3 trillion, we're not feeling it on main street? >> we're not feeling it on main street because the banks are not lending yet. that is the next lever to pull, cut the rate banks are pay for reserves. >> we take into account fiscal

policy which has been madness. ashley: to be kind. >> utter madness, to be kind. we also have corporate america freewheeling with outsourcing of jobs of the we have public policy. we have business practices absolutely upside down. we're not focusing as matter of public policy on the middle class. this president talks about the middle class of the does very little for those who asspire to it. ashley: lou, time for chairman bernanke to give his statement. let's listen in as he sits down at the podium for the last time. >> good afternoon. the federal open market committee conclude ad two move day meeting earlier today. as you already know from our statement, the committee decided starting next month to modestly reduce the pace which it is increasing the size of the federal reserve's balance sheet. the committee clarified guidance on interest rates emphasizing that the current near zero range for the federal fund rate target

will likely remain appropriite well a of the pa time unemployment rate declines to 6.5%, if the inflation runs below the committees longer run goal today's policy actions reflect the committee's assessment that the economy is continuing to make progress but it also has much farther to travel before conditions be judged normal. notably despite significant fiscal headwinds the economy has been expanding a moderate pace and we expect that growth will pick up somewhat in coming quarters helped by highly accommodative monetary policy and waning fiscal drag. the job market has continued to improve with the unemployment rate having declined further. at the same time the recovery clearly remains far from complete with unemployment still elevated and with both underememployment and long term unemployment still major concerns. we've also seen ongoing declines in labor force participation which likely reflect longer term instances like aging of population but also

discouragement on the part of potential workers. inflation has been running below the committee's longer run objective. inflation persistently below proposes risks to economic performance and monitoring developments carefully for evidence that inflation is subjective overtime. this outlook is consistent with individual economic projections submitted in conjunction with this meeting by the 17 fomc credits a beens, five board members and 128 reserve presidents. projection the condition on his or her view of opprobrium monetary policy. fomc participants expect economic growth to a pickup over the next few years. projections for gross domestic product had a central tendency of 2.2 to 2.3% in 2013. rise in 2 brigade of 3.2% with

similar growth estimates for 2015-16. participants see the unemployment rate which is 7% in november as continuing to decline. the central tendency of projections that the and implement a falling 6.6%. and 5.3, and 5.8% by the of final quarter of 2016. fomc participants continue to see inflation running below the 2% objective but moving gradually back to 2% as economy expands. the central tendency of inflation projections are 0.9 to 1.0% rise in 1.4 to 1.6% next year between 1.7 and 2.2% in 2016. what me return to our decision to reduce the pace of asset purchases. when we began the asset purchase program in september of 2012 we said we would continue purchases

until the outlook for the labor market improved substantially in a context of price stability. we have seen meaningful to me know if progress, since we began the purchase program for her economy has added 249 million jobs and the unemployment rate has fallen by 1% to 7%. for comparison when we started the program many forecasters saw the unemployment rate remaining year 8% through 2014. recent economic indicators have increased confidence the job market gains will continue. non-farm payrolls have been increasing at a pace of 1,000 jobs per month and percentage point since june. with fiscal restraint likely diminishing with signs that household spending is picking up we expect economic growth to be strong enough to support further job gains. further fomc participants see the risks around their forecasts of growth and unemployment having become more nearly

balance rather than tilted in an unfavorable direction at the inception of the asset purchase program is. we have been projecting $85 billion per month and long term treasury and mortgage-backed securities. in january we will be purchasing $75 billion securities a month reducing purchases of treasurys and mortgage-backed securities by $5 billion each. and after this reduction we will be expanding our holdings longer term securities at a rapid pace. we continue to roll over maturing treasury securities and reinvest principal payments, and we will put downward -- and make financial conditions more accommodative. which promote further progress in the labour market and move inflation back toward committee's objective of 2%.

are modest reduction reflects the committee's believe that progress towards economic objectives will be sustained. if the incoming data broadly supports the committee outlook for unemployment and inflation we will reduce the pace of security purchases in further measured steps at future meetings. continued progress is by no means certain. consequently future adjustments to the pace of asset purchases will be deliberate and dependent on incoming information. asset purchases remain a useful tool prepared to deploy as needed to meet our objectives. with unemployment still well above the rate which committee participants currently estimate between 5.2 and 5.8% and with pnflation continuing to run below the long-term objectives, hialeah, dated monetary policy remains appropriate. to emphasize commitment to provide high level of monetary accommodation as long as needed,

the fomc enhanced forward guidance. the committee has said the low target range for federal funds rate would be appropriate at least as long as the unemployment rate remained above 6.5%, inflation was projected to be 1/2% above the 2% longer run goal, longer term inflation expectations remained well anchored. we have emphasized these numbers are thresholds, not trigger's meaning coughing a threshold will not lead automatically to increase in federal funds rate but would indicate wheat was appropriate for the committee to consider whether broader economic outlook justified such an increase. with many fomc participants projecting the 6% unemployment it will be reached by the end of 2014 the committee decided to provide additional information out expect policies to evolve after the threshold is crossed. based on its assessment of current conditionn in the outlook which is informed by a

range of indicators including measures of labor market conditions, financial conditions and inflation pressures the committee now anticipate it will likely be appropriate to maintain current federal funds rate target well past the time the unemployment rate declined below 6.5%. especially if projected inflation continues to run below the 2% goal. in part this expectation reflect our assessment in need of a comprehensive set of indicators, substantial amount of slack in labor market when the unemployment rate falls 6.5%. at hetrick cost on the unemployed and underemployed in their families and reduces the nation's productive capacity warranting our ongoing highly accommodative policy. the last phrase of the enhanced guidance underscore is the prospect for inflation provide another reason to keep policy accommodative. the committee is determined to

be too low inflation too high. it anticipates keeping rates low at least until it sees inflation lean back towards 2% objective. our forward guidons reflect committee participants latest projections for the federal funds rate. the central tendency of projected unemployment rate for the fourth quarter encompasses 6.5%. 15 of 17 fomc participants do not expect a rate increase before 2015. most targets for the federal funds rate rising only modestly in 2015 while three did not increase until 2016. for all participants the projection for the federal funds rate is 75 basis points at the end of 2015 and 1.75% at the end of 2016. in summary reflecting cumulative progress at an improved outlook for the job market the committee decided today to modestly reduce the pace at which it is adding to long-term securities on its

balance sheet. if incoming information supports expectations of further progress toward these objectives the committee is likely to reduce the pace of monthly purchases and further measured steps in future meetings. the process will be deliberate, asset purchases are not on a preset course. the fomc provided additional guidance on future short-term interest rates stating it expects to maintain federal funds target at current near zero rrnge well past the time the unemployment rate falls below 6.5% especially if projected inflation runs below 2%. enhanced guidance about policy intentions and substantial increase in holdings of long-term securities will ensure monetary policy remains accommodative consistent with pursuit of mandated objectives of maximum employment and price stability. i will be glad to take your

questions. >> the washington post. today was the first reduction in asset purchases, future reductions will likely occur in measured steps but not a predetermined course. tell us about the framework to determine the size and timing of those reductions and previously the program to end to get there by the middle of next year. is that still a likely scenario? >> as i said, the steps we take will be dated dependent, if we are making progress in terms of inflation and job gains i imagine we will continue to do at each meeting a measured reduction, that will take us late in the year, certainly not by the middle of the year. if the economy slows and we are disappointed in the outcome we could skip the meeting or two. on the other side of things pick up and we go a bit faster, my

expectation is for similar moderate steps going forward throughout most of 2014. >> mr. chairman, thank you. when you say a similar moderate step going forward, 10 billion an increment people should anticipate and equal amounts of mortgage-backed securities and treasurys also -- finally, when you say well past the unemployment rate of 6.5%. >> on the first issue of $10 billion, again we say we will take further modest step subsequently so that will be the general range, i want to emphasize we are dated

dependent, we could stock purchases if the economy disappoint, pick them up somewhat if the economy is stronger. in terms of m b s vs. treasurys we discussed that issue. i think the general sense of the committee was equallreductions or approximately equal reductions was a simpler way to do this. it doesn't make a great deal of difference how much we hold so that was going to be our strategy. on the issue of another number, the unemployment rate, let's talk about the labor market condition, the unemployment rate is a good indicator of the labour market, the best single indicator that we have, so we were comfortable setting 6.5% unemployment rate as the point at which we look at a more broad set of labor market indicators. however, precisely because we don't want to just look at the unemployment rate, once we get

6.5 we want to look at hiring quick vacancy participation, long-term unemployment, wages, we couldn't put it in terms of another unemployment rate levels specifically so i expect it will be some time past 6.5% before all of the other variables will line up in a way that will give us confidence the labor market has strong enough to withstand the beginning of increases in rates. the survey of economic projections distributed, that is individual assessments and not the committee's collective view but nevertheless it gives some sense of expectations about the length of time, the sdp shows 6.5% expected by large number of people to be reached by the end

of next year. and the end of 2015. the magnitude they are currently expecting i emphasize it will depend on our being persuaded that across a broad range of indicators the labor market is strong, we can begin to withdraw accommodation. >> wall street journal. mr. chairman, as you know, the fed is going through a transition next month. can you talk about the role that janet yellen played in formulating a policy being laid out today and what kind of consistency the public can extract in the 10 year, and the program you are laying out, carrying on under her leadership? >> yes it will. i have always consulted closely with janet even before she was

named by the president and worked closely with her on these decisions as well. she fully supports what we did today. >> the financial times. mr. chairman, your inflation forecasts never get back to 2% in the time horizon you cover after 2016. given that, why should we believe the fed has the symmetric inflation targets and in particular why should we believe you are following an optimal policy, optimal control policy that that would imply inflation going above target at this point. >> these are individual estimates. simplicity around them and so on. we think inflation will move back 2%. we allow the possibility as you know in our guidance it could go as high as 2.5%.

even though inflation is quite low, and let me give you the case wide inflation might rise. there are factors like health care costs, and unusually low and might be reversed. if you look at the fundamentals, inflation expectations and financial markets, if you look at growth which we anticipate will be picking up in the u.s. and internationally, if you look at wages which were growing at 2% little bit higher according to many indicators all of these things suggest inflation will gradually pick up. i tried to emphasize in opening remarks and clear in my statement, we take this very seriously. is not easy. inflation cannot be picked uu and move where you want it. it requires obviously some lot and some good policy.

and make sure inflation does not stay too low and continuing to monitor that carefully and take whatever action is necessary to achieve that. even under optimal control it would take awhile for inflation. inflation is -- can be quite in there shall and take time to move and the response of inflation to increasing economic activity is quite low. particularly given an environment where we have falling oil prices and other factors contributing downward forces on inflation, it is -pdifficult to get inflation to move quickly to target but we are again committed to doing what is necessary to get inflation back to target over the next few years. >> over here? >> craig torres from bloomberg news. there has been a great deal of discussion about the potency of

policy in the boundary and to bounce off of robyn is striking that inflation has fallen while q e 3 has been in place and the economy continues to undershoot the fomc forecast. i guess a simple question is a you giving up? how do you reach the limit of your policy tools and is there nothing more you can do? the economy is still running way below the trend line that existed before the financial crisis? >> everything depends what benchmark you compare it to. i said last year's that monetary policy was not a panacea. it couldn't solve all our problems and in particular it can't do anything about slowing and potential growth which appears to have happened at least to some extent. it can't do much or anything about fiscal policy which is working in the opposite direction.

given those things, the outcomes we had are not as bad as you might think. in particular, as i mentioned many times the congressional budget office assessed the fiscal drag in 2013 as being 1-1/2 percentage points of growth. it looks like we will get actual grooth. at those numbers together it is counterfactual. monetary policy appears to have succeeded in offsetting a good bit of fiscal drag, we were not sure we could accomplish. we are not giving up. we intend to maintain a highly accommodative policy. nothing we did today was intended to reduce accommodation. we will be buying assets at a high rate and increasing and holding on to those assets and our guidance today we strengthen our guidance to make clear we expect to keep rates low be on the points unemployment is at

6.5%. >> peter barnes, fox business. was it a close call in the discussion today among participants, members, given all you said about the outlook and your forecast? was there a lot of debate whether to go ahead and start capering now or wait longer and wage for more data? >> certainly it was a very important decision and we debated it quite extensively. that being said the question we asked ourselves was did we feel comfortable to say we were on a way towards meeting the criteria we set when we began a program in 2012? that criteria was a substantial improvement in the outlook of the labour market and if you look at the cumulative improvement and i mention some figures in my opening remarks or if you look at recent numbers either on unemployment, and also in terms of growth, we are

seeing encouraging numbers in terms of household spending, auto purchases, fiscal drag is reduced, stronger numbers internationally. i don't want to overstate the case as you look at our projections. you will see we only assume or project a small pickup in growth going into next year. there was a widespread review that there was a reasonable expectation first, labour market to continue. and by the time we complete this process it is very likely it will pass the hurdle of substantial improvement in the labour market. it is true that while we have passed or made significant progress on the labour market and growth turtles there's a question about inflation which is more than a bit of a concern as we indicated in our

statement. our outlook for inflation goes back to 2%. i gave you reason that will happen, but we take that very seriously and if inflation does not shows signs of returning to target we will take appropriate action. >> mr. ccairman, now that you have introduced capering into the system, if the economy was to stumble again in the future would you recommend or have you discussed with your colleagues increasing bond buying the in the future and have you considered any alternative measures? for example more direct stimulus into the economy if it were to stumble again? >> would direct stimulus do you have in mind? >> any stimulus that you would in terms of legal authority

the federal reserve has, we don't have it. we are getting to a fanciful discussion. the basic tools were asset purchases and we are allowed to buy treasurys and agency securities. corporate or other things the way many central banks are. with interest rates near zero, we can manage forward guidance and i think that has been effective. we thought we could do more but beyond a certain point markets may not accept, may not view the long distance guidancc as being credible. we can change the interest rate on reserves which is something we talked about. the other at thing i could think of that amount to a direct

infusion into the economy is actions similar to the british funding for lending program where they provided cheap funding to banks if the banks could show that they had increased their lending to households or small businesses. we could in principle do something like that because we do have a discount window where we lend to banks. however, differently from what was going on in the u.k. and europe, here, our banks are flush with liquidity and plenty of cash on hand and lots of reserves. our senses, there would not be any take on a program under current conditions. we do not have the authority to lend directly to small businesses or other types of institutions and in any case i don't think right now that tight credit in most areas is the

major problem. what we have in many cases is firms are either not looking for credit or balance sheets are not strong enough to pass creditworthy screens that the bank. we do have a range of things we can do, but we are already being progressive. under some circumstances, yes. >> a narrow question and related broader question. the changeover in leadership play any role in the decision when to begin tapering? did you have a preference on how to get started before you left to the broader question is you are historian of policy. eight years at the federal reserve? >> the answer to the first question is no. the answer to the second question is i will be interested to see. row by live long enough to read

the textbook. what we showed, there have been two big changes that i would cite at the fed in the last few years. the result in many ways of the crisis. the first is federal reserve has rediscovered its roots in the sense that the fed was created to stabilize the financial system in times of panic and we did that and we use tools that were analogous in spirit to what the central banks of the and for hundreds of years but adapted to modern financial system. the other thing unique, maybe not completely unique but largely unique about this period is we were trying to help the economy recover from a deep recession at a time when interest rates were essentially zero and that required us to use other methods, most prominently forward guidance and asset

purchases, neither of which is entirely new, but let you put aside the depression where monetary policy was on the hole pretty passive. this is the first, one of the first examples of aggressive monetary policy taking place in and year zero interest-rate environment. we are seeing japan, uk and others taking similar approaches and that will be an issue, an area monetary historians will be interested in exploring and monetary purists and empirical studies. >> chairman ben bernanke, today, with one hand you are giving the economy something by telling us or signaling you may keep interest rates lower longer than we previously thought but with the other hand you are taking something away by reducing

large-scale asset purchases, if you think overall this is maintaining the level of monetary accommodation steady, is that a sign the decision to reduce the asset purchases is relatively less about improved outlook for the economy and perhaps more about the concern the asset purchases are less effective or might be feeling bubbles? >> as i said before asset purchases are supplementary to full. our main tool is interest-rate policy. the reason asset purchases are a supplementary tool is much less familiar tool, less ability to calibrate how big the effects are for example and also true that as the balance sheet of the federal reserve gets large managing the balance sheet, exiting from the balance sheet is more difficult. there are concerns about effects on asset prices but i would say

that is another thing future monetary economists will get very closely. our view in september of 2012 was we had interest rates already low and they were pxpected to stay low for a long time. the economy was faltering. we needed an additional boost, we brought in the asset purchase program again. we put in specific objective which on the labour market, our sense was once the intermediate objective was obtained, the economy had grown and was moving forward, at that point we could wind down the secretary chew, supplementary to lend achieve the same amount of accommodation using interest rates and forward guidance and so i do want to reiterate that this is not intended to be a