monetary policy is the job of the fomc. at the fed reminded as recently when they changed the discount rate, changes in the two rates are set by the boards but don't necessarily coincide with the fomc. i'm wondering if this is an issue, if it makes any difference, this legal distinction that the rate paid on reserves and the discount rate are determined by the boards and not by the fomc, which is the monetary policy maker? >> that is a fair question, given our different governments structures. it's more theater than actually what will matter. during the current environment, the fomc, as we have for all the years i have been observing this, have a very collaborative approach to looking at monetary policy. the regional bank presidents come to washington. we work with governors. we do that's as the federal open market committee, we exchange views and talk about what the proper level of accommodation or restraint is, given what we are looking at. over the past many years, that has translated into what should the funds rate beco

i have attended fomc meetings like in 1995. i've observed some of the conflicts firsthand that fomc members face in addressing the dual mandate to promote maximum employment and price stability even in these times. price stability is 2%. inflation as measured by the personal consumption measures over the medium term. when i became chicago fed president in 2007 i never would have guessed that my first two and a half years would have me voting continually for lower interest rates and more policy accommodation. i just would not have expected the need for that. but with the unemployment rate at 9.7% and if inflation significantly under my benchmark for price stability, there's no conflict. why today i will highlight a number of labour market issues that lead me to think this accommodation will likely give corporate for some -- for some time. let me mention a summary of economic outlooks. i am in bereavement with the view that restricts bank credit, along with business and households will continue to strengthen the cover. these head

i have observed firsthand some of the conflicts the fomc members face in addressing the dual mandate to promote maximum employment and price stability even in more normal times. for me price stability is 2% inflation measured by personal consumption expenditures over the medium term. when i became chicago fed president in 2007, i never would have guessed my first two and a half years would have me voting continually for lower interest rates and more policy accommodation. i just wouldn't have expected the need for that. but with unemployment rate at 9.7% inflation significantly under the benchmark for price stability there is no conflict between the policy goals. so the directions for the policy have been cleared. today i will highlight a number of the market issues that lead me to think this accommodation will likely be appropriate for some time and let me emphasize as you know from all of the federal speakers to come here that these are my views and not those of my colleagues on the federal committee. let me briefly mentioned a summary of the economic outlook. i find myself in broad

have benefit of attending fomc meetings since 1995. i have observed first-hand some of the conflicts that fomc members face in addressing the fed's dual mandate to promote maximum employment and price stability even in more normal times. for me price stability is 2% inflation as measured by the personal consumption expenditures deflator over the medium term. when i became chicago fed president in 2007, i never would have guessed that my first 2 1/2 years would have me voting continually for lower interest rates, and more policy accommodation. i just wouldn't have expected the need for that. but with unemployment rate at 9.7% and inflation significantly under my benchmark for price stability, there is no conflict between our policy goals. and so the directions for policy have been clear. today i will highlight a number of labor market issues lead me to think this accommodation will likely be appropriate for some time. let me emphasize, as you know from all the fed speakers who come here these are my views and not those of my colleagues

does this have an impact on the fomc's activities, first mr. bernanke and then mr. volcker? >> if we of the regulator of only the banks, we are thinking that is a bad idea. we need to see a broad financial system. we need to have the information about the broader economy and know what is going on across the country, not just in the great state of new york, for example. there is a close connection between the need for the federal reserve to look at banks of all sizes, and our regional structure. exactly why we have a regional structure -- we have policy makers from 12 regions to speak to local people, including local bankers, to get information about what is happening in their part of the country. but the regional structure of the federal reserve and the supervision of small and medium- sized banks, both of those things together provide us with information, qualitative the information, which cannot be obtained it nearly any other way. >> it's important to monetary policy to have the supervision of all the banks? >> also of financial stability, because we need to see what is h

but my expectation is that the fomc will reduce the size of our balance sheet only gradually over timeconveyed is that i don't think we're due for an outbreak of inflation. not in the short run, as a result of the fed's economic stimulus measures, and not in the long run as a consequence of massive federal budget deficits. if the fed acts responsibly by unwinding its recession fighting programs in a careful and deliberate manner, then we will avoid an upsurge in inflation in the near term. and, as long as the fed remains an independent central bank free to pursue its objectives of maximum employment and stable prices without interference, then there's no reason why it won't be able to keep prices stable in years to come. let me stop there and thank you very much. i would be happy to take a couple of questions. [applause] >> now, just wait for the microphone to come to you and dr. yellen will take your questions. >> i have two questions. number one, what do you think the economic impact will be of the recent medical legislation? and, second, do you think outsourcing of production and th

selling off some of our assets could play a role in the shift, but my expectation is that the fomc will reduce the size of our balance sheet only gradually over time. so the message i hope i have conveyed is that i do not think we are due for an outbreak of inflation, not in the short run as a result of the fed's economic stimulus measures, and not in the long run as a consequence of massive federal budget deficits. if the fed acts responsibly by unwinding its recession-fighting programs in a careful and deliberate manner, then we will avoid an upsurge of inflation in the near term. and as long as the fed remains an independent central bank free to pursue its objectives of maximum employment and stable prices without interference, then there is no reason why it will not be able to keep prices stable in years to come. let me stop there and thank you very much. i would be happy to take a couple of questions. >> if you would wait to the microphone to come to you, dr. yellen will be taking a couple of questions. >> dr. yellen, i have two questions. what do you think the impact of the recent

with a seven governors, the board retains a majority votes on the fomc, even though all 12 presidents always participate in the discussions. the 12 regional reserve banks give the federal reserve deep roots in the nation's communities, which allows the system to better understand various aspects of our economic diversity, of our country and to stay in touch with mainstream, not just wall street. reserve bank -- reserve banks have councils and other mechanisms to keep them abreast of events going on in their regions. president bring a rich array of information and views from around the country to help formulate national monetary policy. congress also made the fed independent of the treasury and the administration. the fed receives no government appropriations from congress. again, as a way of depoliticizing the central bank. in fact, the system turns over any excess earnings on its portfolio of securities and loans above the cost of its operations to the united states treasury. in 2009, the federal reserve system returned $46 billion to the u.s. treasury. now being independent however

selling off some of our assets could play a role in this shift, but my expectation is that the fomc willce the size of our balance sheet only gradually over time. the message i hope i've conveyed is that i don't think we're due for an outbreak of inflationnot in the short run as a result of the fed's economic stimulus measures, and not in the long run as a consequence of massive federal budget deficits. if the fed acts responsibly by unwinding its recession- fighting programs in a careful and deliberate manner, then we can avoid an upsurge of inflation in the near term. and as long as the fed remains an independent central bank free to pursue its objectives of maximum employment and stable prices without interference, then there's no reason why it won't be able to keep prices stable in years to come. thank you very much. i would be happy to take a couple of questions. [applause] if you will just wait for the microphone to come to you, toyekllen will be take -- dr. yellen will take your questions. >> i have to questions from. did you think the impact will be of the recent medical legislat

the fact that the three of us sit on the fomc we have a good understanding of the economy and economic conditions. we then can meet with our supervision team and help them understand the economic conditions as they go out in and supervise institutions so it is a two-way street. we learn about the economy through the supervision of the banks we supervise large and small but we also then can take what we know about the economy and economic conditions and the environment and use that in our supervisory role also so that's why it's so important for us to stay involved in mad. >> thank you. another thing that is coming through very clearly in these questions has to do with the five months and work connecticut known as fasb, and we get frustrated as bankers and i see that in these questions with the pronouncements and the changes in accounting rules and the concept of treating banks and now talking about loans being marked to market etc. these tools keep up capital. these rules cause us a tremendous amount of time and energy and staff. could you comment on accounting rules and how today they

. >> the procedural issues -- could you -- i spent a lot of time explaining to audiences how the fomcmakes the decisions and how he make the decisions before you go. can you just briefly run through heavy prepare for a meeting, what sorts of papers, materials, etc.? just procedural. not any detail. >> with the reserve banks, we have dedicated research staffs dedicated to thinking about of the economy is playing out. we also have our bank supervision staff which relies to a banking conditions are at grassroots level and how things are recording well with local conditions. we begin this process two weeks before w. we have already been getting a lot of information. the research staffs a string together reports. -- starts putting together report. what effect might the have? when they announced they might do 1 and 1/4 trillion dollars, it changes interest rates by 50 basis points. there is a ton of research that goes into that assessment. weenies before we go to washington. we bring information to washington for the to see it in accordance -- we as seen the boards in their analysis. it is

does this have an impact on the fomc's activities, first mr. bernanke and then mr. volcker? >> if we of the regulator of only the banks, we are thinking that is a bad idea. we need to see a broad financial system. we need to have the information about the broader economy and know what is going on across the country, not just in the great state of new york, for example. there is a close connection between the need for the federal reserve to look at banks of all sizes, and our regional structure. exactly why we have a regional structure -- we have policy makers from 12 regions to speak to local people, including local bankers, to get information about what is happening in their part of the country. but the regional structure of the federal reserve and the supervision of small and medium- sized banks, both of those things together provide us with information, qualitative the information, which cannot be obtained it nearly any other way. >> it's important to monetary policy to have the supervision of all the banks? >> also of financial stability, because we need to see what is h