Impact of paying those banks billions of dollars . Thank you. A lot of turmoil in china. There was an earlier discussion about foreign markets being part of how we judge our growth. Devaluing their currency. I could go on on things you know better than i. You see as the stability of the Chinese Market and how does that impact us . Yellen china has grown rapidly for a long period of time. Years, they have been for reasons trend that are entirely understandable. Growth,abor force reduction in the case of investment growth, a desire that they have which is in their own interest and one that we share that their economy rebounds from the heavy dependence on the source of trade. As they have moved toward the technological frontier, further progress in adopting technological changes. Blacks are they truly attempting to increase the mystic consumption domestic consumption . Rhetorics are saying they are attempting to increase domestic consumption. The policies dont seem to reflect the readily rhetoric. My impression is they are trying to rebounds the economy. Consumer spending is a smaller share of their economy then sumer spending is an hours than ours. It has been growing rapidly. They are trying to boost it. I believe the course they are on is in their own best interest and we would agree. Subjects, by the way, you feel the turmoil we are currently seeing in the threat devaluet the value their currency, you dont feel like that threatens our economy. They are attempting to game it by increasing their exports and devaluing their currency, etc. Beir yellen when they may decision to devalue by a couple percent. To put that in context, remember that the u. S. Dollar has been rising, appreciating significantly over the last year and a half. The chinese currency has been linked to the u. S. Dollar. During that. The chinese currency had been strengthening substantially relative to many of its trade partners. Adjustments oft their Exchange Rate in a way that was arguably not well communicated and proved disruptive. They saw Large Capital outflows. I think they recognize that stability of their Exchange Rate is in their best interest. They would ultimately like to move to a more marketbased and flexible system of Exchange Rate determination. I wish you were there central banker. I hope you are right. Secondly, in january of this year, the economy actually slowed. Growth became negative. It is attributed to a slowdown in the Energy Market because oil prices have fallen so Energy States that have produced a lot of jobs by the way, jobs for those lower income, less skilled workers which we have spoke of, that as if that so fell, Oil Production rose for a brady of reasons. Now Oil Production is decreasing once more. Rig counts are falling. My state has been impacted by this. Thisomments on how shedding of jobs and the expiration and production component of the Energy Industry is going to impact our economy . Yellen we have seen a huge decline in oil prices for reasons pertaining to huge increases in supply and swelling and demand sold slowing in demand. It has had an enormous impact on drilling activity, jobs in that sector. The fed has been holding back growth. Even though we have had benefits of spending in terms of employment, going forward, what impact does i have on our growth . I am struck that your forecast is that the economy will continue to grow at this 2. 5 rate, not the 3. 5 we had under reagan and clinton, but this 2. 5 . If we are shutting all of these jobs and in the industry which provides a tremendous number of jobs for less skilled workers, it seems as if that endangers this 2. 5 we have. Chair yellen member we are creating so many jobs a year. I was told it takes so many jobs a month to bring back those in employment who are unemployed. Because our Labor Participation market is so low, for those newer workers who are entering the market, to employ them, as well as to maintain Current Employment for those currently, something i read speaks of those 2025yearold workers being underemployed. A higher rate of unemployment among those. All of this to say, to a new 10,000 a month, is that adequate to account for those newly entering . Yellen to provide jobs for those entering the labor force requires 100,000 jobs per month. There is a downward trend in the. Abor force due to its aging if Labor Force Participation is stable, that helps to absorb people who are discouraged and have dropped out. Quite a bitequires less than 200,000 or so jobs. In terms of increasing back our labor Market Participation is as low as it has been since jimmy carter. Whenever the president speaks about how the Unemployment Rate is, our Labor Participation is low as it has been since jimmy carter. My question is how do we increase Labor Participation as well as take care of those who are entering . We dont seem to be a call pushing that with 210,000 per month labor growth. We dont seem to be accomplishing. Yellen we are on the path of decreasing Labor Participation due to the aging population. I dont think we should expect to see Labor Force Participation move up a great deal over time. If it were simple he stable over stable over time rather than declining, we would be absorbing people who are in aps discouraged and stronger job market, would move back. 200,000 jobs a month is enough to make progress on those dimensions. I yield back, thank you. We have had the return of two of our team members of the committee. We have time for both of you to ask her questions. When i was here earlier, you mentioned moderate growth in the economy. Earlier this week, economists at citigroup predicted not only a tightening of the u. S. Market would force the fed to increase shortterm markets Interest Rates more rapidly to listen to the paid, they said it would than it was anticipated, they said it would result in an inverted yield curve which resulted in a recession. Economists said they would sign a 65 likelihood of a recession in the United States 2016. 65 seems high to me, but i am not an economist or the fed a chair. What would you assign a risk level of a recession . Chair yellen i dont have the but decision on the part of the fomc to increase rates would only occur in the context where the committee believes we were going to enjoy at least somewhat above trend growth so that we would see an improvement in the labor market. Uncertainty that pertains to the economic outlook. There are always shocks that occurred. Sides,ks are on both faster and slower growth. I cant put a number on the risk of a recession, but i absolutely wouldnt see it as anything approaching 65 . Assuming you do or dont do something with respect to Interest Rates, everybody would agree that regardless of what you do, historically speaking Interest Rates would still remain at historically low levels. What tools would you have what tools with the fed have if wered economists at citi right and the u. S. To go into a recession . Tot would you have mitigate the problem . Chair yellen we have all of the tools we have previously used to combat a recession. First of all, we would have the possibility of lowering rates. Markets ino determining longerterm yields is expectations about the future. Ath of policy for a number of years after , we discussedzero the reasons we thought it would be appropriate to keep rates at low levels. As it turns out, seven years with zero rates, we discussed why we thought we would be keeping rates at low levels for a long time. As the market absorb the notion that they will stay low for a long time, longerterm yields came down. Course, we had asset purchases, we undertook substantial asset purchases in order to simulate the economy stimulate the economy. I think those purchases were successful in conjunction with that Forward Guidance and bringing down longerterm rates. Those tools are still available. Last question. I met with a group of ohio bankers yesterday. In december, they brought up to me the committee on banking supervision is planning to finalize new rules. The banks are required to hold against there charting assets. Book access we understand the current proposal could have a negative impact on the Financial Market liquidity, increasing farming costs for americans and american businesses. By some estimates, they told me to regulatory changes proposed by the committee would increase mortgage and auto loans by 1. 5 and home runs in america by as six pointer present. I am a former realtor. That number popped out to me as a huge problem. Concerns that the borrowing rules would make it more expensive in ohio as well as across the country. Does the fed support the vessel theittee finalizing proposal before these concerns are addressed and will you be conducting your own costbenefit analysis of what the impact the rules would have in the country . Chair yellen the fed is taking part in those discussions as other regulators. I am not aware there are any capital requirements. I am not aware of any thought of changing those requirements in the manner that would have the kind of impact you are discussing. We can try to get back to you on that. Thank you, chairman, my time has expired. Chair, how are you . Because i promised my team, we want to extend a thank you to your staff and team for tolerating our technical written questions and some of the responses. It is appreciated. Some of them are lengthy in nature. Can i take us a different direction . I am blessed to sit on Financial Services so we get to cross each others past often. Often. S the indexes and economists who are saying there beentrong our team has collecting information about worldwide debt. Does that cause fragility in north america . Numbers in the last nine years, developing countries, 57 trillion in new debt which has doubled their gdp growth. Worldwide debt is 300 of gdp. How do you, from a policy with future Interest Rates adjustments, the affects that will have on u. S. Currency at the same time with developing country debt i wont call it crisis but debt stress on the horizon . How does that affect your Decision Making and does it provide any fragility to our Economic Growth . Or even potential recession threats . Chair yellen it is something we take account of as we try to evaluate the Global Environment and the likely impact it could have on the United States. It is something we look at as well as part of our Financial Monitoring to try to determine whether there are risks that could impact Financial Stability in the United States. Engage ine fed certain Bilateral Agreements with some of the developing countries . Reserve banks to wall off the cascade effect . Those of us who remember the tequila crisis. What and occupations inoculations does the fed engage in . Chair yellen the fed has swap agreements with a small number centralced countrys banks where we think it is important to make sure that banks doing dollarbased business have access to adequate liquidity. We have no swap arrangements with emerging market countries. The only reason we engage in those swap market arrangements is to essentially protects Financial Stability in the United States. I dont know the word to use, indemnification i was trying to find a word, not jewish and inoculations chair yellen . These are risks when you look at Financial Markets. When you talk about debt, what has been discussed over the last year or so, the fact that private companies in many emerging markets have taken on dollardenominated debt. Systems,is the banking the financial sectors of those emerging markets have been much more carefully regulated in recent years and are less vulnerable. They have themselves denominated dollar shortterm debt. Company corporations in these largeies have taken on a quantity of debt. To you see any large cascade risk in developing countries in sovereign debt loads and private debt loads in those countries that would affect our economy . Chair yellen it is a risk that we monitor. Itould not at this point say is a very serious risk to the u. S. Financial system. This is not meant to be a one were attion, but we data about a month ago. We will call it dollareuro contracts. The movement away from their being settled in new york. Some of that is because of regulatory situations. They were not being settled under our regulatory environment. Does that movement of all or denominated contracts dollardenominated contracts being settled overseas have any threat or difficulty to the Federal Reserves ability to see regulatoryfluence movement of those resources . Chair yellen i am not aware of such a trend, but i will try to look at that and get back to you. That is one of those technical written questions. I yield back. Members o a four inform members the chair has a need to leave at noon. We want to honor that. I just talked to the vice chair and she agrees. I want to give everybody a chance to get a question. Could we limit it to one question and keep it to 23 minutes so that everybody has an opportunity to do that before we run out of time . Thank you, ranking number of maloney Ranking Member of maloney. Thank you for being here. Based on the commentary ive heard from colleagues in the media climbing the Federal Reserve overreaches in its ability to invest in Interest Rates. It is not clear the most important factors the fed will set Interest Rates based on what is called the equilibrium real Interest Rate which has been consistently low, maybe even below zero. Given the equilibrium rate is close to zero, what has not been receiving enough attention is how fiscal policy should play an increasing role in stimulating demand and providing an update to the economy. Since the Federal Reserve has limited tools on how it can their monetarys policy including adjusting Interest Rates and implement in quantitative easing or Forward Guidance, can you speak to the impact that fiscal policy, ofticularly the lack support for certain tax expenditures, even Financial Moves as the expertimport banks have had on the rate of recovery for our economy . Chair yellen generally, there is evidence that the socalled equilibrium rate, a real rate of interest, adjusted rate of interest, fell sharply after the financial crisis and remains quite depressed. Believefactor that we that even when we start raising rates, those rate increases will be gradual. General, when this rate comes down, it means that rates are likely to be lower than the historical norm. To the extent that we are operating in a low, even positive Interest Rate environment. If the economy is hit by negative shocks, we have tools we can use. Our most sure and certain instrument policy is the fed funds rate. When the average level of the Feds Fund Rate is low, we have less room to respond to negative shocks. It would be helpful to be in an environment and give us more scope to be stimulating the economy, responding to adverse shocks if the average level of Interest Rates were somewhat higher. I dont want to give you advice on fiscal policy. That is up to you. Fiscal policytive is something that would, in a sense, enable the fed on average ratese a higher level of and have more scope to respond to negative shocks. I yield back. Thank you so much. Haveecent fomc productions a run on unemployment of four point , close to what we were taught was maximum unemployment. 4. 9 . ,he Broader Market they use does that count those who recently give up for work or parttime for economic reasons for that wrote that rose in october. That is average that is higher than the last average from 20012007. There is still considerable slack in the labor market. How important are the labor tools . Given the considerable slack suggested, is this the right time to raise rates . Chair yellen i would agree with u6 remains elevated relative to it to stork norms. Higher than i would expect a based on historical experience given the standard we are used to. It is one of the things that leads me to believe that even though we are close to that 4. 9 median, there remains a marginal slack in the labor market. Thatportant part of u6 makes it that high is an isary is going to voluntary parttime employment. While that has come down substantially, it is hard to tell for sure because there is a trend over time toward more parttime employment in the u. S. Economy. I believe it remains higher than it ought to be in a socalled full employment economy. In addition, as you noted, there are discouraged workers. A fair number of them, that has come down. I see margins of slack. I think they are reflected in the discrepancy in u6. Thank you, mr. Chair. Thank you chair yellen for being here. I appreciate your patience. This is along the achaemenid of cumulativelong the a impact. I am thinking of the recent adoption of the surcharges and the total loss absorbing capacity. Can you describe a little bit