>> call peter barnes get the last fed statement. they're the ones who say things are getting better. up employment is getting better. housing is picking up. neil: we're seconds away finding out whether that is it. >> i'm not saying they should raise rates. neil: we will sigh. now we know. >> no rate hike, neil. no rate hike. the fed is leaving rates, short-term interest rates unchanged. the fed is saying that it wants to see further improvement in labor market consist and higher inflation before it increases rates and it is worried about foreign economic and financial markets and possible impact on the u.s. economy. so for now, no increase in rates. but it signal ad rate hike could come later this year. let me read from the statement now. quote, information received since the federal open market committee met in july suggests that economic activity is expanding at a moderate pace. household spending and business fixed investment have been increasings moderately and housing sector has improved

further. however net exports have been soft. the labor market continued to improve with solid job gains and declining unemployment. on balance labor market indicators show underutilization of labor resources has diminished since early this year. inflation has continued to run below the committee's longer run objective partly reflecting see clients in energy prices and prices of non-energy imports. go further in the statement. quote, recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. nonetheless the fed does expect the economy to continue to grow at a moderate pace. now, to the interest rates. to support continued progress towards maximum employment and price stability, the committee today reaffirmed its view that the current zero to quarter percent target rate for the federal funds rate remains appropriate. it also goes on to say, quote, the committee anticipates it will be appropriate to raise the target rate for federal funds,

for the federal funds rate when it has seen some further improvements in the labor market and is reasonably confident that inflation will move back to its 2% objective in the median term. the vote for this policy statement today was 9-1. with inflation hawk, jeffrey lacker of the rich monday fed preferring to see, to raise interest rates. neil, back to you. neil: thank you very much. you heard it right there. we were showing on the right side of the screen how the stock market is responding to all of this. it has been whipsawing within 100-point range right after the announcement, stocks moved up. then they have since easing back a little bit. so they're trying to weigh in on this but again, for those that just tuned in, the federal reserve has opted not to hike interest rates in latest go round. we'll showing you how number of interest rates are faring on all of this but as you're watching continued fox coverage on this the federal reserve has raised

some issues that could come up in future meetings. but for now at this meeting it opted not to change the overnight bank lending rate, something pegged to a lot of adjustable rate mortgages, a lot of consumer loans. that will not be affected right now. however there are still two more federal reserve meetings this year. one in the middle of october and one in the early part of december and we could see moves at those meetings. keep in mind, comes at a time when federal reserve already to my colleague's point put itself in a box on this issue. rejoined by maria bartiromo and stuart varney and lou dobbs and charlie gasparino. lou, they didn't move as you predicted but there is confusion in the markets as to whether that's a good or bad thing. >> that is the stuff of which markets are made as we all know. i think this is a perfectly healthy response here. and i think importantly, we talked about the box that they put themselves in, yellen has put herself in, i think this was

a decision, or if you prefer, a non-decision that goes a long way towards extricating them from that box because this suggests that those metrics actually do mean something that they do have greater clarity than it would have been suggested had they raised rates in the face of what are significant crosscurrents in the economy. i think yellen did the right thing. i think the federal open market committee did the right thing and i think you will see this as positive for stability. neil: still very, very early. swinging very wildly here. >> only four minutes. come on. neil: exactly. we'll be all over the map. safe to say, what they will read the decision about 500,000 times. >> now the tea leaf read es looking closely at the statement, passing every single word or comment or sentence, what does she really mean by that. that's what they're doing at the moment. if the verdict come in one way or other the market --

neil: if the market goes down, the immediate fear, maria, to your point they missed an opportunity to be on top of this. it is going to be hell to pay, right? >> now we know what the federal reserve thinks about the economy and what is on the horizon around corner. neil: for now. >> we know federal reserve is afraid what is happening internationally and impact on u.s. is afraid we have seen the participation rate continues to drop in terms of employment and industrial side of economy is weak. the question for markets, what are the alternatives? so we're lower for longer on interest rates? what does that tell you? everyone continues to search for yield. yield can only be found in companies with dividends and seeing growth. neil: paragraph of the fed statement was devoted to all these foreign developments. all of these foreign developments. >> they're scared to death. they mentioned the foreign economies. they mentioned our markets. you can't move up because of the state of the world economy and the state of our markets.

they're still in that corner. neil: if you're in the world bank, maria, you must be liking it, you must be liking it because they told you not to move. >> i think this is very dumb move by federal reserve. 25 basis points would not matter. what they have done is basically said, without like chinese stimulus really seeping into our gdp, into the economic numbers, basically said right now if you're investor and look at markets agreeing with them, no you got to look at these things. this is what they're saying. >> complete reversal. >> they're saying our economy stinks. neil: with two hours to go. liz claman on floor of new york stock exchange. much of the attention was on the global economy and what happened here, just to bring people up to speed, federal reserve had opportunity to raise rates today but for those of you who are indebted, you're getting used to very low interest rates to borrow. that party will continue. for those of you who have been hoping to find a way maybe to

get a little bit more for your cd, a little bit more for your money market savings, those rates stay obscenely low. you will not be rewarded for being the prudent fiscal people you are. >> so for borrowers, rejoice. for those who do all the right things and save your money, curse the day. liz claman, on floor of new york stock exchange. let's -- all over the map. what are to make of this. >> wow. the markets got very quiet on floor of new york stock exchange. in fact one minute before when you were talking they were all saying to everybody on the floor, they wanted to hear exactly what happened. the minute it went up, there was a cry, can't say a cheer. you saw markets start to fluctuate. right now we're negative. what does that mean? i think maria made the great point now everybody knows what the fed thinks of this economy and it is anemic picture at least from where the federal reserve sits. you see intraday pictures and plummet there and attempted climb back.

right now with the dow down 12, s&p is flat at moment, nasdaq down, now back up just two points. reaction is somewhat muted. i think this market doesn't know what to think. neil: it does not know what to do. by the way i did a little of homework coming up to the show because i was watching maria -- [inaudible] within an hour, after fed move, even an expected moved it moved 3 1/2% one way or the other. settles the day one 1% from the close. >> unexpected you said? neil: i don't know. >> i think it is worth looking at some of the growth areas. what is down in this market. technology. okay. banks, industrials, the growth areas of the stock market are down. where is the growth, neil? neil: trish regan, i want to bring trish into this. what are you to make of this? >> you know what i've been saying all along i'm not surprised at all.

i do not think these members of fomc had it in them, given what is going on in china, given that the u.s. dollar is as strong as it has been, i do want to point out the dollar is weaker against just about everything right now. which it may -- neil: dollar has been stronger. >> the dollar has been stronger. that makes it tough for yellen i will raise by a quarter point. that effectively would make our u.s. dollar even stronger then you've got a problem if you're trying to export goods all around the world especially when china and europe and everybody else is with a race to the bottom. neil: i wonder to your point, stuart is here as well -- >> this is nothing. the dow jones industrial average is now down eight points on 16,000 index. neil: why are you making snap judgment based on now, when it was 100 points? >> because you asked him. neil: my point is this -- >> right before 2:00 the dow jones was up 50 points. look at it now. it is down 4.67.

there ask reaction for you. >> what is volume? neil: where do you think we'll end day on this. >> i don't make forecasts about the stock market. neil: but you're obsessing over -- >> that is a nothing reaction to a zero report. neil: 150-point swing. they're trying to assess. >> i disagree with you. neil: you're trying -- i don't. i'm just saying how can you assign significance of movements baked on a second that changes from the next second? >> we're expecting reaction. >> i disagree. reaction most people of the markets expected if we didn't raise rates a degree of a relief rally. this is a relief rally. that is a problem. >> biggest problem, neil, uncertainty until the end of the year. that is where we are right now. the federal reserve has put market watchers, investors in a position of uncertainty.

we don't know what is next until the end of the year. neil: there is enough in this statement, guys, they are setting the stage for december hike. >> december? what about october? >> maybe, maybe not. neil: that is me interpreting. you went ahead to interpret the markets. >> how about tomorrow? this is like absurd. december now? who cares. neil: look at meeting in december. 15th, 16th, whatever it is. they do not hike. ample reasons like you guys are saying not for them to hike. but they don't, but they said, then what? >> look, we now know, i said a moment ago, we know what the fed thinks of economy. we know what the fed's mandate really is, global stability. that is what we're looking at. neil: breaking news on floor of new york stock exchange with liz where you can cut the tension with a knife. this is seat of washington where we hear from janet yellen very shortly to respond to tick by tick developments mr. varney seems to ignore.

i just kid. that is the way i roll. liz, what is going on? >> traders stopped me and told me forget december. the fed will definitely not want to gyrate markets and people's portfolios in advance of christmas, hanukkah, all of holidays. they do not want to do that. neil: hold, they don't want to ruin christmas? >> i know. can you imagine? >> spending money they saved at gas pump. neil: let her finish! >> thank you, neil. let me tell you what they think. they think that it is a possibility that october may rear its head like a pumpkin because they will simply say, i know we don't have a news conference in october. let's call one. neil, they can do that. they can call one. neil: varney is all apoplectic. >> i'm not apoplectic. i want a new job. i want to be a fed watcher. neil: we can arrange that.

he is actually about to make a good point. >> maybe it will be october. maybe it will be december. watch out, it might be christmas. fed-watchers will be -- we're just creating a whole new industry, a heil-paid industry, thousands people make a living out of it this. >> did you notice what happened, stuart, as soon as neil said, watch december, from floor of the exchange came the word it would not be december. neil: exactly. read at that signal. >> we're laughing bit. this is serious. it is not december. not doing it in 2016 during presidential election. we'll have zero -- neil: they have done it during presidential elections. >> thank you. >> doesn't matter if it is october, december. what matters now we know what the federal reserve thinks of this economy. we are in no-man's land. sluggishness. neil: young laid i did, might i point out on your very fine show you said that if the federal reserve not acted by end of the year there could be hell to pay. >> yes. i think markets will view this

as this is a lot worse than i thought. neil: turning from your opinion that you think the market -- >> yeah. >> we have relief rally. 48 points. >> one minute to 2:00 -- >> charlie said it was selling off. >> it was selling off. >> one minute to 2:00 the dow jones average was up 50 points. 14 minutes past 2:00 it is up 50 points. wow. neil: the only thing about you can explain every tick by tick movement with every tick by tick movement. >> you absolutely can. i totally 110% agree with you that investors are trying to figure out just exactly what this means. i would argue, hey it is game on through december anyway. we are going to watch and wait and see what happens. i want to point out something. back in the years before 1994 do you know investors didn't hear quite as much, shall we say from the fed? just a short time ago they didn't have press conferences right?

this is sort of very chatty fed, in some ways a little tmi, everybody i think stuart pointed that out -- neil: that is too much information. i know what you're saying. >> hangs on every word. >> trish, you keep saying investors. isn't this like algorithms trying to figure this out? moist of investing public is out of markets. this is professional traders and algorithms trying to like -- >> no, i'm just making a point. neil: wait. i want to go live. we're obsessed on this as we should, live to sixth avenue, right outside of our studios. as you can see, panic ensuing on the streets. i only mention that, to put this in perspective we should rand probably are covering this and -- >> get reaction from donald trump on this? neil: doesn't do donald trump impression. those tuning in. in case you were fearing day was interest rates on adjustable rate mortgages and debt you have would be affected and move up didn't happen. doesn't mean it can't happen but

didn't happen. maria, folks moving into the holidays, to trish's point and liz's point maybe traders are seeing that disrupted or propensity for being disrupted, whether all clear for rest of the year? >> that buying propensity has been disrupted. we've not seen the consumer show vibrancy in a long time. neil: vibrant in august. >> it was okay. still under expectations even though you saw growth. bottom line we've been waiting for consumers to spend money they saved at gas pump and they haven't. fomc is lowering medium long term fed funds outlook to 3 1/2%. down from 3.8%. neil: what does that mean? >> telling you fed fund will be lower for longer. that's what we all know because the fed did not raise rates. but bottom line -- neil: part of the markets like that, means steady as she goes environment continues.

others who might be behind the curve don't like that. who wins the argument. >> no alternatives for people's money. you're not making money in your savings account or money market. not making money anywhere -- neil: good for the markets? >> good for the markets long term. >> the fed has lost so much credibility with this. this is such a joke, whether they do it now or december -- who mentioned october? this is like, we're in never-never land. neil: we could have another special in october. i say we do this at olive garden? >> yeah. >> i might vote, i never would say, ron paul because -- >> you said what. >> vote for ron paul. i never thought i say that. he wants to get rid of the fed. these guys are jokes. they're -- >> what i said was this fed was probably own positive actor for a period of about four years in this economy. neil: no doubt. >> during the greatest distress

this economy had been in since the great depression. neil: that's a good point. >> when you say the fed has lost credibility -- >> right. >> i suggest they gained back some. >> with who? >> well the same people who you thought lost. >> no, they haven't. >> my god, charlie. neil: i don't even understand what he is saying. >> signaled absolutely nothing about a rate -- >> read the last statement. the last statement. neil: questioning credibility with stuart varney. i will say this, lou is on to something here, that say what you will of the federal reserve. i agree with a lot of chicanery, they're only adult in town. only one getting anything in done. they are only one addressing -- which is bad. i'm not giving them a compliment. >> let's not forget about what president obama added to party. dodd-frank. epa regulations. obama care. you saved $100 at gas pump but spent $160 on --

neil: federal reserve is only act trying to deal with this. >> they were only guys in town who flooded the markets, flooded economy with a lot of money. neil: i completely agree. >> blame barack obama for his lousy economic policies. neil: we had to wait since your last obama comment? >> about an hour and 19 minutes. >> could we possibly construe that as obama being unintended beneficiary or -- >> why do we think -- let me ask you this, if you're the average guy watching the show, why do you think zero percent interest rates are good? you're telling every average investor go out to buy mortgage-backed securities. >> you're ascribing value judgments. >> that is what it is doing. >> charlie, think about the appetite for things like puerto rico. >> it is economic judgment on the part of the fed. >> no. to create wealth through investing. that is what -- neil: trish, you were saying something? trish, i'm sorry you were saying something.

>> i think charlie has a point. you have average investor been pushed further and further out on risk curve. they're suddenly out buying things like puerto rico. the appetite for puerto rican debt was through the roof. this is in part because people can't make money in anything else. neil: liz claman? >> the professional world is doing it and individual investors are doing it. neil: lizzie. >> neil, volatility is caused by the fed. not by all the chinese short term stuff which gyrated markets on a day here, a day there. right now we see very flat vix number, which is fear index. this guessing game, we just put up a graphic, that showed fed's guessing game. this guessing game is causing anxiety and causing volume at this time. neil: you're an encyclopedia, liz? why is that significant? >> it is significant because of what charlie gasparino was saying -- >> yeah. neil: incredible. >> people who aren't a part of the big bank or the big high

financial services algorithm world, they can not participate in this. neil: what disthat mean? if it is moveing the way it is what does that tell you? >> there is no fire in the markets. neil: i knew that, but i was just trying to sound ignorant. maria, i'm looking at this, dodge a bullet or just put another one in the chamber? >> well i think, i don't know if they dodged a bullet. i don't know the answer to that it is clear this economy is not clear what it is saying. life happens. things change. maybe they thought data points were strong, vibrant, three months ago. since then we had complete fallout in china. we had complete fallout in canada. a lot of trading partners have challenged and u.s. economy is not showing good headlines. neil: what would happen if the we changed rates?

the world would be disadvantaged to us, right? >> the world would have big problem if we raised rates. neil: maria says that was the light. >> maria and i agree entirely on this the federal reserve is responding to foreign economies because they're scared to death if they raise interest rates, foreign economies tank. neil: that is life happens. >> that u.s. economy, there is reason commodities have plummeted. iron ore, copper, oil. neil: let's don't agree with charlie. >> that little old lady, janet yellen, just told average savers -- neil: that little old lady. >> i don't like that description, charlie. give me a break. >> look at me like i'm donald trump. >> do you sound like him. >> that nice little old lady. neil: incredible. >> she told the average investor, buy high quality puerto rican debt out there. >> no she didn't. >> yes she did. interest rates are zero. where what you do? you go out --

>> fed is setting monetary policy with eye to puerto rico? are you serious? >> you learn the wealth effect, mr. dobbs. the man i learned economics as a i had k i sat at your nee. listened to you for years. do you understand the wealth effect, sir? >> may i draw your attention to the dow jones industrial average at one minute to 2:00. it was up 50. at 23 minutes past 2:00, up 40 points. wow, neil. neil: do you realize there is another business network that obsesses with such movement. >> accusing me of sounding like -- neil: yes i am. >> the other guys? neil: the tie should have tipped it off. >> traders show uncertainty. urn fortunately uncertainty will be with us to year-end until we get more clarity. >> convened here to somehow gather up from the cost most all of the certainty-- cosmos, all the certainty about the future possibility. ambiguity in off it self is environment of markets.

where money is made. where intelligent choices create great wilt. to talk about as something should be feared or understood is absurd. >> you're arguing for a rate increase. you're saying -- neil: no, he was not arguing. >> is. neil: he says ambiguity -- >> charlie, you can barely, barely discipline your own reasoning -- >> ambiguity. >> let alone -- neil: tell him, lou. >> you're in market where fed keeps interest rate at zero. where is the ambiguity? >> having no ambiguity in all of this is essentially one of the problems. they are, at work, creating a new kind of -- >> she is agreeing with me. >> i'm agreeing with you. neil: trish, do you have to agree with him. >> there is no mystery in our relationship anymore, janet yellen. i know exactly what you are

going to do. neil: what about housing? housing is bumping along. >> nothing. nothing at all. >> nothing. >> zero. >> why don't they raise rates? neil: let's say tomorrow morning. later today. it is sense you're going to get, everything is status quo. nothing changes. >> i think most people will say, because this is what they have been saying, i wish the fed would have moved because i don't want the federal reserve to be manipulating markets by keeping us at artificially low levels. neil: this is not clarity? >> there is no clarity. a lot more uncertainty toward year-end. we'll not have certainty. that means more volatile market. get ready forbid did i up. -- giddyup. >> will large algorithms keep up? neil: the people on the floor that do this stuff, what are they doing? what are they doing when they do this.

>> the guys on the floor aren't doing that. neil: some guy -- >> we shouldn't be saying this that is not exactly where the action is right now. action is places like virtu. neil: kiss that new york stock exchange ad good-bye. >> they want to meet with me for some reason recently. neil: go ahead. >> i don't know what will happen in the future. i can tell you this is one of the dumbest moves. neil: liz claman on floor of new york stock exchange where they're about to turn off your lights there, but go ahead. >> four minutes away. four minutes away from the janet yellen news conference. want to tell you they're watching behavior in the russell 2000. those are small and mid-cap companies. small and mid-cap stocks tend to take money they make, to put it back into their growth opportunities for paying out dividends. that is up nearly a percent right now. that has regained everything it lost during that one little gyration. see flipping over to the russell

2000, that is up nearly a percent. highest percentage gainer here. i would like to say as fed put as pillow down where it thinks every market in the world is going to fall, this is going to be a problem for retail investor pushed out perhaps more into riskier dangerous -- neil: we don't know but glad you mentioned that. janet yellen is going to be speaking in about three minutes. maria bartiromo will take you through that press conference and after events here. we know she is at this site, trish regan. we know she will be asked some of the same questions we were asking and raising here. it will come back to what changed, right? and i thought, maria, you kept repeating it, life happens. something happened along the way to disrupt this decision that seemed to be getting increasingly closer and closer to hike rates. >> i think at end of the day, she didn't have courage to do it. neil: why would it take courage? >> let me just say if i may interrupt this.

trish: larry summers, christine lagarde and lou dobbs saying hey stay where you are. neil: we're fine with it. dobbs is upset. what is the matter, lew. >> i think there should be minority view which i represent, janet yellen and fed have done exactly the right thing. they have reacted to data correctly. they have used use reason and are responsible. neil: the fed only ones that are adults in the room. >> that is my intent. >> i would say a couple things to look forward to, neil, the sector ends in september. corporate earnings are getting impacted from the international story. number two retail sales. we're going into the 10th hiring period. a lot retailers will be hiring testimony workers. neil: toys "r" us. >> that is not benefits. that is sort of artificial employment because it is temporary. we want to watch retail sales as well as jobs numbers next couple weeks. >> we're not a zero interest rate economy based on all the

>> because it's cheap >> it's money >> again, not good. >> just like that. >> easily. >> who wants to kill me >> also -- >> it's -- >> it's immediately to be acquired -- >> since -- the reservation. you know, what's -- >> it's not what she is saying. >> this woman is about to say. >> the suggestion that there -- that the fed is actively irresponsible here is -- >> utterly wrong >> janet is now going to be talking to the press.

i want to thank all my guests for talking over one another. we saved a great deal of time doing so. >> a quarter percent target range for the federal funds rate. since the committee met in july, the pace of job gains has been solid. the unemployment rate has declined and overall labor market conditions have continued to improve. inflation, however, has continued to run lower objective. partly reflecting declines in energy and import prices. we still expect that the downward pressure on inflation from these will fade over time, recent global economic and financial developments are likely to put further downward pressure on inflation in the term. these developments may also restrain you as to activities somewhat. but if not led at this point

to the significant change in the committee's outlook for the u.s. economy. the committee continues to anticipate that the first increase in the federal funds rate will be appropriate when it has seen some further improvement in the labor market and is recently confident that the inflation will move back to its 2% objective over the median term. it remains the case that the committee will determine the timing of the initial increase, based on its assessment of the implications of incoming information through the economic outlook. i will note that the importance of the initial increase should not be over stated. the stance of monetary policy will likely remain highly accommodate for quite sometime in order to get our progress of maximum employment and 2% inflation.

i will come back to today's policy decision in a few moments but first i'd like to review recent economic developments in the outlook. smoothing through the quarterly volatility, u.s. real grows domestic product is estimated to have expand at 2.25% pace in the first half of the year. notably strong outcome than expected in june when committee participants had submitted economic projections. continued job gains and increases in real disposable income in supported household spending. growth in business, fixed investment is moderate hold down in part by a significant contraction in oil drilling activity as a result of the large drop in oil prices over the past year. moreover net exports were a substantial drag on gdp growth

during the first half of the early the further appreciation of the dollar and demand. the committee continues to expect the moderate pace of overall gdp growth, even though the restraint of the exports is likely to sit for a time. the labor market has shown further progress so far this year toward our offing of maximum employment. over the past three months, job gains average 2 20,000 per month. the employment rate at 5.1% in august was down four-tenths of a resource from the latest reading available at the time of our june meeting. although that decline was accompanied by some reduction in the labor force participation rate over the same period. a broader measure of unemployment that includes individuals who want and are available to work but have not actively searched recently and

people who are working part-time when would rather work full-time has continued to improve. that said some weakness likely remains. while the unemployment rate is close to most participants estimates of the longer run normal level, the participation rate is still below estimates of its underline trend. involuntary part-time employment remains elevated in which growth remains subdued. inflation has continued to run below our 2% objective. partly reflecting declines in energy and import prices. my colleagues and i continued to expect that the effects of these on inflation will be transitory. however, the recent decline in oil prices and further appreciation of the dollar mean that it will take a bit more time for these affects to fully dissipate.

accordingly the committee anticipates the inflation will remain quite low in the coming months. as these temporary effects fade and importantly as the labor market improves further, we expect inflation to move gradually back to our 2% objective. survey-based measures of longer term expectations have remain stable. however, the committee has taken note of recent declines in market-based measures of inflation compensation and will continue to monitor inflation developments careful. this assessment of the outlook is reflected in the individual economic projections submitted to this meeting by participants, which now extend through 2018. as announced in the minutes from our july meeting, we're also introducing a modest enharassment to the summary of

economic projections by publishing a median objection of course fmoc participants. these medians provide a concise summary statistic of participants perspectives. they should not, however, be interpreted as a collective view or a committee forecast. as always, each participant's projections conditions on his or her own view of the monetary policy. reflecting upper revisions through the first half of the year, participants increased their projections for economic growth this year, compared with the projections made in conjunction with the fmoc meeting. the projection is 2.1% this year and rises to 2.3% in 2016. somewhat of both the median estimate of the longer run normal growth rate. thereafter the median growth

projection declines toward its longer rate. the unemployment rate projections are a bit lower than in june. at the end of this year the median unemployment rate projection stands at 5%. down three-tenths of a percent from june and close to the median estimate of the longer normal unemployment rate. committee participants generally say the unemployment rate declining a little further next year and then leveling out. finally formc participants expect to be very low this year, largely reflecting energy and nonenergy import prices. as the transitory factors holding down inflation and labor market conditions continue to firm, the median inflation projection rises from just four-tenths of a percent this year to 1.7% next year and reaches 2% in 2018.

the path of the median inflation projection is a bit lower than in june. the outlook abroad appears to have been more uncertain of late. and heightened concerns about growth in china and other emerging market economies have led to notable volatility in financial markets. developments including the drop in equity prices, the further appreciation of the dollar, and the widening and risk spreads have tightened overall financial conditions to some extent. these developments may restrain u.s. economic activities somewhat and are likely to if you tell putter downward pressure on inflation in the near term. given the significant economic and financial interconnections between the united states and the rest of the world, this

situation abroad bears close watching. returning to monetary policy, we recognize that there has been a great deal of focus on today's policy decision. the recovery from the great recession has advanced sufficiently far and domestic spending appears sufficiently robust that a rise in interest rate at this time. we discussed this possibility at our meeting. however, in light of the heightened uncertainties abroad and the slightly sort of expected path for inflation, the committee judged it appropriate to wait for more evidence, including some further improvement in the labor market to both confidence that inflation will rise to 2% in the median term. now, i do not want to over

play the implications over these recent developments. which have not fundamentally altered our outlook. the economy has been performing well, and we expect it to continue to do so. as i noted earlier, it remains the case that the timing of the initial increase in the federal funds rate will depend on the committee's assessment of the implications of incoming information for the economic outlook. to be clear, our decision will not hinge on any particular data release or on day-to-day movements in financial markets. instead the decision will depend on a wide range of economic and financial indicators and our assessment of their cumulative implication and actual progress toward our objectives. when we, again, emphasize the

timing in the target range and the federal funds rate is far more important to the u.s. economy than the entire expected path of interest rates. and once we begin to remove policy, we continue to expect that economic conditions will evolve in a manor that we want only gradual increases in the target federal funds rate. compared with the projections made in june, many fmoc participants lowered some to the federal funds rate, including estimates of the longer run normal level. most participants continue to expect that economic conditions will make it appropriate to raise the target range for the federal funds rate later this year. although four participants now expect such conditions will not be seen until next year or later. the median projection for the

federal funds rate rises to about 1.5% in late 2016, 2.5% in late 2017, and 3.5% in 2018. and 2016 and 2017, the medians are about a quarter percentage point below those projected in june. the median projected rate in 2017 remains below the rate that most participants expect to prevail in the longer run. despite the fact that the median projection has the unemployment rate slightly below its longer run normal level and inflation close to our 2% objective. participants provided a number of expectations for their low federal funds rate projections. these include the residual effects of the crisis which likely constrain spending for

some time as well as headwinds from abroad. but the restraining influence of these factors on real activity -- at the restraining influence of these factors on real activity dissipates further, most participants expect the federal funds rate to move to its longer run normal level by the end of 2018. i'd like to under score that the forecast of the appropriate path of the federal funds rate as usual are conditional on participant's individual projections of the most likely outcomes for economic growth employment, and other factors. but our actual policy actions over time will depend on how economic conditions evolve, which is quite uncertain. if the expansion proves to be more vigorous than currently anticipated and inflation moves higher than expected,

then the appropriate path would likely follow a steeper and higher trajectory. controversial if conditions were to prove weaker than the appropriate trajectory would be lower and less steep. finally the committee will continue its policy of reinvesting proceeds from maturing security agencies and back securities. the committee sizable holding of longer term securities should help maintain cooperative financial decisions and promote further progress toward our objectives. thank you. let me stop there. i'll be happy to take your questions. >> madam chair, this notion of uncertainty and economic global developments, is it fair to say that it could be many months before those

global developments work their way through the u.s. economic data and that you would not have the certainty that you're looking for to raise interest rates for many months and perhaps well into next year? >> well,, steve, i think you can see from the fcp projections that most participants continue to think that economic conditions will call for or make appropriate an increase in the federal funds rate by the end of this year. for participants moved their projections into 2016 or later, but the great majority of participants continue to hold that view and of course there will always be uncertainty, we can't expect that uncertainty to be fully resolved. but in light of the developments that we have seen and the impacts on financial markets, we want to take a little bit more time to

evaluate the likely impacts on the united states. and as i mentioned, the inflation outlook has softened slightly. we've had some further developments, namely lower oil prices and further appreciation of the dollar that put some downward pressure on the near term in inflation. now, we fully expect those further affects like the earlier moves in the dollar and in oil prices to be transitory but there is a little bit of downward pressure on inflation. and we would like to see some further developments and this importantly could include -- likely to include further improvements in the labor markets that would boost our confidence that inflation would move back to 2% of the median term.

>> this is tom. can i ask about the next meeting in october. do you view that as a live meeting even though there isn't going to be a scheduled press conference on that time and what kind of developments would you need to see to be confident in moving in the near term? is it more important in the financial markets or more to do with the up coming data? thanks very much >> so as i said before, every meeting is a live meeting where can make the decision to move the target federal fund rate, that certainly includes october, as you know, and i've stressed previously were we to decide to do that, we would call a press-free thing and to participated and exercise to make sure that you would know how to participant in that press briefing, should it

happen. so, yes, october it becomes a possibility and we will be looking at both financial and economic to try to make sure we feel really that the u.s. economy is doing well. you know, i want to emphasize domestic developments have been strong, we see domestic demand growing at a solid pace, the labor market continuing to improve. of course we will watch incoming data to confirm our expectation that that will continue. and we of course will watch global financial and economic developments. i can't give you a recipe for exactly what we're looking to see, but as we say, we want to see continued improvement in the labor market, and we would like to burls our confidence.

and of course further improvement in the labor market could serve that purpose. we could see other things that would raise that confidence and further improvement in the labor market will do that. >> the group of protesters out here before your meeting, there was a similar group at jackson hole. they and others have warned the fed not to raise rates because out of concern that the labor market is not fully healed, what impact if any has that had on you and your colleagues and your decision today? >> so we have been receiving advice from a large number of economists and interested groups and that's of course appropriate, and we value hearing the opinions of many, you know, many different

groups and individuals with different perspectives but, look. at the end of the day it's the committee's job to come together to analyze the data that we have on the economy to decide how it affects the outlook and try to deliberate and having a judgment about the appropriate path of policy and that's what we did today. as i said, although we are close to many participants and the median estimate of the longer run normal rate of unemployment, at least my own judgment and this has been true for a long time; is that true are additional margins of slack, particularly relating to very high levels of part-time involuntary

employment and participation that suggests that at least to some extent the standard unemployment rate under states the degree of slack in the labor market. but we are getting closer, the labor market has improved, and as i said in the past, we don't want to wait until we've fully met both of our objectives for the process of tightened policy and given the monetary policy. >> madam chair, do you think over the past few months at your last meetings that you've gotten closer to or away from the fed inflation goals. and secondly you received a congressional subpoena for the did disclosure of the 2012 policy meeting. are you any closer to complying with that? have you turned over any new information to congress? >> see your first question was

have we come closer or moved further away from our inflation goal. so we've used the same language that we expect to achieve our 2% goal over the median term. and i would say although -- as we say in our statement, recent developments seem likely to put some downward pressure where after all way below our inflation targets. but in important reason for that is that declines in import prices reflecting the appreciation of the dollar and declines in energy prices are holding down inflation will below our target and below core inflation. we expect those affects to be transitory and inflation expectations, we expect inflation to move back to 2%.

now, in the intermeeting period, we have seen some further appreciation of the dollar and some further downward pressure on energy prices. and that creates a bit of further drag on inflation that i would view as transitory, as very likely to be transitory. so i continue in the committee continues to expect that inflation will move back to 2%. so this should be a small thing. and in the meantime the labor market has continued to improve. so a tighter labor market, a labor market moving toward full employment is one that is generated upward pressure on inflation. so that bolsters my confidence in inflation. on the other hand we've had a long period in which inflation has been running below our

objective i consider it, and the committee does very important that we achieve our inflation objectives and defend against inflation that is consistently above our inflation objective and also persistly below. we want to have a good degree of confidence that that will occur. we did take note in the statement of the decline of inflation compensation. and it's hard to get a direct read on inflation expectations out of these measures, they can be pushed down by factors pertaining to liquidity and the treasury and the tips market and other issues but we have taken note of that, and i would say that that's something that is caught our attention and is a factor that

we are watching. so we would like to have a little bit more confidence. but i would not interpret developments during the intermeeting period as significantly under mining confidence. and the labor market is really important that as it continues to improve, it has and we want to see it improve further, >> oh, i'm sorry. you asked about the september 2012 leak. we are working very closely with house financial services committee that's requested information to satisfy their request. we're working very closely with them. >> [inaudible] >> benny applebaum, "the new york times." the economic projections that you all released today shows committee members expect roughly a three-year period in which the up employment rate will be at its lowest -- unemployment rate

will be at its lowest level. could you talk about why, as a moment ago you said we'd expect inflationary pressures when unemployment is at a low level, why is inflation going to be so weak for so long under those circumstances, and does it indicate when you are projecting that, basically, much of a decade will have passed without the fed reaching its inflation target, does it indicate that you have failed to do enough to revive this economy in recent years? >> well, we've been very focused, benny, on doing everything we can to revive this economy and to achieve our maximum employment objective. and after we took the funds rate down to zero, as you know, we put in place a number of other extraordinary measures including forward guidance and large scale asset purchases in order to speed the recovery and attain

both our inflation objective and our maximum employment objective. and, i mean, when you look at the projection, you see, as you mentioned, that we see sufficient growth to push the unemployment rate. it's already very close to participants' estimates of its longer run, normal level. we expect the unemployment rate to fall slightly or least participants project that it will fall slightly below that level. as that occurs, we would expect labor force participation, the cyclical component of that to diminish over time, and we would hope to see some decline in the portion of slack that's reflected in high levels of part-time involuntary employment. be now, inflation is going back

in our projection to 2%. it takes til 2018 to get there. it's awfully close in 2017, and it's not terribly far away even next year. we have very large drags from import prices and energy prices, and over the next year or so those things should dissipate, and the behavior of inflation should mainly -- if our understanding of the inflationary process is correct and if inflation expectations are well anchored, which i believe they are -- as the labor market heals and as that healing progresses, we will see further upward pressure on inflation. that's what we expect. now, it's a slow process. it's characterized by lags, and that's why it takes a few years

as the inflation, as the unemployment rate falls and even overshoots its longer run normal level, it just takes some time for inflation to get back to 2%. but the overshooting helps it get back faster than it otherwise would. and it certainly is important for us -- and i think our credibility hinges on defending our inflation target not only from threats that it rises above, but also that we not have over the medium term that we want to see inflation get back to 2%. and we believe the policies we're following are designed to accomplish that and we'll do so. >> [inaudible] >> hi. thanks. from "the washington post." i want to piggyback on that question and bring up the old

threshold of 6.5% unemployment during which the fed promised to keep interest rates low. that had sort of assumed, i guess suggested the fed was comfortable with inflation rising above 2%, but you just said moments ago that you don't want to wait until inflation actually hits your target before you are ready to lift off. so i wonder if you could explain that a hitting bit. is there a shift in how much inflation the fed is actually willing to accept? >> is so let me be clear. 2% is our object i. we want to -- objective. we want to see inflation go back to 2%. 2% is not a ceiling on inflation. so we're not trying to push the inflation rate above two. it's always our objective to get back to two. but 2% is not, is not a ceiling, and if it were a ceiling, you would have to be conducting a policy that on average would hold