Consider the until this year, the reasons why inflation was low are not hard to understand. Its a combination of slack in the labor market, declines in energy prices, and a strong dollar that pulled down import price inflation. So, whats important in determining inflation Going Forward is Inflation Expectations by some, by many, by some survey measures of professional forecasters, those have been rock solid. We do also look at household expectations, which have come down some. Marketbased measures of inflation compensation as we mentioned in the statement, they have declined and theyve been stable in recent months, but theyve declined to levels that are low by historical standards. That might suggest that Inflation Expectations have come down, but when cant get a clear read, there are risk premia built into inflation compensation that make it impossible to extract directly what exactly Inflation Expectations are. So you know, there is a miss this year. I cant say i can easily point to a sufficient set of factors that explain this year, why inflation has been this low. Ive mentioned a few idiosyncratic things but frankly the low inflation is more broadbased than idiosyncratic things. The fact that inflation is unusually low this year does not mean that thats going to continue. Remember, that in january and february, core inflation was running over a 12 month basis at around 1. 9 , and we look to be very close to 2 now. Weve had several months of data that have meaningfully pulled that down, and what we need to do is figure out whether or not the factors that have lowered inflation are likely to prove persistent, or theyre likely to prove transitory, and thats what were going to try to be determining on the basis of incoming data. And you asked me about the policy implications. Of course, if it if we determined, our view changed and instead of thinking that the factors holding inflation down were transitory, we came to the view that they would be persistent, it would require alteration in Monetary Policy to move inflation back up to 2 . And we would be committed to making that adjustment. Reporter hi, anne with reuters. I wanted to ask you, markets seem to be pricing in a shallower path of rate hikes than the fed does and the se p and wonder what do you think markets are missing here, and whats your conviction about, you know, that your view is the correct one on the gradual the haste that gradual means which seems to be a little bit faster than what markets are pricing . So, im not really going to try to explain what Market Participants are thinking. I think all of us, both market and fomc participants paths who have come down not in the last couple of quarters, but over the last several years, theres been a growing recognition, the socalled neutral Interest Rate consistent with the economy operating at maximum employment, that that rate seems to have come down, and most of the economic papers and research bearing on this topic suggest that its quite low. Market sep, the fomc participants, you can see by their estimates of the longerrun, normal rate of interest, this time it came down from the median came down from 3 to 2. 75 , so that shows that even in the long run, fomc participants, in light of incoming data, are adjusting their views. I would say they still believe that in real terms that neutral rate will be rising somewhat over the next few years. With a 2 inflation rate that will estimate in real terms amounts to 75 basis points, which is higher than the 0 or slightly positive rates now. So thats one factor that explains the path in the sep. Market participants may have lower estimates or believe that low neutral rate may be more persistent. Let me emphasize that as i said before, theres nothing set in stone about the policy paths that you see in the summary of projections, a great deal of uncertainty around them, not only is there disagreement, there is also uncertainty. And fomc participants have been revising their views over time, and they will continue to do so. Id also point out a couple of technical reasons why its difficult to compare what you see in the sep and market implied paths. One is fomc participants are writing down what they think is the most likely or modal outcome for rates, but, of course, there are downside risks, and the mean rate, if theyre asked to write that down, would take account of waiting all possible outcomes and likely would be lower than what participants are writing down as their most likely outcome. In addition, in markets, many economists have suggested that there are term premia that can affect moving from the socalled marked implied path from a view of what the future federal funds rate path is, and if the term premia are naked as many economists think they likely are, there is less difference in what you see in the fomc plot and the marked implied plot. Reporter thanks, jim with the l. A. Times. Chair yellen, your term expires as chair in february. Have you had chains to meet with or discuss your situation with President Trump yet, and if so, what were your impressions of him, and what hes looking for from the Federal Reserve . So i have said that i intend to serve out my term as chair, and that im really not going to comment on my intentions beyond that. I will say that i have not had a further meeting with President Trump. I met with him early in my term and not had a further meeting with him. Reporter adam shapiro, fox business. Chair yellen, a month ago you delivered a speech in wyoming which you said the balance of Research Suggests that the core reforms we have put in place have essentially boosted resilience without unduly limiting credit ability and growth. Two part question. First, what message do you Want Congress and President Trump to hear from that statement, and then regarding economic growth, the accommodative process that the fed has followed has helped bring us to full employment. Economists point out people who havent benefitted. 52 of americans on stock 48 dont. Theyve not participated in the gains in the stock market. Housing prices, the median house price at a record high, and 39 million americans according to a harvard study spend more than 30 are in housing. What would you say to those people about fed policies and the impact theyve had on their lives . Okay, so you asked what was the main message of my speech . And i would say its that we put in place since the financial crisis a set of core reforms that have strengthened the Financial System, and in my personal view, its important they remain in place, and those core reforms are more capital, Higher Quality capital, more liquidity especially in systemically important banking institutions. Stress testing and resolution plans, and those four prongs of improvements in banking supervision have really strengthened the Financial System and made it more resilient, and i believe they should stay in place. But i also tried to emphasize, and i believe that they have contributed to growth and availability of credit. Ive also tried to emphasize that all regulators should be attentive to undue regulatory burden, and look for ways to try to scale that back, and this is especially true after years in which we have implemented a large number of complex regulations, and we have been committed to doing that. I would point out particularly Community Banks, that are laboring under significant regulatory burden. We have been looking for ways to scale back burdens. One in the gripper process where, weve listened to concerns among Community Banks and are looking for ways, for example, to simplify capital standards and reduced burdens, and thats very important. More generally, we want to tailor, we want to and we would like to see congress as well. We can do things to appropriately tailor regulations to the risk posed by different kinds of banking organizations. There is some things that congress could also do to help that problems, and we have made some concrete suggestions, and some of the regulations that weve put in place with other regulators since the crisis, like the volcker rule are really quite complex, and were working, we believe we should, and were working with other regulators to try to see if we can find ways while carrying out what doddfrank intended that banking organizations not be involved in proprietary trading. Nevertheless, the implementation can be less complex. So that was that was my main message. Your second question asked about what impact the fed has had on Income Distribution because of the fact that stocks and homes tend to be disproportion at least. I would say look, we were faced with a huge recession that took an enormous toll in terms of depriving large numbers of people and disproportionately lower income people who are less advantaged in the labor markets found themselves without work. We had a 10 Unemployment Rate, and our congressional mandate is maximum employment and price stability. So we set Monetary Policy not with the view toward effecting the distribution of income, but pursuing the congressionally mandated goals, and i am pleased to see the Unemployment Rate and every other measure that i know of, pertaining that the labor markets show dramatic improvement over these years, and that is hugely important to the economic wellbeing, not at the top end of the wealth and Income Distribution, but to the bottom end of the Income Distribution, and we have seen this year Median Income in terms rise significantly with gains throughout the Income Distribution. Marty and heather . Reporter marty, associated press, madam chair, the next month with the departure of vice chair fisher, the fed is going to lose quorum. Do you have is that going to present operational challenges for you . Do you have contingency plans . Has the senate assured you that mr. Quarrels confirmation will be approved . And have they given you assurances that the pace of a nomination is going to pick up soon . First, let me say they will greatly miss vice chair fischer. Hes made enormous contributions to the fomc and to the broader work of the ffsh Federal Reserve and enjoyed working with him and appreciated his wise counsel and friendship. It is conceivable we will be down to three governors. I have full confidence that even if that happens, well be able to carry out our complement of responsibilities. There is every action that we are allowed to take under the Federal Reserve act can be taken even if we are a board of three, of three. Although, we will have to abide, as we always do, by the restrictions that are part of the government. I will welcome a full complement of colleagues. We have a lot of work to do, and it would be nice to distribute it over more people, but perhaps more important than that, i think its very important to have a broad range of views around the table as we deliberate on policy actions. Ive had very good interactions with randy quarrels and hope he will be confirmed. I look forward to working with him, and i hope that the administration will make other nominations to fill our slots. Reporter heather long from washington post. As you know, congress is considering a major tax reform package. Do you or any of the Committee Members have concerns if that package does not end up being deficit neutral and ends up adding to the debt . Would be that problematic for the economy . Look, thats something thats a matter for congress and the white house to decide. You know, ive put forward a few principles about fiscal policy they would reiterate that one of the problems that the American Economy suffers from along with many other economies around the globe is slow productivity growth, and i think it would be very desirable if fiscal package had the potential in it to create incentives that would raise productivity growth. We do face, in terms of longer term deficits, as the population ages in unsustainable debt path that will require i believe some adjustments to fiscal policy, and i Hope Congress will keep that in mind. But beyond a few core principles, its really i dont want to weigh in on details. Reporter Nancy Marshall again from marketplace. When you testified before Congress Last july, you said that you might be prepared to take Enforcement Actions against wells fargo, if it proved to be appropriate. Do you think its appropriate and what actions could you take . So let me say that i consider the behavior of wells fargo towards its customers to have been egregious and unacceptable. We take our supervision responsibilities of the company very seriously, and we we are attempting to understand what the root causes of those problems are and to address them, and i am not able to discuss confidential supervisory information and not yet able to tell you what actions we may take. I want to say were committed to taking the actions we regard as necessary and appropriate to make sure that the right set of controls are in place in that organization. Reporter can you give me any kind of a timeline . Were working very hard on it. Reporter hi, thank you, David Harrison with dow jones. Id like to follow up on the Balance Sheet question, if you may. What specifically it would take for you to reverse the decision to wind down the Balance Sheets and under what conditions would you consider adding to the Balance Sheet again . And separately, the followup to that, looking more broadly, how do you think history will judge the effectiveness of your asset purchases and the conditions under which that policy should be used . Thank you. So, starting with the last part of the question, i mean, my own judgment based on my experience and the Economic Research that has tried to estimate the effectiveness of our Balance Sheet actions, starting in 2008, and has also looked at the similar Balance Sheet actions in other parts of the the world including the euro area is that these actions were successful in making financial conditions more accommodative. And i believe in stimulating a faster recovery than we otherwise would have had. A recent fed working paper estimated that the full set of Balance Sheet actions that we took during the crisis may have lowered longterm Interest Rates by about 100 basis points. Obviously, there are different estimates around of what difference it made, but i would say that its effective. It will be up to future policymakers to decide in the event of the severe downturn, whether they think its appropriate to, again, resort to Balance Sheet, to adding assets to a Balance Sheet. I would say that if economists are correct, that were living in a world where at the level of neutral Interest Rates, not only in the united states, but round the world, is likely to be low in the future due to slow productivity growth and demographics. Now we dont know that that view will bear out to be correct, but it is a view that many people adhere to when there is evidence of it. Then future policy makers will be faced with the question of in the event of the severe downturn, where theyre not able to provide as much stimulus as they would ideally like by cutting overnight Interest Rates. What other actions are available to them, and during the crisis, we bought longer term assets and used forward guidance, and for my own part, i would want to keep those things in the tool kit as being available. It will be up to future policymakers to decide how to rank those or whether or not there might be other options that are available to them, but i dont think this issue will go away, although perhaps its only, well, you know, this being well be a decision that future policymakers will have to face in the event of a significant asset economic shock. I mean, you asked me what would it take for us to resume reinvestment, and i cant really say much more than we said in the guidance that we provided, which is that if there is a material deterioration in the economic outlook, and we thought we might be faced with the situation where we would need to substantially cut the federal funds rate and could be limited by the socalled zero lower bound, it is that type of determination that our committee is saying would mightily the lead us to resume reinvestment. So thats our committee has been unanimous in affirming this statement of intentions, so you know, i think thats where our committee stands. So that is a somewhat high bar to resume reinvestments and thats why in answering previous questions, id say, well, you know, if theres some small negative shock, our first tool, our most important and reliable tool will be the federal funds rate, but if there is a significant shock thats a material deterioration to the outlook, we would consider resuming reinvestments. Reporter hi, chair yellen, victoria with politico. Youve been on the Financial StabilityOversight Council for a few years now and wonder if you had thoughts whether the process whether systemically Financial Institution should be changed or improved in any way and somewhat separate but related question, the situation with equifax, i was wondering if there is anything related to that, that might raise systemic issues that you would need to sdmus. So, you asked first about the designation process. So during the time that ive been on the fsoc, only one firm, several firms were desnated before i participated. Met life was designated during the time i was there and seen how the designation process works. I do think designation is important. We saw during the financial crisis that nonsystemically important, nonbanking organizations like lehman and aig that distress produced broad, systemic consequences that were adverse for the u. S. Economy, and having the ability to designate firms when the fsoc makes the determination that their distress or failure could have systemic repercussions, i believe thats an important an important policy tool for fsoc to have available. Now its not meant to be a oneway street in the sense that a firm thats designated, the procedures require annual review. Firms may change Business Models or how they conduct their business, and we should welcome dedesignation of firms if Business Model has changed in a way that leads us to believe that their failure or distress would no longer be systemically important, and thes are decisions that we make every year. So im satisfied with that process. So far ge capital dramatically changed its Business Model and was dedesignated, and i believe its a process that works. So i know that the treasury is looking at this and may make recommendations and if they do, id be glad to consider them as part of the fsoc process. Its been important and basically working. You asked about equifax and, you know, of course, that is a very serious data breach. We would really urge consumers now to be very careful in monitoring their credit reports and financial situation and through our supervision, were working with the banks that we supervise to make sure that they take appropriate actions with respect to their business processes in light of the fact that there could be breaches or fraudulent transactions or information that they receive that they might use, for example, in credit determinations, could be contaminated by bad data, and more generally, i mean, it points to the importance of strong cybersecurity controls and attention to cybersecurity risks which we do see as one of the most significant risks to the Financial Sector and were very focused in our banking supervision in making sure that banks have appropriate controls in place and the equifax breach, i think, highlights the importance of that. Reporter Michael Mckie from Bloomberg Television and radio. We talked about what you want to do and what you may, do not necessarily why. With four rate increases behind you, financial conditions are looser than before you began, and im wondering if that bothers you, if youre concerned about overstimulating the economy, or if you feel inflation could break out much more quickly than we have seen . Or if you feel theres a Financial Stability question because stocks, bonds and real estate are all so expensive you in. How would you explain what the fed is doing, why the fed is doing it to the American People . First of all, let me say that the decisions that weve made this year about rates and today about our Balance Sheet are ones weve taken because we feel the u. S. Economy is performing well. Were working down our Balance Sheet because we feel thats stimulus that in some sense is no longer needed. So the basic message here is u. S. Economic performance has been good. The labor market has strengthened substantially. Every measure of the labor market, whether its the narrow Unemployment Rate, the broader Unemployment Rate, the number of people working in parttime jobs who want fulltime work. The level of job openings. The quick rate, the difficulty that firms are facing in hiring workers, the level of confidence we see in surveys about the labor market, all of that is pointing to vast and continuing improvement in the labor market, and we see sufficient strength in the economy in term of spending that growth with, its ups and downs, but never theless is Strong Enough, looks to be Strong Enough in the medium term to support ongoing improvement in the labor market, and all of that is good, and i think that the American People should feel the steps were taking to normalize Monetary Policy are ones that we feel are well justified, given the very substantial progress weve seen in the economy. Now, inflation is running below where we want it to be, and weve talked about that a lot during this last hour. This past year, not clear what the reasons are, i think its not been mysterious in the past, but one way or the other, weve had four or five years in which inflation is running below our 2 objective, and were also committed to achieving that. So the Monetary Policy path that we follow and the paths that my colleagues are writing down and our projections as ones they think will be appropriate given Economic Conditions are ones that we think are necessary to move inflation back up to 2 and to maintain a strong labor market on the sustainable basis. And in making these judgments about the path of policy, we have to balance various risks. One risk is that if we tighten policy too quickly, we may find out that although we dont think this now, that the inflation shortfall is something thats going to be persistent. And if we tighten too quickly, we could undermine inflation performance, leave it to a lower level Inflation Expectations could fall, and that could become engrained and that would be dangerous. So thats a reason to be cautious about raising Interest Rates when inflation is as low as it is. But on the other hand, we have a strong labor market and a low Unemployment Rate and although the pace of job gains is not quite as strong this year as, for example, as it was in 2016, were still averaging 175,000 jobs a month this year, which is quite a bit above the pace of 100 to 120,000, that would be consistent with stable Unemployment Rate if Labor Force Participation begins to move down in the manner we expect. So if we dont do anything to remove policy accommodation and the labor market tightens and continues to tighten, as you mentioned, arguably, i mean we could arguably financial conditions overall havent tightened that much. The economy could overheat, inflation could rise more quickly and above our objective, that is something that would occur with a lag, and that would force us later on on to tighten policy more rapidly than would be ideal and we could risk a recession if we did that. There are risks on both sides to the objectives and my colleagues and i, while constantly watching incoming data being open to revising our views on the outlook and revising our expectations about policy is the best way to manage that set of risks. Thank you. Liz well, fed chair janet yellen wraps up one of the most significant news conferences in at least two years. Markets are left wondering what she said, what does it mean . Take a look at the dow. This is stunning. Intraday showing so much uncertainty, it has crossed the unchanged line more than 232 times. And then just the past couple of minutes more than 11 times added onto that. No uncertainty with the u. S. Dollar bring on the dollar bulls. If we are to pick the biggest reaction to the news that starting next month the fed will unwind bloated crisis era Balance Sheet, the behavior of the green back, the bulls getting shoulder behind the dollar. This is the dollar index, almost instantaneously once she announced rates are Holding Steady between 1 and 1. 25 , but that the unwind would begin, thats bullish for our currency. The dollar had been bumping around 2 1 2year lows. If you show it against other currencies, spiking against the euro, spiking against the canadian dollar, and spiking against the yen. Only thing higher is the mexican peso. Stocks telling the world, we knew it was coming. Market is flat here. Dow up nine, the nasdaq down 12, s p down 1. The russell up 4. How would the fed siphon off more than a trillion dollars of treasuries and securities from the Balance Sheet and is the timing right . Well get to that in just a minute. We need to tell you that as she spoke, she answered questions, she did discuss something very important, that of course was the hurricane effect on the economies. She did make it very clear that in the shortterm between the next couple of quarters and possibly certainly the Third Quarter here, we might see shortterm moves due to hurricanes harvey and hurricanes irma, but what about Hurricane Maria . Its happening right now. Let me show you the radars at the moment, and you can see, look at this situation, it is trashing puerto rico right now. And we do have this rather stunning news that has been reported by officials on the island. The island has lost power. 100 of the island has lost power. Were going to get you an exact location of the hurricane in a minute. There was an interesting moment when it came to treasuries. The yield at 2. 8 at last check, that is a move to the upside. When the markets move higher, they like something, when treasury markets move higher, fear is leaving the market. Theres a bullish feeling things must be good enough if the fed is ready to unwind the bloated Balance Sheet which was so bloated due to crisis era moves to safety system. The question is, is now the right time to do that . Should the fed start unwinding Balance Sheet . We turn to experts who have had inside look at the fed. Former senior economist bill lee used to be the bigwig at citi, and paul kubiak, the Balance Sheet ballooned during the recession in the effort to stabilize the economy. Bill lee to you first, is that the right or wrong thing to to and is the timing correct . Janet yellen emphasized she wants to slowly wind down the Balance Sheet. To where . Where is the target level shes trying to shoot for . No framework, no theory, nothing to guide us. Liz wait, what do you mean no framework . They were pretty clear week can put up the chart. She would initially cap selling both treasuries and agency securities, capped to the end of the month and then start to i guess raise those caps ever single quarter, capping out at 50 billion per month in october of 2018. Isnt that a framework . But liz, telling you how fast theyre going to be reducing the Balance Sheet, not where. It tells you nothing about where the ultimate target is going to be. The best estimate is going to go down to 2 1 2 to 3 1 2 trillion because we need more reserves now than before the crisis because the fed changed operating system. The fed pays on on reserves, the Balance Sheet automatically becomes bigger. How much bigger. We have seat of the pants policy being made here, except the one thing we do know is what you said, its going to be really slow, and slow going where . Its an unguided missile but a very slow one. Liz so slow, paul, i was thinking its almost like going to be like claymation. This stop action where you stop and move gumbys hand and move pokeys hoofs, unbelievably slow so as to not spook the market. Is the timing right and too early, too late or just perfect . No need to do it now. Except that liz this is to paul, im so sorry. Sorry, paul. From my point of view, i think janet put it out on the line where she said, you know, if not now then when . Unemployment is low, mrgz is low, asset prices are strong, seems like the right time to start, and its a very gradual process. Liz its quite evident that through the entire news conference, and wed like to make it understandable for our viewers. The one thing that could throw them off their course this they stated today which is one more rate hike this year is inflation. Heres what janet yellen said, listen and well have you react. If you determined our view changed and instead of thinking that the factors holding inflation down were transitory, we came to the view that they would be persistent, it would require an alteration in Monetary Policy. Liz because we have such low inflation. Bill, its at about 1. 9 , 1. 4 and 1. 9 in the past couple of months. What does that tell us . No pricing power, we have tight labor market which she called pretty desirable. Im wondering does that worry you . Actually, given the numbers they gave us, theyre projecting the Unemployment Rate is 4. 1 for the next two years. Half a percentage point below the longrun wait. We should not be using that to measure tightness and i think thats the thing causing us to be surprised inflation is so low. There is other measures that janet yellen did mention about job openings, but the level of gross hiring hasnt kept up with the job openings, which means firms are like construction workers and specialty skill setters that are in short supply. Liz paul with, all due respect to the Federal Reserve. All of this liquidity, the bond purchases, bring us to a gdp for 2017 of just 2. 4 , but goes down. Median projection for gdp, gross domestic product, the output of all goods and services is 2. 1 . President trump wants 3 , is he going to get it or not . Not if you look at these numbers. Basically more of the say. Slow growth, low inflation, thats what the crystal ball of the fed says and all the people in the dot plots are seeing the next few years. So were not headed towards 3 if you believe their crystal ball. Liz paul, bill, thank you very much. Youve made it understandable for our viewers, and im not sure they want to understand it. Liz, if i were an investor, i would say invest more, asset prices and leverage sustained for quite a while. Liz great point and get to traders and look at market reaction. So the s p 500 which is a much better sense of how these types of news pieces are absorbed because its got 500 stocks dipped. After the Federal Reserve statement was released and once janet yellen began talking stocks recovered some of the losses. Right now down two point at the moment. The low of theed session for the s p was down fine. Financials, the best performing sector in the s p. Rising borrowing costs. We didnt get a rate hike but held steady and maybe might get one more this year, the banks are telegraphing that we will. And flipping over to the laggards. I showed you the 10year yield, spiking higher, the price goes down, utilities and consumer staple stocks falling the most when you look at all major sectors. To the floor show, traders at the new york stock exchange, cme group, bill lee said keep investing, nothings going to change, really. The market didnt move a whole lot as its prone do. If you are investor in stocks, keep staying the course, keep buying them, buy the financials could be the next sector that benefit if we get the rate hike. You got to find them and ride the trend. Liz ira, you sat through a million Federal Reserve conferences all the way back to im sure paul volcker you were aware and watching. Tell me what you got from this one. This is the most important in two years, ira . It is important, she wants to get back to a norm, shes clear with that. Went from 900 billion Balance Sheet, 4. 5 trillion, she wants to shrink it in the most gradual way. Its like making one of the ships out of paper. Putting it on the waterways out, there watching it gradually go down. Thats what youre going to be like do. Not look for this to be a market moving event. It isnt. But it is an event where the fed is setting a path and overtime thats the path theyre going to go down. Liz i mean the dow crosses the unchanged line 237 times, wait, yes, wait, no, were not sure, and there really is not much movement. We do have commodities moving at least in some direction here. We have crude oil moving higher. Gasoline higher than we were a year ago, she brought up that and said she expected that price spike, hurricane related, transitory, temporary word for temporary, to be a little higher. Tell me how you view the commodity market playing into what janet yellen said looking ahead. Its dollar reactionary. The dollar making a big move. Liz very big. Reflected mainly in the gold market, seeing big moves over the last month. Rallied from 1300, back around 1300. That all has to do with the fed expectations and the dollar. Right now the dollar is in control. Liz, the bigger question outside of this announcement were getting from the fed today is whos going to be holding that gavel in the spring of 2018 because youre losing the number one and the number two fed people over the next several months. It could be janet yellen bing the market with low volatility is underestimating the potential for where this market could go if it is perceived unfriendly face sitting at the fed. Liz weve got Charlie Gasparino working that angle. Hes going to come down in just a moment because she was very, very cold and even when it came to being asked that question about are you going to stay . And she said, well, well let you know what she said in just a minute. Charlie is parsing every single one of the words within what she said. Back to the Federal Reserves overall move. Fox business adam shapiro was in the room. Hes joining us from the Federal Reserve in washington, d. C. Adam, what jumped out at you during the entire news conference, thats what tends to grab Market Attention . One, concerned about inflation, you heard chair yellen sayas the beginning of the year up 1. 9 , now it will be up around 1. 4 , thats core inflation, that is troubling to the fed but pressing on with policies and we are expecting an Interest Rate increase in december, and then three rate increases next year, but other issue that jumped out was the fact we started the unwinding of the Balance Sheet will take four or five years, a long time if its uninterrupted. The key here is a lot of people, critics have pointed out not everyone has benefitted from Federal Reserve policy. Look, if you own stock, stocks gone up. If you own a house, the value of your house is back to where it was before the great recession, but 50 of americans dont own stock and more than a third of americans are spending 30 of incomes for housing. I asked janet yellen what she would say to those americans who havent benefitted from fed accommodative policy, heres what she said. We were faced with a huge recession that took an enormous toll in terms of depriving large numbers of people and disproportionately lower income people who were less advantaged in the labor market found themselves without work. We had a 10 Unemployment Rate, and our congressional mandate is maximum employment and price stability. So we set Monetary Policy not with the view toward effecting the distribution of income but pursuing those congressionally mandated goals. Reporter and it was those goals, full employment which were at right now, that some people could say, well, they put into place policies which made it easier to borrow money, to help fund an asset increase in equities, but not everyone benefitted from that, liz . Liz i would say this, that we better be careful. Inflation doesnt gently and moderately move higher. When it starts to move, it spikes and that could be a real danger i think. Ive heard smart Market Participants say, that adam, thank you very much. One of the big question us and just heard our traders bring it up was asked during todays press conference whether janet yellen will be back for a second term once her current one ends at the end of january of next year. Heres how she answered . So i have said that i intend to serve out my term as chair, and that im really not going to comment on my intentions beyond. That i will say i have not had a further meeting with President Trump. I met with him early in the term and not a further meeting with him. Liz todd colvin said that is a major question. So first explain us to what youre hearing and why it should matter to the retailer investor watching right now . Listen, if you i guess this is where i come out on this. If its between janet yellen and gary cohn to be the next fed chair, you have to think that either trump really is mad at gary cohn over his response, his response to trumps charlottesville remarks, or that, you know, my guess is he has to be really mad at him, he should have the job over janet yellen. A couple things struck me. She hasnt had a further meeting with trump, that marginally is a favorable sign for gary cohn. All regulators should be attentive to unregulatory burden, look for ways to scale that back. Everybody says. That heres the thing that caught my eye. Core post financial crisis regulations should remain. That is in direct contradiction of what donald trump campaigned on which is getting rid of many, many regulations including doddfrank. She seems to be staying still should be enforced, keep the tenets of doddfrank, mainly enforced by the fed. Gary cohn, from goldman sachs, wants to essentially relax a lot of doddfrank and change it, so if its between those two, you got to give the push to gary cohn, unless trump is so, so mad at him over what he said, and i heard he was really annoyed. And you in heres the third thing, maybe gives it to neither of them and puts it to someone like gary cohn, a guy named kevin warsh, now at stanford university. Full disclosure, friend of mine for years, his name is in the mix, could be the default candidate that trump pix because i just dont know how you keep yellen in there if shes defending post financial crisis reforms that donald trump said he wants to get rid of. Liz neither taking neither side on this one, we know President Trump is very interested in getting rid of regulations or not making new ones. For her to have brought up that, the proverbial nail in the coffin, but then we have four seats empty on the fed. Right. And by the way, id like to see who they put in the seats. It will be interesting. Back to Monetary Policy, what we dont know is gary cohn, kevin worsh, are they committed to unwinding the Balance Sheet faster than janet yellen. Do they want to do it faster . My guess is that trump loves easy money, hes going to unwind it. Shes on the page with him in terms of unwinding the balance seat. If you start unwinding it, you sell the securities you bought from the banks when you did quantitative easing, if you sell it out, there if you do it faster, its going to have depressive impact on Monetary Policy. Shes on him, shes with trump on the Balance Sheet side, i dont think shes with him on the regulatory side. Gary cohn is obviously with him on loosening up doddfrank which he ran on and probably on with the anybody that trump points is on with him on the Balance Sheet. Thats where we are nouchl the one thing thats safe to say, shes going to fill out term but not beyond that. Liz if gary cohn helps put together a tax reform plan that effectuates, that would be a big win for the president. Yeah, and maybe thats the ticket, right, to the fed chair. Liz charlie, thank you very much. We told you at the top of the hour this is a very uncertain market at the moment. The dow looking a bit more certain. Up 29 points although earlier i believe the high of the session was more like we hit the high of the session, right . Close to it. S p is flat as a pancake but either way, slightly higher. Youre looking at a record close for the dow and the s p. You need to stay with me. Coming up back up, much more, and your Hurricane Maria update. You need to know where it is. Stay tuned. Copd makes it hard to breathe. So to breathe better, i go with anoro. Go your own way copd tries to say, go this way. I say, ill go my own way with anoro. 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Under an hour, and you can too. Type in your business or idea. Pick your favourite design. Personalize it with beautiful images. And. Youre done and now business is booming. Harriet, its a double stitch not a cross stitch build a better website in under an hour. Free to try. No credit card required. Gocentral from godaddy. Im. Im so in love with you. Whatever you want to do. Is alright with me. Ooo baby lets. Lets stay together. Liz breaking news. We want to update you on exact location of Hurricane Maria. If you can see it right now, it has moved across part of puerto rico. It is west of san juan, just trashing that major city there. This is u. S. Territory. The storm heading northwest at approximately 12 miles per hour. By the way hurricane warnings officially in full effect for british and u. S. Virgin islands, turks and cakes coast, southeast bahamas and dominican republic. Lets bring in wart mccarthy, Jim Frischling to get to this right now. Ward, the fed says, okay, things are stable, were going to start unwinding this bloated Balance Sheet, but what could derail all the plans besides inflation . It would take a lot to derail the plans to shrink the Balance Sheet. Janet yellen tried to make that pretty clear. They want to start the Balance Sheet, unwind, put it on a shelf, let it happen. Now that distraction is out of the way. They want to get back to rate normalization. I think that is what they will do. For them to interrupt Balance Sheet normalization, you would have to have a major downturn in the economy, or a significant financial problem. Liz Jim Frischling, say you had those things, where are you assaulting money to protect you from that kind of issue . Sure. Actually i really believe that people left europe for dead, on or about brexit. If you look at valuations, they are about half, price to earnings valuations of some european etfs, half of that what were seeing in the u. S. Europe is not dead. I think people like germany, italy, spain are worth taking a look right now. Liz great to see both of you. Ward mccarthy, Jim Frischling in a jampacked hour with janet yellen saying were ready to get back to normal but boy it will be slow. We thank our jewish friends for the new year, rosh hashanah. Now we have countdown to the closing. David climbing in the final moments of trading to close yet at another new record. Seven in a row, folks. S p just turning positive. Melissa nice. David nice indeed. Not so for the nasdaq. Still well take two out of three. Im david asman. Melissa er were not pick at thisky. Im melissa francis. Here is what else were covering in the very busy hour ahead. Hurricane maria slamming puerto rico at a category 4 storm. Thousands in shelters as flash