Transcripts For FBC Markets Now 20130918

I am not sure that bernanke will discuss the topic. Looking at both fedex and General Mills. Fedex has been a great performer. They have done maintenance on the planes. That has also cut down on the prices. We are seeing General Mills under pressure while fedex is hitting new highs. Lori thank you, nicole. Adam we are just an hour away from the latest decision from the central bank. Lori will they, or wont they when it comes to tapering . Peter most of the Analysts Expect them to do a soft launch of its tapering. Probably dial it back right ten 20 billion a month or so. Make sure that markets and investors know that it will be future tapering and it will be data dependent. This may not be a slamdunk for the fed. Take a listen. With such a slew of moderately bad news, much weaker than they expected, you know, it does raise the question why start tapering now. I think the market has not really priced that in yet. Peter one of the other options could be not to start tapering now. I also want to mention the new Economic Forecast from the fed. We get it every quarter. We are going to start getting the numbers for 2016 projections. We are not expecting anything earth shattering out of those. These are the blue dots. We will get them for 2016 from the members. That will give them some idea on how members think they should start raising shortterm Interest Rates. Lori the markets really just discounted. The rates will rise again one day. Peter barnes, thank you. Adam after months of buildup and speculation, they are expected to announce tapering of purchases. What happens if they do not taper . I have to imagine, i read one article that said titanic if they do not start tapering. The markets would be in freak mode. Well, i think you are right. I think the market is really poised that they will start their engines. The economy is not gangbusters at the moment. They will eventually announce the taper, but kind of modulate the Forward Guidance. Adam what happens as they start revealing their predictions for this economy Going Forward . As peter just talked about, there could be hands of raised in the Interest Rates that they charge banks Going Forward. What will happen to our retirement account . Believe it or not, there are many reasons for the Federal Reserve to start raising Interest Rates. Today, what the Federal Reserve is doing is reacting. It is not because they are trying to slow the economy, they are reacting to the fact that they perceived the economy getting better. Adam some people say the economy is not getting better. You look at inflation. They have a target of about 2 . It is below that. Initially, over the next couple years, look at the market. Lets face it, the Unemployment Rate is coming down. You can have a debate on whether or not some of that is due to the inflation rates. The near fact is, we are seeing labor market improvement. We lost almost 9 million jobs during the financial crisis. We have created more than 6 million jobs. Those are the facts. Now may be a good time to actually get into the market. I think that this is a fairly good time to get into the market. We will not see the 13. 4 annual gains or even the 19 plus rates of return on the s p 500 forever. We certainly see that organic growth in the market, it is reasonable to expect every 12 months eight12 . We will see some positive contributions. I think this is a good time to get back into the market. Adam thank you very much. We will have chairman bernankes comments. Lori the long awaited apple operating system said to be available for download. Some of the biggest changes apple has ever made to its operating system. Apple has dramatically changed the look. The updated control centers one the best reviews. All it takes is a quick swipe. All of this on top of the many positive reviews. The 5s and the 5c due out friday. Up 6. 24. We have some news about black very. Blackberry unveiled a new smart phone. It will have a 5inch touch screen display. You can get it in malaysia. Lori lets go. [laughter] we are hearing that people are starting to get icons for that update right now. Did you hear this . Customers refrain from bringing firearms into his store. The presence of weapons in stores is unsettling for many customers. If you are packing heat, it usually it is covered. You do not really know unless you are a police officer. Adam nearing a possible Government Shutdown. Doing everything they can to delay obamacare. Lori elon musk in a race for a driverless car. Adam Charles Payne on how you should position yourself before the announcement in about one hour. vo you are a business pro. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrft. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Anbe a name and not a number . Tor scottrade. Ron im never alone with scottrade. I can always call or stop by my local office. Theyre nearby and ready to help. So when i have questions, i can talk to someone who knows exactly how i trade. Because i dont trade like everybody. I trade like me. Thats why im with scottrade. Announcer scottrade proud to be ranked best overall client experience. See who does good work and compare costs. It doesnt usually work that way with health care. But with unitedhealthcare, him. Adam and investors are placing their last that before any decision from the fed. How are commodities doing . Sandra smith has todays trade. Sandra we are watching commodities. We are watching currencies. This is all in play right now. Basically, they are watching a very large contingent of traders. The tapering will actually be on the higher end of estimates. As i talk to people down here, this market may be setting itself up for a big surprise. We are watching the u. S. Dollar ahead of this. Right now, it is down on the day. Trading at its lowest level in about five weeks. The euro, watching that specifically, at a two week high today against the u. S. Morgan stanley is buried polish on the euro. Volatility is here for now. Gold prices right now hitting a sixweek low. Gold has been lowered based on the fact that the fed will reduce their Bond Buying Program. Oil prices up on a end up report. We have fallen significantly. We are getting a lot of movement in the bond market. The yield is up online for the first time. Adam you talk about excitement. We are waiting for it. Lori lets check in with Nicole Petallides. She is watching electronic arts. Nicole looking at it very closely. We know that the former ceo was ousted. Now they are tapping and insider to take over. He is andrew wilson. He will be the next chief executive. Down 3. 4 at the moment. Lori thank you. Adam tesla is jumping into the race. The electric carmaker expects to create a car that can handle 90 of the driving within three years. This is not speculation. The projects timeline is more ambitious than the rivals. Google has been working on an automated car for a few years. Lori who will really want to even driving, it is one of your favorite things to do. Do you think that this will take off. Adam absolutely. I do not think that people will stop texting while they drive. I think that that will win out. Lori the dueling words as white house tells agencies to prepare for a shutdown. Adam walgreens is making sweeping changes to how it provides Health Insurance to its employees starting next year. Well oracle ceo we will explain. [ engine revs, tires squeal ] [ male announcer ] since we began, mercedesbenz has pioneered many breakthroughs. Breakthroughs in design. Breakthroughs in safety. In engineering. And technology. And now our latest creation breaks one more barrier. Introducing the cla. Starting at 29,900. Ten minutes past the hour. The investigation into this deadly shooting rampage at the Washington Navy yard continues as the pentagon continues. The shooter reportedly obtained his security clearance when he enlisted in the reserves in 2011. Rescuers and colorado are turning their attention to finding the hundreds of people still missing after last weeks flooding. Less than 600 remain unaccounted for. State officials report six flood related deaths. Some good news in georgia. Police have confirmed that perez has been found alive and taken to a local hospital. The girl was kidnapped during a Home Invasion early yesterday morning. Back to lori and adam. Lori thank you. Walgreens making changes because of the healthcare law. They say they will drop coverage for roughly 160,000 employees. Walgreens is just the latest to join the list of u. S. Employers making the switch to private insurance exchange. Adam president obama trying to drum up support from business leaders. Rich edson is in washington, d. C. With more. Rich he is warning republicans. That is exactly what republicans are doing. The Government Shutdown is less than three weeks away. You have never seen the debt ceiling or the threat of not raising the debt ceiling being used to extort a president or a governing party. For decades congresses and president s have used the debt limit for legislation to cut spending. Even president obama worked with us two years ago in the debt limit negotiations. Rich republicans say they will detach a defunding to the bill. Republicans say they can probably pass out from the house in the next few days. They presented their conference with the policy options. As for the president , the Administration Says it refuses to negotiate over the debt ceiling. Adam has anyone week . Rich you hear time and time again that there still is the same threat from the administration behind the scenes as they are making in public. Adam thank you. Lori Larry Ellison has a pretty busy day ahead of himself. They will have to decide where the allegiance really lies. It is due to start in just about 15 minutes. After the Quarterly Earnings call. Oracle is expected to report revenue of 8. 4 billion. They are probably easier targets. They must win six of the seven remaining races. Adam here is a quick look at the Software Update hitting iphones and ipads across the country. The biggest change to ios since the iphone. Lori pretty good reviews so far. Adam higher Mortgage Rates not scaring homebuilders. Lori will the fed continue doing its part . Adam at 2 30 p. M. New york time, we will hear from mr. Bernanke himself. We will carry that live for you as he takes questions. My mantra . Trust your instincts to make the call. 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Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar adam time to head back to the floor of the New York Stock Exchange and check your investments. Nicole petallides is watching homebuilders. Nicole . A lot of news here in this sector. Start off with what were seeing in the Housing Starts. New Home Construction actually picked up in august, 0. 9 . And that basically shows that theres gains and theres demand for the sector despite recent signs of softening . We also talked about Mortgage Applications in the latest week. Those are on the rise up over 11 . Majority of homebuilders are pulling back. Some of the others such as pulte group and Lennar Hovnanian have down arrows. Everybody is waiting on the fed. Overall as well we know that Mortgage Rates are so closely tied to our 10year rate. Back to you. Lori great, nicole, thank you. As we heard Housing Starts falling short of expectations during august. And with the Housing Market still needing a boost my next guest suggests that the fed will likely announce a minimal taper today but will only reduce its purchases of treasury bond purchases, not those mortgagebacked assets. Phillip swagel, former assistant deputy of treasury and economist at American Enterprise institute. So good to have you with us. Thank you. Lori it popped some today, correct . I had it did after the fed started talking about the taper Mortgage Rates popped up. There was Research Presented at the jack hon sole conference this august was the purchases were most detecteffective part of the qe3. In a sense the fed would create uncertainty if they didnt do a small taper so i think they have to go ahead and do it. Lori let me ask you how the Housing Market. We got the Housing Starts data for august, up from july but lower than expectations. So are you, i really want you to zero in on how the fed with its Monetary Policy has propped up the Housing Market and how much more need to be done if at all . Yeah. The fed has done a huge amount and actually has been the bang part of the qe1, 2 and 3 is housing with low rates. As you said Interest Rates have popped up. Weve seen refinancings have drop off suddenly and probably home sales have been eaffected. Housing market is recovery. Home sales are up, construction is up. There will continue but definitely theres an impact what is happening with Interest Rates. Lori so the impact of this extraordinary easy Monetary Policy will continue to help heal the Housing Market. But overall, would you still describe our overall Monetary Policy, ben bernanke fed, as providing easy money to the system . Oh absolutely. I would put that in all capital letters, easy money, in all caps. With the taper, it will be a small taper i suspect at the same time the fed will find a way to strengthen its Forward Guidance and tell Market Participants that easy money is here to stay for a long time. As you said the data have been very mixed. Housing data occasionally disappointing. Industrial production, inflation weak. So inflation low, that is. So the fed will find a way to say we are slowly tapering but this is not the end of easy money. Were continuing with our policy. Lori phillip, of course well get the Economic Forecast as well with the fed event this afternoon. For the first time well get a peek what the fed thinks will happen in 2016. What do you they have the overnight Bank Lending Rate which has been near zero to this point . Markets expect that to start to rise beginning of 2015. I think the fed will try to push that back. I think data has been weaker than the fed previous forecast. The fed has to find a way to mark down their forecasts and say we think the economy will still need monetary support into 2015 and maybe into 2016. With the goal of reversing some of the Interest Rate damage caused by the feds discussions this summer. Lori phillip swagel, thank you for helping us set up ahead of the fed this afternoon. Well see you again very soon. Ill look forward. Thank you. Lori so we are just less than 30 minutes away from the fed decision and chairman Ben Bernankes comments to the press. Keep it right here on fox business for complete coverage. Now, when the hottest thing on the exchanges are the exchanges themselves. Lori one way to put it. Adam yes it is. Charlie gasparino will be here with the latest. Exclusive details about the possible nysenasdaq mergeer. Look at some of the biggest winners and losers on the Dow Jones Industrial average. The index is still up 36 points right now. Off 36 points right now. 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Cracker barrel samestore sales rose 2. 6 . The Restaurant Operator reported a profit of 34. 3 million, down from 34. 7 million yearoveryear. Cracker barrel warned that current profit will be lower than analyst estimates due to higher commodities costs of the thats latest from the fox business network, giving you the power to prosper. Adam so a merger brewing on wall street and this time it looks like it may be the exchanges themselves. Fox business Senior Correspondent Charlie Gasparino is here with exclusive details what would be a blockbuster story. Before we set oaf headlines and stories flying before im saying there are merger talks with New York Stock Exchange and nasdaq, theres not. There is lot of things going on in the exchange business. Ive been talking people with both nasdaq and New York Stock Exchange and these are senior people, im asking right now is this thing, out of merging the stock business of the New York Stock Exchange and the nasdaq stock business, is that something that cant be done, that people would be against . What was surprising, based on my conversations with these senior people, they believe it is going to happen at some point. They believe first off that the New York Stock Exchange is, the new ceo is now owned by the ice, Jeff Sprecher, always miss pronounce his name, who started Intercontinental Exchange which is essentially a computerized derivative excake exchange he does not like the stock business of New York Stock Exchange, the thing we talk bull at time. What he wants they have a derivative portion of that. That is what he is really looking for. People inside the New York Stock Exchange believe at some point he will spin that out. Thats when it becomes an issue of can the New York Stock Exchange merge with the nasdaq to create a bigger exchange and i think, you know, people are telling me, i tweeted this on my twitter page, i got emails from people saying sounds absurd, antitrust issues, this is a different environment. Were talking about there are many exchanges out there. Bats and direct edge controls much more stock trading business or more stock trading business than the nasdaq. We have other exchanges in the world. This is a global market. And ill tell you, i dont think the New York Stock Exchange or the nasdaq is, in the future, five years from now, it will be very difficult for those things to compete independently if sprecher sells it off and nasdaq stays independent. There will be Competitive Pressures for them to merge. Thats what were hering from these people in both those exchanges. Now a couple things have to happen for this to happen. Again you need regulators to give an okay. As you know, when bob greifeld of nasdaq proposed a tender hostile bid for the New York Stock Exchange couple years ago the regulators shot it down at some point. Will that change under Mary Jo White who now runs the sec, or the people in the Justice Departments Antitrust Division . That would have to change. And number two, Jeff Sprecher would have to spin off the New York Stock Exchange from the current composition of ice. But ill tell you, both of those are not insurmountable based on what i know. Sprecher, listen, he will go on tv, if he does some tv, doesnt do a lot of tv, say he wants to keep that business. Nobody inside that place believes he wants to keep that business. Were talking about stock business were talking about listings and trading, matching of buyers and sellers. You know, so thats why this thing has a shot. Regulators come and go. There is Obama Administration justice department. Maybe theyre stricter on antitrust or a republican or different type of democrat. But those are not insurmountable odds. Thats why what is fascinating here you got people talking inside both of those companies about those two mergers, quite simply, quite frankly, it will be very hard for either of them if sprecher spins it off or nasdaq stays independent for them to compete in this market. Lori with regard to all the trading glitches weve seen recently, is there a line of thinking streamlining consolidating these exchanges would alleviate that problem . That is definitely true. I dont know if that is the thinking behind it this is much more driven by competitors. That is true. Going through data feeds to put a price you have to jump through a lot of hoops. We have many different markets both of these exchanges are taking price information from. This is convoluted system we have since rule nms, National Market system was created back in 2005. You have the spawning of all these dark pools and all this other stuff. Lori sound like a horror movie. It does. Dark pools. Some are not really that bad but they are places you can send trades that dont necessarily, they dont have transparency of these other places and they create markets and create some price discovery. It gets very difficult to sort of feed that information into the information that the New York Stock Exchange and nasdaq have to adam youre writing about this we can read about this online . Are you trying to get me to wrap a story . Telling you to wrap it. What does it mean to companies that become public in the future. We dont have time to talk. One place but probably New York Stock Exchange. Adam well pick up the discussion again because it could be potentially were way ahead of this thing. Im throwing it out there. People at both exchanges are talking about this right now. Lori Charlie Gasparino, thank you. Adam thank you, charlie. Gold is falling to the lowest level in six weeks today on bets that the fed will reduce stimulus. With under 20 minutes until the fomc decision is released, fox business contributors phil flynn is in the pit of cme group. Hi, phil. Thank you very much. I dont know if im looking at gold or Interest Rate futures that is the way the goldmarkket has been acting. If there was one market other than Interest Rate futures really fearful of the fed the goldmarkket really has been it. Right best big fed announcement today, will they taper, how much will it be . Gold futures dipped below 1300 an ounce but it didnt stay there very long. A lot of people think perhaps this fed meeting could be the bottom. If the fed, if we price in all the tapering already maybe weve already made our move. Some traders are looking for a big rebound. The other big rebound in the Metals Department is copper. Copper had a big rebound. It too was hurt by taper fears. But that created very, very strong demand. Big talk of chinese orders into the Copper Market brought us back up. How about that oil . Oil is one of the markets that really didnt get impacted by the tapering. They were more focused about what was happening on the geopolitical front. So today if any market in the commodities will really move big on tapering, take a look at oil because it really hasnt had time to think about tapers. It has been focused on world war iii. Adam phil flynn, well leave it at that im giving laws word. Thank you very much. From commodities to stocks keith bliss joins us from the floor of the New York Stock Exchange. Keith, you just heard phil flynn reporting there. Hi, keith. So if you believe that the stock market has figured in the taper already, could this be the bottom and could we see a rebound ahead for the rest of the session and beyond . Yeah, we could, absolutely. I think what well see in 15 minutes time or so, what will be the complexion of the announcement is. If it is right in line with a 10 or 20 billiondollars pullback which what everybody expects and the mix of pullback, mortgages or treasurys. I think they will pull back on the treasury side. Theyre still concerned about the nascent recovery with the recovery and dont want to mess with the mortgages too much. Were catching some big momentum that got built into the market over last several months. Our expectation the market will chase the alltime highs in next couple weeks or so. Lori Charlie Gasparino was in here reporting on some talk about a merger, nyse, nasdaq. We know the Exchange Industry consolidation has been the climate of date. Anything you can contribute, keith, any talk on the floor of sentiment, competitive atmosphere of trading right now . When you work on the floor of the New York Stock Exchange even though we dont work for the New York Stock Exchange we do have a vested interest. There is always healthy competition between the two. I think you will have to see consolidation inside of the Exchange Industry. In very few short years weve gone to 13 authorized exchanges in the u. S. And 45, 50 different venues where you can trade equities in the u. S. It is too many frankly and led to fragmentation for market bad for both institutional and retail investors. Whether they hook up together will be anybodys guess. Im sure antitrust lawyers will have something to say because of combined market share that entity would have. Well see. I expect to see more consolidation in the market in the coming months. Lori appreciate your insight as always. Keith bliss,. My pleasure. Adam we have breaking news. At t chairman and ceo Randall Stevenson has been named the chairman of the business roundtable. He will replace boeings president and chairman, Jim Mcinerney who held the position since sent 2011. That move effective january 1st. Stevenson will serve a twoyear term. Early today the president spoke to the roundtable after the roundtable released its quarterly ceo survey which found a slight decrease in expectations for Economic Growth in the next few months. Lori decrease from what . Were barely at a good level. Adam thats the problem, right . Lori investors wait to see if the Federal Reserve will ease back on the throttle of monthly bond purchases. First last minute advice from our own Charles Payne. How he says you should play todays fed decision. Thats coming up next. This man is about to be the millionth customer. Would you mind if i go ahead of you . Instead we had someone go ahead of him and win fiy thousand dollars. Congratulations you are our one millionth customer. Nobody likes to miss out. Thats why ally treats all their customers the same. Whether youre the first or the millionth. If your bank doesnt think youre special anymore, you need an ally. Ally bank. Your money needs an ally. [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All onhinkorswim from td ameritrade. Adam were minutes away from the Federal Reserve decision on what a lot of people are calling the most important meeting of fomc in recent history of markets. Gold is slipping as well. Falling to the lowest level in six weeks while crude is climbing after bigger than expected decline in inventories. Charles payne joining us now. What do you expect . You said they could throw a wrench into all this. Looks like ben bernanke made wall street a promise. Despite the fact we always hear, listen, the wall street loves moneyprinting they would like to sigh so many some form of tapering. Zero to 10 or 15 billion would be acceptable. Chump change. Chump change. Lori it really is though because were talking about extraordinary stimulus measures to prop up the market and economy. Right. Im one of these guys who says the real anxiety should come when they start to hike rates. This is reversal of course. I feel like the tail wagged the dog too much in the whole saga. I think wall street has too much influence over the Federal Reserve. Adam every headline is tapering but seems bigger issue will be hints to outlook of 011 raising overnight rate or 2015, right. Absolutely. That will be lost initially in the sauce and then well look at it. You wonder if they adjust their parameters to the new normal. Certainly hard to say, to take a victory lap when were creating 150,000 jobs and nine Million People dropped out of the workforce and real wages are going down. Kind of hard to say, mission accomplished. Lori why not rip off the bandaid . You may roil the markets a little bit. What do we have to lose at this point . Philosophy. You go completely counter to what ben bernanke believes. He studied the great depression. He thinks ripping the bandaid off too soon exacerbated it. Could this be some sort after mea culpa, we have a few more arrows of the quiver but what weve done now is hasnt worked and risks outweigh rewards. That is another way to interpret it. Adam on that we will leave it. Charles, thanks. Thanks a lot. Lori this is probably the most important Federal Reserve statement coming at us in just a couple minutes. Most important i should say in couple of months at least. Tracy byrnes and Ashley Webster take you through it plus all Market Reaction next on fox business. Dont go anywhere. No two people have the same financial goals. Pnc investments works with you to understand yours and helps plan for your retirement. Talk to a pnc investments Financial Advisor today. Tracy welcome back. Im tracy byrnes. Ashley the county down is almost there. Im Ashley Webster. It is the moment wall street has been waiting for for months it seems. Will the fed start tapering its bond buying today or signal changes to come . Were moments away from finding out right at top of the hour. Chairman bernanke meets the press at 2 30 eastern answering reporters question about the fed policy and outlook. Lets check the markets ahead of the fed decision, coming up in about 2 1 2 minutes now. As you can see, the dow, nasdaq, s p all moving lower. Oil is ticking up just slightly and gold too though essentially flat on the day. Tracy were keep watching all that for you. We have an allstar panel to guide us through the much awaited fed decision. Doug cote chief Market Strategist at ing, scott brown, chief economist at raymond james, anthony valari, Lpl Financial and former fed economist steve oler in, now at aei all with us, along with our fine friend, Nicole Petallides on floor of the New York Stock Exchange and sandra smith out at the pits of the cme. So we have got it covered from all angles. Nicole, lets head to you first. I know we heard earlier the volume was very, very light. The market is basically wait and see. I think i heard keith bliss earlier today even if we get a taper call it will probably not move at all. Look everybody is expecting a some sort of a taper call, 10, 15 billion on the 80 billion Asset Purchase Program. If they do that how do they break it down . This is what traders are looking very closely at. Will they taper treasurys and less so for mortgagebacked securities in order to keep those Interest Rates under, obviously not by 3 . Dont forget when we started this year, Interest Rates were 1. 8 . They went up to 3 . That may be one avenue they may be discussing. In addition to will they do it on a, you know, every, versus, just one big thing. Ashley exactly. May run out of time here but lets go around the panel. How much will the fed cut . Doug cote, how much . 20 billion. Ashley 20 billion for doug. Scott brown . 10 billion off of treasurys. Ashley were making notes of these. Tracy writing this down. I got it. Ashley anthony valari . 15 billion. 10 in treasurys, five in mortgagebacked securities. Ashley interesting. Steven, what do you say, steven . I think 10 billion all in treasurys. Ashley all right. Very interesting. Thank you, gentlemen. Tracy that will be the interesting point of it too, right, ash, the breakdown of this number. Ashley there are those that say they will not touch the mbs, the mortgage side of things, just look at treasurys. Well have to find out. Average median is 10 billion. Could the fed throw a wrench in it and say i dont think the economy is Strong Enough. I dont think that will happen, will you . Tracy they called a 7th. Ashley get out to peter barnes with what the fed has to say. No taper. No taper. The fed is worried about the recent rise in Interest Rates and the fiscal battles in washington and how think could slow Economic Growth. The fed has decided not to taper. Let me get to the key lines in the policy statement. Quote, the Committee Sees the Downside Risks to the outlook for the economy and the labor market has having diminished on net since last fall but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market. Taking into account the extent of federal fiscal retrenchment, the Committee Sees improvement in Economic Activity and labor Market Conditions since it began its Asset Purchase Program a year ago as consistent with growing underlying strength in the broader economy, however the committee decided to wait more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the fomc decided to continue purchasing additional mortgagebacked securities at the current pace of 40 billion per month and longer term treasury securities at a pace of 45 billion a month. Lets go now to the important economic analysis. Quote, information received since the federal open Market Committee met in july suggests that Economic Activity has been expanding at a moderate pace. Some indicators of labor Market Conditions have shown further improvement in recent months but the Unemployment Rate remains elevated. Household spending and business fixed investment advanced and the housing sector has been strengthening but Mortgage Rates have risen further and fiscal policy is restraining Economic Growth. Apart from fluctuations due to changes in Energy Prices inflation has been running below the committees longer run objective but longer term Inflation Expectations are stable. Well skip redundant language from the last statement. The fed of course did decide to keep federal funds rates at zero to a quarter percent. Let me go right to the vote. It was 91, with Esther George of the kansas city fed, a hawk, again voting against this. She was concerned that the continued high level of monetary accommodation increased the risks of the future economic and financial imbalance and over time could cause an increase in longer term Inflation Expectations. Now lets scoot over to the new economic projection. A slight downgrade in the projects. Let projections. Lets start first with gdp growth projection. In june the last forecast, when the last forecast was released the fed was expecting 2 1 2 in gdp growth for 2013. Now it is expecting 2. 2. Kind of catching up here with the, with the private Sector Economists and actual numbers. It does see growth getting to 3 in 2014 and above that in 2015 and 2016. On the Unemployment Rate, it has reduced that slightly. It expects unemployment, it was in june 7. 3 was the projection. Now it is 7. 2 . It sees it getting to below 6 by 2016. On inflation, it sees it well under its objective, its 2 target. 1. 2 in 2013. 1. 6 in 2014. 1. 8 in 2015. And 1. 9 in 2016. We also want to look at the guidance on how these fed members think, when they think it will be appropriate to start raising the shortterm fed funds rate. That is a new tool the last couple years. Not much change from the june statement right now. Three expect tightening to begin in 2014. 12 expect it in 2015. That remains the majority. Time period, 2015 and two in 2016. But were also betting what level of shortterm rates they are expecting here from these little blue dots on this chart. They see fed fund around, clustering around 1 in 2015 and around 2, to 2. 5 in 2011. Guys back to you. Tracy peter, stay with us please because we need to bring in our panel for this reaction. I have to think many of you were very surprised. Doug cote out in stand ford, i will throw to you first. You were looking for a 20 billiondollar reduction and you got nothing. That is like a bad christmas, sir. What do you think . To put it lightly i believe its a negative surprise for the market. You had the good. Gdp upgrading their forecasts for Economic Growth. So did europe. So did japan and they also upgraded language from modest to moderate. So i dont get it. There is also the bad side, imbalances theyre talking about in asia, india, indonesia. I believe that currency crisis is quantitative easinginduced. To me, negative surprise to put it lightly. Ashley yeah. Scott brown, youre, you were expecting somewhere around a 10 billiondollars cut in the bond purchases. How surprised are you . I guess this is a statement on the economy and its very slow recovery. Well, this was, i think intended to be a call though the general thinking was they were going to start tapering. That was majority opinion of, of Market Participants. But all theyre really doing here is just postponing the tapering. The best argument for tapering it has to start sometime and i think the thinking was that if they took a baby step here that would be a good initial step with a promise to wait and see and sort of do it very gradual tapering. That is still the case. Well push it out now. I think it is very unlikely they move in october. Now you look at december as being likely start of a tapering. Tracy steven, you were a former fed economist. You know, what does this do to the credibility of the whole Federal Reserve right now . Everyone going in thinking they cant back out. They have thrown way too many darts out there, way too many hints saying they were going to do this and now they didnt. You can tell the market is a little confused. It is up, pulling back a little bit. It doesnt know what to think. Right. I dont think this will be a hit on the feds credibility at all. I think this is a smart move even though this is not what i expected they would do. If i would have been an fomc member today this is what i would have done. Theyre right to highlight there are a lot of riskses in the environment. Interest rates moved up a lot. And weve seen slowing in the Housing Market. We know international risks are out there as well. Ashley anthony, your reaction. You called for a 15 billiondollar cut if i remember correctly, 10 billion on the treasurys. Five billion on mbs you must be a little surprised . I am a little surprised. I thought this fomc meeting was about as much as bernankes legacy to restore more about a normal economy but clearly he is worried about the economy. If youre a bond investor this is sure sign the fed doesnt want rates to go high and another sign the selloff is over. As far as the rate projection for 2016 i think that was key hurdle for the bond market. 2, 2 1 2 fed funds was largely what the bond market expected. Muted reaction but still a positive one for bonds. Ashley should we bring in the market folks now . What do you think. Go to Nicole Petallides, if youre standing by. Tracy pointed out. The market shot up and came back down and now it is kind of up 77 points. It certainly reacted. These are like the most exciting days on wall street. These are the types of days where you dont get what you expected. Most people expected that 10 to 15 billion in tapering. Instead they got a different picture. In this case, equities took off, the dollar pulled back. The 10year now at 2. 75 . It really is very interesting to see this. The other thing that i think is noteworthy within this statement which we listened to very carefully, once again, talking about fiscal policy. And that is certainly been restricting growth and restraining growth. And that is so key. It is basically ben bernanke and the fed saying look were doing all we can with Monetary Policy but we need our government to really moving average along with us, fiscal policy. Tracy sandra, weve got a gold chart up now. Holy toledo. It has shot up, news that, you know what . Money will keep coming. Good ol dollar i guess . Im not sure who just said there was a muted reaction to this announcement. But they were intensely rung. Trade something going nuts here on the floor. Not only the s p 500 on this announcement spiked up and hit its highest intraday level ever. You have gold prices squared up ahead of the report. They have shot up. Theyre up 37. They were down on the session before this announcement. The vix had been flat. It is down now nearly a full percent. Oil prices had topped over 2 gain on the session, guys. Weve got a market that is severely reacting to this. I got to tell you something, i will give props to the guys in the fed funds futures pit i reported last hour i went into the pit they said to me there was growing contention of many of their counterparts that said that we were going it see no action from the fed. Ashley they were right. We reported that. That was starting to be the word down here on the floor and that certainly came to fruition, guys. Ashley sandra, i wanted to mention oil. The dollar birthe way dropping to a sevenmonthmonth low agaie euro. Were seeing oil pick up as well. Up nearly a buck 80 a barrel now. Yeah. This is a lot of pinned on the dollar move. If you look at dollar prices you saw them at 3 1 2 week lows before this report. Were seeing lowest level for the u. S. Dollar in five weeks. Remember the relationship there, guys. If the fed is will to provide stimulus for market continue to print money, continue the Bond Buying Program that devalues our currency against world currencies. You get a weaker u. S. Dollar, makes all the commodities, gold, oil, cheaper for the foreign buyers and pushes prices up. Tracy two very different worlds and two very different reactions. Well go to d. C. Real quick. Peter barnes is getting ready to take a seat at the News Conference. Why dont you chime in before you go . Well have to listen very carefully to what ben bernanke has to say in his statement the here because remember in the june meeting he was deputized by the fomc to go out and try to explain the, the policy path forward. We did not get a timeline on tapering or any of these other issues in the actual statement itself. So i expect that they will once again deputize chairman bernanke to come out and try to explain all this and we will be very, want to listen very intently whether or not he sticks with this kind of, were going to start tapering in the fall and finish up qe by the middle of next year. If we get around 7 unemployment. Well see if he makes any changes in that path forward. Ashley peter, thank you very much. You head off to the News Conference. As you say we will be very interested to see what the fed chairman, mr. Bernanke has to say. He will meet with the press, just about what, 19 minutes or thereabouts. By the way, the market now taking off again. The dow is up 121. The s p getting close to record highs, if not touching them. Of course it is great for wall street but when will main street catch up . That is the conundrum that the fed is facing right now. Well have ongoing Market Reaction to the fed statement and the projections next. Dont go anywhere. Its a wild day here on the markets. Well be right back. [ male announcer ] imagine this cute blob is metamucil. And this park is the inside of your body. See, the special psyllium fir in metamucil actually gels to trap some carbs to help maintain hethy blood sugar levels. Metamucil. 3 amazing benefits in 1 super fiber. From capital one. Boris earns unlimited rewards for his Small Business. Can i get the smith contract, ease . Thank you. Thats three new paper shredders. [ boris ] put em on my spark card. [ garth ] boris Small Business earns 2 cash back on every pchase every day. Great businesses deserve unlimited rewards. Read back the chickens testimony, please. Buk, buk, bukka [ male announcer ] get the spark Business Card from capital one and earn unlimited rewards. Choose 2 cash back or double miles on every purchase every day. Told you id get half. Whats in your walle tracy all right. We have some breaking news. You just heard it here. The fed decided not to taper after all. The market is pretty happy right now up about 100 points. Peter barnes reported it was 91 voters Esther George being one dissenter as we knew. Your dow up 103 points. Nasdaq, s p, ashley noted hitting a record high, getting up there. Oil up about 2. Gold big winner, theyre very happy. Gold up, oil was up as well. Peter barnes has taken his seat. Federal reserve chairman ben bernanke will hold his News Conference in four minutes now. Ashley 14 minutes. Tracy excuse me. There goes my math. Ashley new jersey math. Tracy theres that. Well get more reaction to that well check on the bond market right now. Your 10year right now, well show that to you in about a second. Do you see it . Ashley i dont but it dropped below. I can say the 10year tracy 2. 76. Down eight basis points. It was 2. 75 a second ago. The 30year as well, can we put that up, you guys . Ashley there you go. Tracy down to 3. 79 . Lets get back to our allstar panel, doug cote, chief Market Strategist at ing investment management. Scott brown, chief economist, raymond james. Anthony valari i have to note is this san diego, nicest lace place of all our guests, fixed income strategist at lpl. And stephen olinner. Lets go to scott first. The scott, the Economic Data, still not so great but certainly getting better. Do you think this was a proper rationale to just wait and see yet again . At this point we could be waiting and seeing for months . Well, you know, we are definitely still on the recovery path. Its not especially strong but i dont think that was ever going to be expected given the magnitude what we went through. The thing that noticed about the fed summary of Economic Projections is that they pushed the forecast for 2014 gdp a bit lower. There may be more of a concern about the pace of recovery and idea that the economy needs a bit more support in the near term. Ashley lets bring in doug cote. Doug, you know what . Part of the expectations for today that weve all been told that the taper had already been priced into the markets. This brings back the uncertainty. Yes, theyre going to have to start tapering at some time but we still dont know. What does that do from the market perspective . They like easy money that continues to flow with great abound but there is still uncertainty out there now . It says that the market cant stand on its own two feet and that is a worry about fundamentals. Ashley yep. I thought there were a lot of good signs out there like i said in the developed markets around the world. Sure there was some excesses in asia but im concerned that, you know, maybe there is some bad news coming that i didnt price in. So, yes, the market likes stimulus but for the longer term you want the fundamentals. You want Economic Growth. Ashley right. You want jobs. And you want, and looks like theres a problem. Tracy anthony, what does it do to the bond market . They have to be happy. Keep purchasing. They are so far. Anything that kicks the can down the road in terms after fed rate hike and i think this does that is a positive for bond. It also reduces risks near term. But the bond market knows that tapering is coming. Fed rate hike is coming so potential upside is limited. 10year has to get through 2. 75. If it does that, goes lower, will probably go to 2. 50. That is probably bit. That is as much retracement i would see. This puts more of a floor to the bond market. Interesting to drive returns Going Forward. Moderate positive for bond. I wouldnt get too carried a way with the rally in the bond market. Ashley scott, well hear from mr. Bernanke in just over 10 minutes now. What would be your question to him on this notaper wednesday . Hopefully well get some details into what really drove this decision. What was the decision to taper say in december rather than now. I mean what are they fearful about and i think he is likely to stress that tapering is still going to come but its not going to be for a while. Ashley all right. Tracy steven, lets throw the same question to you, as a former fed economist you have to be wishing youre in the meeting wondering the thought process . Absolutely. So bernankes press conference will be really, really interesting and he is going to of course try to lay out the logic for the notaper action today but i dont think he is going to indicate that tapering is off the table for october or december. I think this was really a Risk Management action on the feds part. They want to see more information about how the Housing Market is behaving in light of the higher Mortgage Rates and they want to see what plays out in Congress Yard to the continuing resolution and the debt ceiling. Theyre buying time so they see how things evolved. Tracy punting it yet to congress again. Guys, everyone stay there. Well have more with our allstar panel in a moment but chairman ben bernanke meets the press in nine minutes . How is that for jersey math. You can see every question and answer live right here. So dont go anywhere. The dow is up 105 points. [ male announcer ] now, taking care of things at home is just a tap away. Introducing at t digital life. Personalized Home Security and automation. [ lock clicks ]. That lets you loser to home. Thats so cool. [ male announcer ] get 100 in instant savings when you order digital life smart security. Limited availability in select markets. 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Fed chairman ben bernanke will meet the press and have a News Conference in just about phi minutes, this as the dow hits an intraday record high, five minutes to mr. Bernanke. No taper, that is the decision. Perhaps a bit of a shocker seeing as how much weve talked about how much they were going to taper leading up to todays announcement. We want to get back to sandra smith at the cme where weve seen an amazing amount of action. Gold and oil moving higher. Lets get down to sandra right away. Reporter ashley, im seeing people running on this Trading Floor for the first time in years. At the risk of getting run over, im going to send our cameraman into the options pit on the floor now. Its nuts down here. This market was definitely taken by surprise. Youve got the dollar plunging right now which affects everything that trades on this floor right now. Not only do you have the stock market hitting highs, the dow, s p both hitting intraday highs, dows up 130, by the way, oil prices now making intraday highs, up 2. 40 on the session, gold which was down before this announcement is up nearly 40 right now, and talk about the fear trade leaving the market, the victim, which was flat heading into this, is now down a full point showing that investors, theyre not worried. They see a fed thats going to keep printing money. I just talked to the guys in the fed funds futures pit who accurately called no movement by the fed, no tapering by the fed. I just talked to them, and they said it seems as long as they continue this, its going to be harder for them to get out of this, meaning the feds going to have a really hard time coming back and doing any tapering at all, so they really dont see an end to it which is somewhat of a scary proposition, but the stock market seems to love it for now. Ashley up for the markets. All right, sandra, thank you very much. Tracy lets continue with that market talk. Doug, i mean, come on, youve got to be somewhat happy about this. Were up 130 points. Equity world is doing the happy dance right now because, to sandras point, the longer youre in, the harder to get out. Who knows whats going to happen october, december. Well, in the short term it certainly helps my strategy. Weve been saying get out of the defensive trade, get into the market. Risk assets are the place to be. Thats how you build wealth, and so in some respects it helps, but id rather it be driven by fundamentals in the long term. Ashley yeah. This tells me theres something wrong with the fundamentals. So its well see. Ashley scott, how effective is all of this bond buying been so far . Look, 85 billion every month is being purchased by the fed. The markets are doing great. Theres lots of easy money for the corporations out there, but main street, what do they get out of it . Im sure they look at these markets and say, so what . Well, the markets do get lower Interest Rates which have been very supportive of things like Motor Vehicle sales and, obviously, the housing sector. Thats been a real plus. So the fed does see the asset purchases being pretty effective. But again, you know, its about meant to last forever. Its a bit odd because the fed has always had this view that its the total amount of securities that it purchases that matters. Ashley yeah. Relative to the amount of bonds that are out there. Not really the monthly pace. So theyre really kind of caught off guard in may and june when Interest Rates started rising. Again, it shouldnt really matter where the fed starts to to taper in september or december, that shouldnt be that big a deal. But for some reason it is a big deal for the markets and, therefore, it does really matter. Its a bit odd. Tracy we want to know whats going on already. Stephen, you know, the point with low Interest Rates, every favor, including most older people, they got burned. Continuing with what doug was talking about, hes concerned. Theres something underlying here thats not so great with this economy. So what is it . You know, i dont really think thats what the fed said in their statement. They talked about continued moderate growth. Their forecast for gdp growth was downgraded but only a little bit. As i said before, i think this is really a Risk Management move. Its just a stall for time. And i think if it turns out that the activity in congress doesnt produce a lot of disruption, we dont have a debt ceiling problem, we do get a continuing resolution that allows the government to continue to fund itself, i think the fed will put this back on the agenda for their october meeting. I think they just want to sit on the sidelines because they think the environment looks risky. Ashley but, anthony, very quickly, there is no News Conference in october, its not until late december, so do you see this going to the end of the year before we look at taper again . I think it does. It think it pushes it out to december, and the Economic Data becomes much more important Going Forward. The Market Reaction is a positive one now. Well have to see how the Economic Data plays out to whether it justifies fed tapering. Obviously, the fed was worried about the deceleration over the past year, so clearly a bigger issue. Tracy were going to jump to ben bernanke now and the conference live. Good afternoon. The federal open Market Committee concluded a twoday meeting earlier today. As you already know from our statement, the committee decided today to keep the target range for the federal funds rate at 0 to onefourth prosecutor and make no change in either its Asset Purchase Program or its Forward Guidance regarding the federal funds be rate target. Ill discuss the rationales for our decision in a moment. Economic growth has generally been proceeding at a moderate pace with continued, albeit somewhat uneven improvement in labor Market Conditions. Of course, to say that the job market has improved does not imply that Current Conditions are satisfactory. Notably, 7. 3 , the Unemployment Rate remains well above acceptable levels. We have seen ongoing declines in Labor Force Participation which likely reflects discouragement on the part of many potential workers as well as longerterm influences such as the aging of the population. In the committees assessment, the Downside Risks to growth have diminished on net over the past year, reflecting among other factors somewhat better economic and financial conditions in europe and increased confidence on the part of households and firms in the staying power of the u. S. Recovery. However, the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market. In addition, federal fiscal policy continues to be an important restraint on growth and a source of downside risk. Apart from some fluctuations due primarily to changes in oil prices, inflation has continued to run below the committees 2 longerterm objective. The committee recognizes inflation persistently below its objective could pose troubles to economic performance, and we will continue to monitor inflation developments closely. However, the unwinding of some transitory factors has led to moderately higher inflation recently as expected, and expectations well anchored, the committee anticipates that inflation will gradually move back. In conjunction with this meeting, the 17 participants in our policy discussions five Board Members and 12 reserve Bank President s submitted individual Economic Projections. As always, each participants projections are conditioned on his or her own view of appropriate Monetary Policy. Also at this meeting we extended the horizon of our projections through 2016. Generally, the projections of individual participants show that they continue to expect moderate Economic Growth picking up over time as well as gradual progress towards levels of unemployment and inflation consistent with the Federal Reserves statutory mandate to foster maximum employment and price stability. More specifically, apartments projections for Economic Growth have a central tendency of 2. 02. 3 for 2013 rising to 2. 93. 1 in 2014 and 2. 53. 2 in 2016 for the Unemployment Rate, the central tendency of projections is 7. 17. 3 for 2013, declining to 6. 46. 8 in 2014, and by 2016 to 5. 45. Be 9 , about the longer run normal level for the Unemployment Rate. Most participants see inflation gradually increasing from its current low level towards the committees projection of 2 . The central tendency is 1. 11. 2 for this year, 1. 31. 8 for 2014 and 1. 72. 0 in 2016. With unemployment still elevated and inflation projected to run below the committees longer run objective, the committee is continuing its highlyaccommodative policies. As you know, in normal times the committee eases Monetary Policy by lowering its target for the shortterm policy Interest Rate, the federal funds rate. However, the target range for the federal funds rate currently at 0onefourth percent cannot be lowered meaningfully further. Accordingly, the committee has been providing policy support to the economy through two complementary methods, by purchasing and Holding Treasury securities and agenty mortgagebacked securities and by communicating the committees plans for setting the federal funds rate target other the medium turn. Ill discuss these beginning with our program of asset purchases. In september 2012 the fomc initiated a program of purchasing 40 billion per month in agency mortgagebacked securities in addition to the 45 billion per month in longer term treasury securities that we were already acquiring as part of our Maturity Extension Program. We stated that purchases would continue until we saw a substantial improvement in the outlook for the labor market in a context of price stability. In december 2012 we announced that we would continue to purchase 45 billion per month in longer term treasuries after the Maturity Extension Program ended later that month. Thus, our total purchases of longerterm securities were maintained at 85 billion per month in addition to the reinvestment or rolling over of maturing securities on our balance sheet. The committee agreed today to continue asset purchases at that rate subject to the same conditions that we laid out a year ago. Because the committee tied its asset purchases to the outlook for the labor market, its important to assess how that outlook has evolved. As i noted earlier, conditions in the job market today are still far from what all of us would like to see. Nevertheless, meaningful progress has been made in the years since we announced the Asset Purchase Program. For example, the Unemployment Rate has fallen from 8. 1 at the time of our announcement to 7. 3 today. And about 2. 3 million private sector jobs have been created over the same period. Over the past 12 months, aggregate hours of work are up by about 2. 4 , weekly new claims for Unemployment Insurance have fallen by about 50,000, and surveys suggest that households perceive jobs as more readily available. Importantly, these gains were achieved despite substantial fiscal headwinds which are likely slowing Economic Growth this year by a percentage point or more and reducing employment by hundreds of thousands of jobs. Not all labor market developments over the past year were positive, however, notely the Labor Force Participation rate fell and real wages remained about flat. In light of this cumulative progress, the fomc concluded at our june meeting that the criterion of substantial improvement in the outlook for the labor market might well be met over the subsequent year or so. Accordingly, the committee sought to provide more guy dance on how the pace of purchases might be adjusted over time. The committee anticipated that subject to certain conditions it might be appropriate to begin to moderate the pace of purchases later this year, continuing to reduce the pace of purchases in measured steps through the first half of next year and ending purchases around mid year 2014. However, we also made clear at that time that adjustments to the pace of purchases would depend importantly on the evolution of the Economic Outlook, in particular on the receipt of evidence supporting the committees expectation that gains in the labor market will be sustained and that inflation is moving back towards its 2 objective over time. At the meeting concluded earlier today, the sense of the committee was that the broad contours of the mediumterm Economic Outlook including Economic Growth sufficient to to support ongoing gains in the labor market and inflation moving towards its objective were close to the views it held in june. But in evaluating whether a modest reduction in the pace of asset purchases would be appropriate at this meeting, however, the committee concluded that the Economic Data do not yet provide sufficient confirmation of its baseline outlook to warrant such a reduction. Moreover, the committee has some concern that the rapid tightening of financial conditions in recent months could have the effect of slowing growth, as i noted earlier, a concern that would be exacerbated if conditions tighten further. Finally, the extend of the effects of restrictive fiscal policies remain unclear, and upcoming fiscal debates may involve additional risks to Financial Markets and to the broader economy. In light of these uncertainties, the committee decided to await more evidence that the recoverys progress will be sustained before adjusting the pace of asset purchases. The committee will, of course, continue to monitor economic and financial developments closely. As noted in todays statement, in judging when to moderate the pace of asset purchases, the committee will at its coming meetings assess whether incoming information continues to support the committees expectation of ongoing improvement in labor Market Conditions and inflation moving back towards its longerrun objective. However, as we have said and as todays decision underscores, asset purchases are not on a preset course. The committees decisions about their pace will remain contingent on the Economic Outlook and on the committees ongoing assessment of likely efficacy and cost of the program. Let me turn now to the fomcs Forward Guidance regarding the federal funds rate. The committee genre affirmed its expectation that the current exceptionally low range for the funds rate will be appropriate at least as long as the Unemployment Rate remains above 6. 5 , so long as inflation and Inflation Expectations remain well behaved as described in our statement. As i have noted frequently, Economic Conditions we have set out as preceding any future rate increase are thresholds, not triggers. For example, a decline in the Unemployment Rate to 6. 5 would not lead automatically to an increase in the federal funds rate target but would instead indicate only that it had become appropriate for the committee to whether the broader Economic Outlook justified such an increase. The committee would be unlikely to increase rates if inflation were projected to remain below our 2 objective for some time, for example, and in making its assessment, the committee would also take into account additional measures of labor Market Conditions such as job gains. Thus, the first increases in shortterm rates might not occur until the Unemployment Rate is considerably below 6. 5 . The projections of the path of the federal funds rate by individual Committee Participants are generally consistent with this guidance. Although the central tendency of the projected Unemployment Rate for the forty quarter of Fourth Quarter of next year encompasses 6. 5 , 12 of the 17 participants expect the first rate increase to take place in 2015 and two expect it to occur in 2016. Most participants also see the funds rate target rising only very slowly after the process of removing policy accommodation begins. The medium projected funds rate for the end of 2015 is 1 . And notably, although the central tendencies of the projections for both inflation and the Unemployment Rate in 2016 are close to the longer run normal values for those variables, the median projection for the federal funds rate at the end of 2016 is 2 , well below the longer run normal value of 4 projected by most participants. Committee participants generally believe that because the headwinds to recovery will abate only gradually, achieving and maintaining maximum employment and price stability will require a patient policy approach that involves keeping the target for the federal funds rate below its longer run normal value for some time. Let me close by noting that although the fomc is employing two instruments of policy asset purchases and Forward Guidance about shortterm Interest Rates the overall stance of Monetary Policy is what matters for growth, jobs and inflation. Our program of asset purchases was set up a year ago to help achieve a substantial improvement in the outlook for the labor market in the context of price stability relative to conditions when the program was initiated, and we have made progress toward meeting that criterion. However, even after asset purchases are wound down which we will do in a manner that is both deliberate and dependent on the incoming Economic Data, Federal Reserves rates guidance and its ongoing holdings of securities will insure that Monetary Policy remains highly accommodative, consistent with an aggressive pursuit of our mandated objectives of maximum employment and price stability. Thank you, and id be glad to take your questions. Thanks, mr. Chairman. Pedro decosta from reuters. You cite meaningful progress both on the unemployment front and in terms of payroll growth. But much of the decline in the Unemployment Rate has been due, as you note, to the decline in participation. So my question to you is, and also on the payroll front, some people would argue that while there has been growth, it hasnt been Strong Enough to keep up with population growth and make up the gap that we had from the recession. How high do you think the jobless rate would be if it were not for the decline in participation . Ive heard estimates as high as 1011 , and could you put the labor market in that context . Certainly. So i think there is a cyclical component to participation, and in that respect, the Unemployment Rate understates the amount of sort of true unemployment, if you will, in the economy. But on the other hand, theres also a downward trend in participation in our economy which is arising from factors that have been going on for some time including an aging population, lower participation by prime age males, fewer women in the labor force, other factors which arent really related to this recession. Over the last year, the Unemployment Rate has dropped by eighttenths of a percentage point. The Participation Rate has dropped by threetenths of a participation point which is pretty close to the trend. So in other words, i think it would be fair to say that most of the improvement in the Unemployment Rate not all, but most of it in the last year is due to job creation rather than to lower participation. I would also note that if you look at the broader measures of unemployment that the bls publishes including parttime work, including discouraged workers and so on, youll see that those rates have fallen about the same amount as the overall, standard civilian Unemployment Rate. So i think that there has been progress, and its obscured to some extempt by downward trend, but i also would agree with you that the Unemployment Rate is while perhaps the best single indicator of the stated labor market, its not by itself a fully representative indicator. [inaudible] benal l balm, new york times. To what extent do you regard yourself responsible for the tightening that you noted . Was it a mistake to talk about tapering in june, and do you stand by your guidance that it will be appropriate, do you still expect it will be appropriate to dial down asset purchases by the end of this year . So to answer the first part of your question, i think theres no alternative in making Monetary Policy but to communicate as clearly as possible, and thats what we tried to do. As of june, we had made meaningful progress if in labor Market Conditions in labor Market Conditions, and the committee thought that was the time to begin talking about how the eventual winddown of the program would take place and how it would be tied to the evolution of economic variables. And in particular, i talked about a proposed strategy that would take about a year for the total winddown to take place and which in turn was also fully contingent on the ratification, so to speak, of our outlook which included continued improvements in the labor market. So all of that was very consistent with what we said when we began the program, that our goal was to achieve a substantial improvement in the outlook for the labor market, and we needed to communicate how that was going to be put into practice. Failing to communicate that information would have risked creating a large divergence between market expectations, public expectations and what the committees intentions were, and that could have led to much more Serious Problems down the road. So i think the communication was very important. The general framework, to answer the other part of your question, the general framework that went to our operating is still the same. We have a threepart baseline projection which involves increasing growth thats picking up over time as fiscal drag is reduced, continuing gains in the labor market and inflation moving back towards objective. We are looking to see in the coming meetings, well be looking to see if the data confirm that basic outlook. If it does, well take the first step at some point, possibly later this year, and then continue so long as the data are consistent with that continued progress. And so that basic structure is still in place. But what i want to emphasize is really two things. First, as ive said, the asset purchases are not on a preset course. They are conditional on the data. Theyve always been conditional on the data. And secondly, that even as we move from asset purchases to rate policy as the principal tool of Monetary Policy, its our intent to maintain a highly accommodative policy and to provide the support necessary for our economy to recover and to provide jobs for our citizens. [inaudible] Jon Hilsenrath from the wall street journal. Just to follow up from that question, mr. Chairman, you said that you could pull back the purchases possibly later this year. You sound a little bit less certain that its going to happen later this year, so id like you to, to ask you to talk a little bit more about your conviction about whether these are like, the pullback is likely to start this year. Where do you stand on that . I also dont think i heard you mention that 7 unemployment number that youve talked about back in june. That was the rate that was, the Unemployment Rate that was supposed to prevail when the fed was done doing this. Is that no longer operative . So there is no fixed calendar, schedule. I really have to emphasize that. If the data confirm our basic outlook, if we gain more confidence in that outlook and we believe that the threepart test that i mentioned is, indeed, coming to pass, then we could move later this year. We could begin later this year. But even if we do that, the subsequent steps will be dependent on continued progress in the economy. So we are tied to the data. We dont have a fixed calendar schedule, but we do have the same basic framework that i described in june. The criterion for ending the Asset Purchases Program is a substantial improvement in the outlook for the labor market. Last time i gave 7 as a indicative number to give you some sense of, you know, where that might be. But as my first answer suggested, the Unemployment Rate is not necessarily a great measure in the all circumstances of the state of the labor market overall. For example, just last month the decline in the Unemployment Rate came about more than entirely because of declining participation, not because of increased jobs. So what we will be looking at is the overall labor market situation including the Unemployment Rate, but including other factors as well. But in particular, there is not any magic number that we are shooting for. Were looking for overall improvement in the labor market. [inaudible] Steve Liesman with cnbc. Mr. Chairman, one question just three parts, if you dont mind. [laughter] have you indicated to president obama you did not want to serve a third term . If so, when . Did president obama indicate to you he did not want you to serve a third term . And those two parts notwithstanding, would you serve a third term if asked either wholly or in part . Well, i have the same answer to all three parts of your question. [laughter] if you will indulge me just a little longer, i prefer not to talk about my plans at this point. I hope to have more information for you at some reasonably soon date, but today i want to focus on Monetary Policy. Id prefer not to talk about my own plans. [inaudible] elan moy, washington post, you mentioned that tighter fiscal conditions are a concern for the committee as you guys think about whether or not its appropriate to reduce asset purchases. What do you all expect to be able to do in the future when you actually do begin to pull back your asset purchases to manage expectations and manage the Market Reaction such that we dont see another increase in rates . Well, whats the relationship between the pullback and fiscal policy . Oh, im sorry, i meant financial conditions. Oh financial conditions. Financial conditions, sure. Well, i think part of the reaction weve seen, and it comes from a number of sources. Part of it comes from improved economic news, and thats part of the reason why rates have gone up in other countries as well as in the united states, and that, to the extent that tighter financial conditions reflect a better outlook, thats a good thing. Thats not a problem at all. Part of it reflects views about Monetary Policy x that we want to make sure we get straight. And thats why to answer the earlier question again, its why communication so important. We need to explain as best we can how were going to move and on what basis were going to move. Its much more difficult today than it was 20 years ago because the tools are more complex, less familiar. But thats still very important. I think the other factor which was at play was an unwinding of excessively risky and leveraged conditions in the markets and insufficiencies of liquidity in some cases meant that those unwindings led to larger reactions in prices and rates than might otherwise have occurred. Now, the tightening associated with that is to some extent unwelcome, but on the other hand, to the extent that some of the riskier, more levered positions have been eliminated, i think that makes the situation more sustainable and reduces at least the risk that there will be an overstrong reaction to further announcements. So we will do our best to communicate clearly, that is our goal and our objective. The more clearly we communicate, the better the chance that markets will understand our intentions and that we can avoid any, any sharp movements. But again, were dealing with tools that are less familiar, harder to quantify and harder to communicate about than the traditional funds rate. [inaudible] Robin Harding from the financial times. Mr. Chairman, the Meeting Committee median Committee Member suggested 2 Interest Rates at the end of 2016, and in the long run they expect Interest Rates to return to 4 . Can you give us any sense of when you and when the committee expect Interest Rates to get back to that 4 again . Well, let me first restate, i think the key point here, which is that the large majority of the participants in the fomc including voting and nonvoting members who are asked to to describe their own assessment of optimal policy, the large majority of them estimate that the appropriate target for the federal funds rate at the end of 2016 will be around 2 even though at that time the economy should be close to full employment according to our best projections. The reason for that, there may be possibly several reasons, but we did discuss this in the committee today. The primary reason for that low value is that we expect that a number of factors including the slow recovery of the housing sector, continued fiscal drag, perhaps continued effects from the financial crisis may still prove to be headwinds to the recovery, and even though we can achieve full employment, doing so will be done by using rates lower than sort of the long run normal. So in other words, in economic terms the equilibrium rate, the rate that achieves full employment look like itll be lower for a time because of these headwinds that will be slowing aggregate demand growth. So thats why we expect to see growth, i mean, rates at unusually low level. I imagine it would take a few more years after that to get to the 4 level. I couldnt be much more precise tan that. I mean, were already, obviously, stretching the balance of credibility to talk about specific projections to 2016. But i think you would expect to see the rates would gradually rise for the two or three years after 2016 and, ultimately, get to 4 . [inaudible] mr. Chairman, Josh Zimmerman from bloomberg news. You indicated that you can see the fed lowering the pace of purchases once the economy starts to grow faster in line with what the feds projections. For about the past four years, the fed has been projecting that growth would quicken to about 3 , and it never has. So at what point are you going to decide that other costs and benefits are the reason that youre making the decision . Are we getting close to that having to be a deciding factor even if you dont get the growth forecast the way you havent the past four years . And does the complication of this this is kind of a second question, but im going to do it anyway does the complication of this mean that you need a press conference to make a tapering decision . Well, youre certainly right that we have been overoptimistic about outyear growth. There are a number of reasons for that. One reason for it, though, is that it appears and i talked about this in a speech last year it appears that as part of the aftermath of the financial crisis that at least temporarily the potential growth rate of the economy has been slowed, perhaps because new businesses are not being formed at the same rate, innovation may not be translated into new technologies at the same rate, investment is lower, etc. So it appears again that the potential rate of growth of the economy has been slowed somewhat, at least temporarily, by the recession and the financial crisis. And you can see that in the slower productivity figures. Now, we have, you know, we have anticipated that slowdown in productivity, and thats one of the main reasons that we havent anticipated the relatively slow growth. Deviation of output and employment from its normal level. In the amount of slack, we have done better. Our predictions in unemployment have been better than the predictions of growth and particular one thing has been quite striking, unemployment, we were too pessimistic of unemployment this year. Unemployment has fallen faster than we anticipated. In that respect we were too pessimistic rather than too optimistic. We will continue to do the best we can. We continue to look for confirmation ofn our broader scenario which basically is that we will continue to see progress in the labor market, the growth will be sufficient to support that process and moving back toward the target, that is what will determine our policy decisions. In terms of press conf think it is important to say there is an understanding in the committee that we have had for a while that there are eight real meetings every year. Every meeting is a meeting in which any policy decision can be taken. Should anything occur at a meeting without a scheduled press conference that requires additional explanation, we certainly could arrange public on the record Conference Call or some other way of answering the medias questions. [inaudible] use of the committee would be unlikely to raise a fund rate if it remains below