To run below our objective, a mild undershooting of the Unemployment Rate considered to be normal in the longer run could help inflation, could help move inflation back to 2 more quickly. Second, a stronger job market could also support labor market improvement along other dimensions, including greater labor force participation. A third reason relates to the risks associated with the constraint on conventional Monetary Policy when the federal funds rate is near zero. If inflation were to move persistently above 2 , or the economy were to become noticeably overheated, the committee could readily increase the target range for the federal funds rate. However, if inflation were to remain persistently low or the expansion were to falter, the fomc would be able to provide only limited amount of additional stimulus through conventional means. These motivations notwithstanding, i continue to believe that it will be appropriate to gradually reduce the degree of Monetary Policy accommodation, provided that labor Market Conditions strengthen further and inflation continues to make progress toward our 2 objective. Because Monetary Policy affects the economy with a lag, steps to withdraw this monetary accommodation ought to be initiated before the fomcs goals are fully reached. And if the head winds that have lingered since the crisis slowly abate, as i anticipate, this would mean the neutral rate of Interest Rates would move up to provide gradual increases in the federal funds rate, but i stress that the Economic Outlook, including the pace at which the neutral rate may shift over time is uncertain, so Monetary Policy cannot proceed on any preset path. This point is well illustrated by events so far this year. For a time in january and early february, Financial Markets here and abroad became turbulent, and financial conditions tightened, reflecting and reenforcing concerns about Downside Risks to the Global Economy. In addition, data received during the winter suggested that u. S. Growth had weakened, even as progress in the labor market remained solid. Because the implications of these developments for the Economic Outlook were unclear, the fomc decided at its january, march and april meetings that it would be prudent to maintain the existing target range for the federal funds rate. Over the past few months, financial conditions have recovered significantly, and many of the risks from abroad have diminished, although some risks remain. In addition, Consumer Spending appears to have rebounded, providing some reassurance that overall growth has indeed picked up as expected. Unfortunately, as i noted earlier, new questions about the Economic Outlook have been raised by the recent labor market data. Is the markedly reduced pace of hiring in april and may a harbinger of a persistent slowdown in the broader economy . Or will monthly payroll gains move up toward the solid pace they maintained earlier this year and in 2015 . Does the latest reading on the Unemployment Rate indicate that we are essentially back to full employment . Or does relatively subdued wage growth signal that more slack remains . My colleagues and i will be wrestling with these and other related questions going forward. To summarize, ive explained why i expect the u. S. Economy will continue to improve, and why i expect that further gradual increases in the federal funds rate will probably be appropriate to best promote the fomcs goals of maximum employment and price stability. Ive also laid out the considerable and unavoidable uncertainties to this economy and appropriate path of the federal funds rate. My colleagues and i will make our policy decisions based on what incoming information implies for the outlook and the risk to that outlook. What is certain is that Monetary Policy is not on a preset course, and that the committee will respond to new data and reassess risks so as to best achieve our goals. Thank you very much. Thank you so much. The chair has graciously agreed to answer a couple of questions within our time constraints. From members and guests of the council. So if we have any questions, lets hear them. There are two microphones. Thank you very much for coming here, dr. Yellen. My pleasure. When deciding whether to keep shortterm Interest Rates low, is your primary concern gdp growth and the Unemployment Rate over the next few quarters or do you also consider the negative followon effects that occur much later due to low Interest Rates such as, im sure you heard this, a few hundred thousand times, if you could imagine consumers getting into too much debt, take advantage of the low Interest Rates and we get five years from now with defaults or defined benefit Pension Plans having to invest more money into the plan, less spending now or underfund and default later that, sort of thing. Do you take that into consideration, too . To what extent do you balance one versus the other . Thank you very much. Thank you for that question. The Federal Reserve takes its mandate and appropriate objectives from congress, and congress has assigned to us two main goals, namely maximum employment or full employment and price stability. So that is our focus and thats what we keep our eyes on. You asked if our focus is just the next couple of quarters and the answer to that is absolutely no. We are trying to take a medium and longer term perspective in setting Monetary Policy. We respond and our views on policy respond to incoming data such as a surprise like the labor Market Report last friday, only to the extent that we determine or come to the view that the data is meaningful in terms of changing our view of the medium and longer term Economic Outlook. So we are focused on the medium and longer term. And you mentioned various negative impacts of low Interest Rates which we well recognize. You, in particular, mentioned the impact on Insurance Companies and pension funds, the fact low Interest Rates can reach entities like those but also ordinary investors to reach for yield to take on risk that could ultimately have serious negative consequences. And of course, as we saw most importantly and dramatically in the case of the financial crisis, such risktaking behavior, when it becomes really excessive, has in the medium and longer term very serious negative effects for the economy and the attainment of the employment and price stability goals that congress assigned to us. So we look very carefully at Financial Stability risks. We try to assess those. And on occasions, i think we would prefer, most of my colleagues and i believe there are other tools that can be used to address emerging Financial Stability risks socalled macro or supervisory tools, i would never rule out the possibility that if we thought a stance of low Interest Rates was giving rise to serious Financial Stability risks, that that could become a factor affecting policy. Thank you very much. Thank you for your time today. I would like to ask about the dynamics on the committee and your role as chair. I think there is impression in the Financial Media or among Market Participants that essentially your vote is the one that matters. And clearly, youre the chair but there are also the other people in the room. Im wondering how you view your role in terms of coming into the meeting with an outcome that youre expecting versus sort of judging where the committee is. Im wondering if you faced the situation during your term as chair where you came in expecting one outcome but were swayed by the weight of the committee . Thank you. Thank you for that. So the Federal Reserve system was intentionally designed to be one where many independent voices and thinkers would come together around a table to work constructively together, but to bring independent points of view, formed in part by the contacts we have contacts with our local communities, businesses, households, consumers in our communities assessing and bringing to bear information about the economy and the outlook. So i have assembled around the table at the moment, we are two short, were at 17. 17 intelligent, thoughtful individuals who come with their own independent thoughts. And i feel my job is to, first of all, add my own thoughts. Im also thinking about all of this data and i and what is the right policy, and we share our thoughts with one another. Not only at the meeting, but also in the runup to the meeting and on other occasions, we talk to one another. And i look to achieve a consensus in the committee. Sometimes people dissent. I believe ive had as many as three dissents on one occasion, and i think some dissent is certainly to be expected. In an economy as complex as ours. Sometimes changes and ways that are different interpretations as to whats happening, but i am looking to find a consensus to try to help form that consensus, and i think my colleagues look to me to explain what that consensus is. I will say that i have never founded a difficulty to be in that consensus myself. So i cant really think of any occasion where the outcome or decision at a meeting is one that i havent personally been comfortable with, and i think we have come together as a committee, and while there are a range of views and the world hears them expressed, i think we have considerable consensus and respect for one another. Thank you. My question regard communication and the ability to provide any insight or Forward Guidance to the Financial Markets which are no doubt watching all of this very interestedly. You defer to the desire to gradually normalize rates to a real normal level which is above the rate we see today. Yet with the degree of data choppiness and uncertainty around whether or not some of the recent data is a trend or just an anomaly, i wonder if you could comment on the ability to provide guidance that is any more forward looking than two or three weeks based on the data coming to the committee . Thank you. So let me start by saying that the committee frequently refers to this process of normalizing rates, and i think maybe its useful to make clear that thats not some independent goal of Monetary Policy that we have full employment, price stability and normalization of rates. Most of my colleagues and i believe in a pretty normal economy, its likely to be appropriate to have a higher level of Interest Rates, perhaps not the historical average, but something higher than weve had in recent years. Even that, what is a normal level of Interest Rates in a normal economy, i tried to emphasize, let me say again, its something over which we have to be uncertain. There have been shifts in the economy. I think the current level of neutral or normal rates is pretty low. I do believe that will tend to rise over time, which if it does, means Interest Rates would appropriately afford the economy move further up. But i have to say that is something were uncertain about and have to find out over time. Now with respect to Forward Guidance, i know Market Participants really want to know exactly whats going to happen. It is only on rare occasions when we are able to provide that kind of guidance. There is, as i said, about 18 times no preset plan, and we look at data and we have to rethink the outlook constantly, and in light of that changed outlook, reevaluate. I really think the best we can legit plaimately do is explain factors are guiding our thinking. We provide detailed information every three months. Each participant this isnt a committee view, but all 17 participants write down their assess miamis for the likely path of gdp growth, inflation, unemployment and the path of policy over the next three years they think goes along with that and is appropriate. Those views change. Theyre not fixed. Would never say look at the path we go down in march because we have to constantly be reacting to new data and rethinking and questioning things we thought previously. During the depth of the crisis we provided more concrete Forward Guidance. We thought it was appropriate to do that. For example we gave various dates and said we thought it would be unlikely probably did this in 2011, 2012, we would be raising the funds rate before mid 2013 or mid 2015 or before the Unemployment Rate declined below 6. 5 . We had the view this was a very unusual down turn, that it would be long lasting, and that we would need to hold Interest Rates at very low levels for an unusually long period of time. Without making a promise, we were trying to communicate that view to markets and it helped because it brought down longer term Interest Rates, which helped the economy. But that was a very unusual period. With apologies of those who wont get a chance with the constraints of time, well take one more question here. Thank you for coming. Being retired, being an extreme lehman into my economics, and listening to all the morning shows on sundays and all the cable shows, and not having any particular interest of the candidates except in economics and my retirement, they have mentioned sidebaring that if the republican candidate becomes president of the United States, that there is a possibility of an economic crash all over the world because of the world viewing donald trump, how they view donald trump. Is this a possibility . Thank you. Im sorry. Ive got nothing for you on that. You know, were very focused on doing our jobs and well just see what happens. [ applause ] thank you. I mentioned earlier the councils programs fed chair janet yellen wrapping up what we thought would be about an hourlong speech and q a about the economy speaking in philadelphia. That last question led to a very, very short answer. She didnt want to answer about donald trump. Welcome to power lunch. The gang is all here. We thought we might get a new top on here. The dollar fell, Interest Rates fell, it would suggest it confirms based on the employment report on friday that the investors think a rate hike is less likely than it was just a week ago. If thats what investors think, i think theyre right. If you listen to what yellen said, she did not do a complete aboutface from a couple of weeks ago where she said rate hikes could be appropriate in coming months. She left off the in coming months months part. She kept the rates going in the same direction. Remember the buildup to that last speech was all her colleagues on the fomc saying its going to happen. We need to do it in june or july. She said coming months sound okay to me. Given the friday weak jobs report, she took off that time period. I was surprised how positive she otherwise is on the economy. For every negative she brought up, she says it seems to suggest the positive outweigh it. Global head winds abating. China, Financial Markets stabilizing. Jobs are disappointing, but coming back. Wage growth is back. Its a very balanced, tilted slightly towards the optimistic side which is saying tilted slightly towards being a little more up. Is she going to have a hard time maintaining consensus on the panel . Depends which direction. I think everybody on the panel is chasing who are looking for a rate hike in june. Not everybody. Esther george thinks they should have raised rates months ago. Loretta meser says its important to raise rates. Center of the committee will be, you know what . Its dumb to hike Interest Rates into weakening job and growth. She mentioned that current Monetary Policy is modestly accommodative. Right. Modestly accommodative when youre looking at really 0. 5 rates. There was an oped in wall street journal that low rates dont seem to be doing much. Do you think janet yellen realized maybe there needs to be another way . I think she would love to hear or find or discover another way. I think youre i right to point that out. Most people dont understand, you can dismiss it and say its wrong, but the way the Federal Reserve looks at the world here, it looks at what the neutral rate is. What rate is it that would not stimulate or otherwise hold back the economy . They see that rate as already very low. Its an inflationadjusted rate. They see themselves barely below it. They do not want to do negative rates. The theoretical context would be to go to negative Interest Rates. Thats why they did qe and maintain a large balance sheet. The fed doesnt see itself having a foot on the accelerator pedal. The other part of that oped you are pointing out, companies are using low Interest Rates to do buybacks and dividends as opposed to investing Capital Investments. Thats where the fed is getting it wrong or the policy hasnt been as effective as otherwise you might think. That is a theory thats been a