The statement the following. I quote. The committee currently expects to implementing Balance SheetNormalization Program earlier this year, provided that the economy evolves broadly than anticipated. In a separate press release, trish, they outline how all of this will work. Fed will begin to unwind the Balance Sheet by allowing 6 billion to roll off monthly initially, 6 billion at threemonth intervals over 12 months until it reaches 30 billion per month. Separately as relates to mortgagebacked securities, 4 billion a month initially. Will increase to 4 billion over threemonth intervals to 12 months until it reaches 20 billion per month. As far as relates to long term projackses here, the fc projects here, three rate hikes this year. They dropped their projection from march earlier this year, from 1. 9 to 1. 6 . They raised gdp slightly. Longer term relates to unemployment 2018 and 2019 they dropped it down to 4. 2 from 4. 5 . Rate hike of a quarter of a point. Neel kashkari the lone dissenter. Balance Sheet Program will begin here. Trish thank you very much, blake burman. We have kelvin kelly, jay pelosky, fox news contributor, steve cortes, our very own nicole president pet Nicole Petallides live from the new york stock exchange. We have given up earlier gains from the session. First of all, i want to go to jay on this one. You know what im troubled by, jay . Im troubled by the fact we have no inflation in this economy right now. Look at cpi, today, what people are paying, consumer price, went down 1. 1 last month. I guess i just question, jay, how it is we can be Interest Rate environment thats rising when prices are going down, so there is no inflation . In fact we should be worried about a little deflation at this point. Unemployment is pretty darn good at 4. 3 . I think you actually hit the nail on the head, trish. Look, the fed is leading the Global Central Bank policy normalization process but the u. S. Economy is lagging. Our Economic Growth is less than that of europe, less than that of japan, less than that of emerging markets. I think you have a situation where the markets could get a little bit concerned that the fed is boxed in here. It wants to raise rates but the economy may not allow it to. On top of it, one other factor that you didnt mention which i think is very significant as we move forward into the year and 2018, the political environment and policy inertia that is existing in d. C. I think it means a weak economy, policy inertia, means very slow if he normalization process. Trish we have the market he reacting a little more postively, nicole up 35 points right now. The fed delivered. They did exactly what investors thought they were going to do but again i think there is a conundrum here as jay points out, they may want to raise rates but can they . That is a great question. Economic reports they know oh so welcoming are tepid, going back to early 2016. Retail sales today. Inflation report. We know that theyre watching inflation so closely. We are seeing markets right now at 21,354. So you now just at this moment, were at alltime record highs. So the market sold off, digest ited moved right back here to the record highs. He keep a close eye on the 10year bond. This is at the lowest level since late last year. 2. 11 . Really unbelievable when you look at that 10year bond. Commodities are just fine. Trish i hear you. It is a strange environment were living. I spoke to bill gross about this yesterday. He is concerned about the structural problems going on in our economy. Kevin kelly, we now live in an environment where it is getting increasingly heart for the next generation to be able to do as well as the last one, for a whole variety of reasons. But how does that start to change . You hit the nail on the head when you started this segment talking about wage inflation. That hasnt happened. Wages are not rising. That leads to healthy inflation. Well not get anywhere a gdp print this current government wants, 3 , 4 . It will take fiscal policies. The fed governors asked for the fiscal policies. That is the only way we can stoke growth in the economy to it raise wages to bring up Living Standards and jobs. Trish this, sr. This is part of bill grosss point yesterday. Theyre not seeing the kind of growth you would think you should see coming out of a recession such as we went through, what is it now, almost 10 years ago . 10 years. You guys are way too negative. Come on people im just, if i were to listen to what were all saying here, i would be shorting everything myself. You know what . There is a great story. Think about it most number of people in america are working in 16 years. Unemployment down to 4. 3 . Corporate Earnings Growth is back. Okay, fine, inflation went down month over month but up 11. 7 yearoveryear of the fact i think we need to rethink our whole assumption about inflation, food prices are low, gasoline prices are low. Thats a great story. Trish i want to explore this a little bit because you say 1. 7 , that is not a ton of inflation. By the way, looks like theyre revising their expectations for inflation from 1. 9 down to 1. 6 . On the one hand, none of us want to see a ton of inflation, right . You dont like it when prices keep going up. Right. Trish but on the other hand inflation is normal for an economy. We need 2 to 3 . Were not even getting that. I know but there is something happening right now as a result of technology. Whether you want to talk about more efficient drilling that has kept, an ables us to access oil and gas in the shale that is technology, right . That increased productivity. If you talk about the fact were buying stuff on our phones which we never did before. If you have robots in warehouses restocking shelves youre going to have lower prices. You will have less inflation. Trish that makes sense but then the corresponding side of that is, why dont we have higher wages . If we have 4. 3 unemployment, kevin, why arent wages going up . One of the biggest overhangs in wages is the Affordable Care act. That tampered Small Businesses from hiring. They have had to fire people and people are going part time. The Regulatory Environment put a noose around the neck of small business. Health care is 17 the gdp. Second largest cost to employers outside of wages. So with that going up it is up from 13 gdp back in 2012. So youve got this environment where Health Care Costs are rising. The regulatory costs are rising. You so you cant raise wages or hire more people. That is why youre seeing that happening. Unskilled jobs are already filled. Trish jay, no inflation why raise rates . Why do this right now . I think the fed would like to get off the zero bond. Clearly it is doing that. It gives them a little bit of cushion for the next recession which we know is inevitable. At some point well have recession. I think the fed wants to protect against it causing a recession by raising rates too fast or pulling back on the Balance Sheet too quickly. Thats the concern that the fed might be in a box here, that the economy is not really Strong Enough to allow it to fully normalize its Interest Rate policy and its Balance Sheet. Therefore if it raises rates too fast you create the condition it doesnt want which is recession because if we do have a recession the fed with rates at 1 is very limited in what it can do to offset the recession. Trish nicole, there is nothing left, right . I mean they have printed as much money as they possibly can. They need to wind that down because there is no end in sight right now and Interest Rates are so low. So yes it is healthy to get off zero, i get that. I guess we all better hope and pray there is no recession lurking down the road because there is not a lot of wiggle room . Well they did raise it at least two times prior to this. Last december and prior december and march and now. So they have raised it a little. They have a little bit of wiggle room ever so slightly. Why theyre talking about one more hike. It is really interesting about the plan winding down the Balance Sheet, 4 1 2 trilliondollars. It came with that caveat sentence, trish, about normalization, normalizing the rates, normalizing what theyre seeing on the Balance Sheet and evolving the economy broadly as estimated. Any blip in the economy they will stop unwinding securities they plan on doing, mortgagebacked securities. They will essentially let them roll off. Theyre trying to hold on to something. Well wait for janet yellen. Got to hear the language. Very interesting, were talking about her term, right, in the new year. Will janet yellen remain the fed head . That is trish that is a very good point because, steve cortes, donald trump wasnt necessarily a fan of Janet Yellens on the campaign trail. Right. Trish and if you couple that what he said about her in the past with the fact that she is not necessarily doing him any favors here by raising rates right now, he might really be looking to replace her. What are your thoughts on that . Could gary cohn be in the mix . Any other names that you can think of . I think potentially, id love to see somebody like cohn, somebody outside of academia. Enough of mit economists because they created a world by the way harmful to regular working americans. They have created in a sense ironically, donald trump you should appreciate janet yellen, because she created the kind of economy that led to his election. That is economy only rewards owners of assets which is very small slice of people to the detriment of working masses. How do we break outside kel . Were normalizing rates albeit slowly. What we need it is not central bank issue, it is fiscal side issue. It is tax cuts and we need them yesterday an more regulatory relief. If we get that, i think the economy can trulily break out. Trish im hearting a theme here. Let me point out i hear the theme on both sides of the aisle. Not as though, steve, full disclosure here, you were on trumps team, hispanic advisory council. We know politically where you stand. Right. Trish that said im pointing out something i think is, bipartisan in that people want to see tax relief and tax reform and its crazy to think, adam johnson, you will let 2 trillion sit overseas working for other countries instead of bringing that money back here and getting people back to work and opening new factories and investing in new research that could help our country grow . Of course they are goingbring that money back. Of course they are going to pass some sort of tax reform, if for no other reason the gop wants to get reelected they have to pass tax reform. Trish youre very confident about that. Confident, as is the market. That is one of reasons were up. Well get a 12 to 15 bump in earnings. Well not get it this year, because washington is so dysfunctional it will take an extra year. Trish you think it will happen before 2018 . Yes. Trish go ahead. Not only do i think it is going to happen, sounds like adam does but more importantly key sectors of the market think it will happen. Market is smarter than any of us individuals. I point to one stock which is boeing. Boeing is almost a trump stock. It is at alltime highs. It is soaring today. Absolutely soared since the election. Up 30 since he was elected. Combination of defense and infrastructure, airports, investment. Boeing certainly believes all of this is certainly going to happen. I believe boeing. If that is true, what will be good for boeing will also be very good for america and good pour for work. Charles trish go ahead. This is tough conversation because the markets benefit from low Interest Rate environment and earnings are worth more but it is not translating to the consumer and not translating to the real economy. 70 of our economy is services. It is struggling right now. The s p 500 is doing so well. They want the status quo. They could care less if tax cuts happen. Trish brought it up, it is bipartisan issue. Obama had in his budget business taxes going down. That will help Small Businesses. Same with hillary clinton. It was part of her plan. We need to get it done. Doesnt seem like its a priority to get done this year. Theyre focusing on everythings including health care which they should do tax cuts. Trish turn the conversation a little bit. Janet yellen will be speaking momentarily. I always point out, look im a reporter. I like i like the fact there is information available. But adam, he heard me say this before, jay, you probably have too, i think the fed has gotten a little too chatty. Yes. Trish always giving a press conference, not just janet yellen but every governor speaking to the media every chance they get. Almost overtelegraphing to the media by which the way is not entirely consistent. The market is up 38 points in part because people are relief they have followed through but adam, have they gotten a little too chatty for their own good. You know that will give boost to this market, adam johnson. You know they want everything telegraphed. You know what, nicole . Weve all become spoiled children. We expect the fed to bail us out. We expect the fed to do everything. That is why they call it the koolaid. Why they call it the koolaid. Well hear from janet yellen. Household spending was higher. That is good. Business activity increasing moderately. That is also decent. Interesting the Neel Kashkari the one dissenter. Trish we like all the information. The only thing i would say information is not always, it will switch on a dime, right . She consistently says, looks things will go along as such provided as such happens. If something doesnt, just feels as though some of the telegraphing that used to happen, the fedwatchers that would try to figure out all of this, you know, just been so saturated by members of the Federal Reserve itself. Go ahead. This is response to how the market reacts. The taper tantrum happened because the marketplace was not expecting tapering to happen with quantitative easing. Markets sold off, bonds sold off, so that was a big issue. They need to telegraph so the market is not caught by surprise. That will cause volatility in the marketplace. If we were down on the year and volatility was up, would they have raised rates today . The answer is no because they talk about the market in their minutes all the the time. Trish hang tight, guys. We have a lot to talk about. Janet yellen is coming up any moment. We want to take that as soon as that happens. Another breaking story going on right now, very sad day, very sad story, President Trump sending his thoughts and prayers to all of those hurt in todays shooting at republican congressional baseball practice including House Majority whip steve scalise. Watch. Well the president earlier coming out and speaking and confirming that the shooter is in fact dead and he expressed of course his condolences to everyone. Here is the president right now. Many lives would have been lost if not for the heroic actions of the two Capital Police officers who took down the gunman despite sustaining gunshot wounds during a very, very brutal assault. Melania and i are grateful for the heroism and praying for the swift recovery of all victims. Trish congressman scalise underwent surgery this morning. He is expected to recover. Also wounded, two Capitol Police officers, a staffer for congressman Roger Williams of texas, and lobbiest for tyson foods. The shoot who was killed at scene has been identified as a 66yearold man from illinois, reportedly a leftwing supporter of Bernie Sanders. I want to go to adam shapiro. He is live on the scene in alexandria, virginia. He joins me now. Adam. Reporter trish, want to bring you up to speed on the status of one of the people shot, matt mica, lob by it for tyson foods. His family said he was shot multiple times. He is in Critical Condition at hospital. The other people, Capital Police officers are expected to recover from their wounds as is the aide to representative Roger Williams. That aide was zachary barf. Matt mica shot multiple times and his family said he is in Critical Condition. Speaker paw paul rye held a News Conference and picked up on president s theme of unity. What he said about this mornings tragedy. We are united. We are united in our shock. We are united in our anguish. An attack on one of us is an attack on all of us. [applause] reporter trish, you pointed out that the shooter, 66yearold James Hodgkinson was killed. The president announced that. We interviewed witnesses who saw the shootout with the Capitol Hill Police an the man with the rifle. He turns out not only been a Bernie Sanders supporter, but opponent, he is opposed to policies of President Trump. Bernie sanders took to the floor of the senate to denounce the violence and here is what he had to say. Violence of any kind is unacceptable in our society. And i condemn this action in the strongest possible terms. Real change can only come about through nonviolent action and anything else, runs counter to our most deeplyheld american values. Reporter so the fbi is now in charge of the investigation. They said this is secure area. They did not room out or confirm other people might be involved. That will be part of their investigation. They will have another president briefing sometime in the 4 00 hour. Trish . Trish we await on janet yellen, chair of Federal Reserve. Will address reporters. Were back with the whole team. What do you want to hear from her, steve cortes, when she comes out . What would be your number one question . My number one why would they reduce the Inflation Expectations. I want to hear. I hope theyre wrong, we need inflationary pressure. I want to hear why that happened. I would ask if im not room, what did she specifically, not generalities, what does she want to see from fiscal side . What should white house do to stimulate the economy to break out. So rate increase is something that is we dont have to think about. Trish look, there is not a ton they can do at this point. I do think, it has been 10 years, practically, right . Weve been dealing with very low Interest Rate environment for so long, adam johnson, and i think at some point you do run a risk. You run a risk people become too complacent. Why buy something today because it will be just as cheap tomorrow, in i can borrow money easily for a very low rate. If you move rates up, you could affect incentives in ways that could be very hello he think. You create urgency. Think how absurd it is, were worried, fed is worried about the low inflation rate but in fact it is the fed that is keeping rates low in the first place . If they want to stoke inflation, raise rates faster. With so many people back to work, with Corporate America making money, we can sustain higher rates. Think about it, trish, the record low 30 year Mortgage Rate is 4 . It is so easy to borrow money. Trish is that function of the fed he . Yes that is the fed. Trish the sense were in stagnant environment . Why are treasury yields this low . Emblematic of a weak economy. Weve seen worst growth out of a recession in history, since the postwartime period in the 40s. Thats emblematic whats happening. If you look, we have a aging pop like, right . There is higher incidents of chronic diseases and illnesses. That will burden this federal government even more. They will continuously he need to borrow. We have to think about fiscal policies and what impact it will do to our deficit. We have a lot of things we need to address right now, especially the Labor Participation rate. I want to know what janet yellen thinks of that, especially because weve seen job numbers come in for the last three months weaker than anticipated. Trish jay, do you worry about the future in an environment where this government owes so much money and Interest Rates at some point go meaningful higher . Were getting to a point where we struggle to pay the Interest Payments on this did not . If rates go higher over time, that is obviously less of a concern. Im on the different side than adam, i think. To me what i see is Credit Demand is falling. Loans growth is falling. Subprime auto loans past dues are skyrocketing. I think the consumer is tapped out. I dont think the consumer has capacity to take on additional debt. The government can not get its policy mix organized properly. We dont have a corporate sector that is looking to invest heavily because of demand isnt there. Because automation and technology is shrinking the need for capital. Trish where is this going . Do you think the market is going to be, some kind of a crash . That is a pretty pessimistic scenario . To me it is the reality of the situation. It is not a scenario, it is a fact. As adam pointed out earlier i agree, earnings have been good. As long as earnings hold up the stock market will be okay. The concern the fed is leading Global Policy normalization process and Monetary Policy of Central Banks an economy is lagging. The bottom line for the investors look outside of the united states. The u. S. Is okay. Europe is better. Japan is better. Parts of emerging markets are better. The look the opportunity is global. With should move money out of the u. S. Which is fully priced, moving it into the other parts of the world, growth is better, Political Risk is lower, valuation is more attractive and that primary is in europe and japan. Trish nicole, you always get kind of nervous when you see a herd mentality. A sense that the market moves higher amid the expectation well get at some point to washington, d. C. That said, you know, as i point out, it makes you nervous when everybody is moving higher, higher. At what point does the music stop playing . And thats a great point. Goldman sachs, what really tipped off the selling in those bank stocks when Goldman Sachs said its a crowded trade for stocks that had been at highs and run up over 52 weeks but the idea here, weve been talking about fiscal policy, versus Monetary Policy, bernie ben bere said we always have to look to washington and fiscal policy, what are they going to do. Now its a different picture. Janet yellen saying we did what we could for Monetary Policy. We need to look for the tax cuts. That is really the purpose and goal and that is likely to happen. That will likely to bring on the growth, lowest recession gains since beginning of time. It is going on the right path. That is the idea here. Trish that is why the market keeps moving higher. Right the fed says things are still not that bed. I will echo sentiment people are looking to emerging markets and europe. I am hearing that. Trish adam, in some ways Janet Yellens job might be easier if we get the policy through. Being academic she is and i know a lot of guys and gals, you can tinker with the economy, you can fix it. They can fix it. Doesnt matter what the finance fun supply demand equation is. So how do you think she is wrestling with all of this in her head, in that she needs washington and needs donald trump to get the republicans together and get this policy through while simultaneously knowing that, you know, thinking perhaps, sheer and the fed can do more . Well, you know, we are still looking over our shoulders where we remember what happened in 2008. Lets face it the private sector was scared to death. We were all scared to death. The fed stepped into a black hole creating bids for bonds that nobody would buy. You know what . While im a small government guy, i have to give credit where credit is due. The fact is that was then, this is now. We havent gotten over fact that is what the fed did then. It is okay to move on. It is okay to get back to normal. It is okay to raise rates. It is okay to trust in power and creativity and entrepreneurial spirit of this country. That is what we need to get back to. We need to get away from the government putting its hand in the mix. Trish i think there is something to that, i really do. Kevin . We have to get over the notion that we eventually have to have recession. It is a normal business cycle. It removes excesses from the marketplace, right . That is signs of a healthy market. One of the biggest issues we have we do he need fiscal policy because we have elected that es people into office to enact policies and theyre not doing it. And the fed trish too busy looking for the russia connection, right . Thats right. But it is not the feds job to save the economy. They have a dual mandate, right . Theyre hitting their dual mandate now. That is why theyre raising rates. It is not their job to save this market and tinker in the open market. I was against quantitative easing. The problem look what it has done. We still cant reach 3 growth. Trish i am with you, adam is with you, steve cortes as well. All that qe, quantitative easing, they kept printing, printing, and at some point i think you run the risk that people become overly dependent on a Federal Reserve that is always going to be there to bail them out. Right. Trish why fight the fed . We heard that forever, right . Can i jump in here, trish . Trish sure. Over to steve, sure. All i would say is, to those who are thinking that we can do away, or do without the fed is, that is much closer to being accurate when we have the fiscal policy. The whole point of this exercise is to move from pure Monetary Policy to what i have called a joint venture between fiscal and Monetary Policy. We dont have that. Trish jay, the whole team, thank you for being here. Lets is len in. Well hear from janet yellen what she thinks of this economy and whether or not she will continue with this rateraising environment this year. Janet yellen everyone. Good afternoon, before i get started i want to say that our thoughts are with those who were injured this morning. Today the federal open Market Committee decided to raise the target range for the federal fun rate by one quarter percentage point bringing it to 1, to 1. 25 . Our decision to make another gradual reduction in the amount of policy accommodation reflects the progress the economy has made and is expected to make towards maximum employment and price stability objectives assigned to us by law. We also released today an addendum to our policy normalization principles and plans. Additional information on the process that we will follow in normalizing the size of our Balance Sheet once we determine it is appropriate to begin doing so. I will have more to say about our Interest Rate decision and our Balance Sheet policy but first i will review recent economic developments in the outlook. Following a slowdown in the first quarter, Economic Growth appears to have rebounded, resulting in a moderate pace of growth so far this year. Household spending, which was particularly soft earlier this year, has been supported by solid fundamentals including ongoing improvement in the job market and relatively high levels of Consumer Sentiment and wealth. Business investment which was weak for much of last year, has continued to expand. And exports have shown greater strength this year in part reflecting a pickup in global growth. Overall we continue to expect the economy will expand at a moderate pace over the next few years. In the labor market job gains have averaged about 160,000 per month since the start of the year. A solid rate of growth that, although a little slower than last year, remains well above estimates of the pace necessary to absorb new entrants to the labor force. The Unemployment Rate has fallen about a half percentage point since the beginning of the year, and was 4. 3 in may, a low level by historical standards, and modestly below the median of fomc participants estimates of its longerrun normal level. Broader measures of labor market utilization have also improved this year. Participation in the labor force has been littlechanged on net for about three years. Given the underlying downward trend in participation, stemming largely from the aging of the u. S. Population, relatively steady Participation Rate is further sign of improving conditions in the labor market. Looking ahead we expect that the job market will strengthen somewhat further. Turning to inflation the 12 month change in the price index for personal consumption expenditures was 1. 7 in april, up less than 1 last summer but down somewhat over the past few months. Core inflation, which excludes the volatile food and energy categories, and tends to be better indication of future inflation has also edged lower. The recent lower reads on inflation have been driven significantly by what appeared to be oneoff reductions in certain categories of prices, such as Wireless Telephone Services an prescription drugs. These price declines, will as a matter of arithmetic, restrain the 12 month inflation figures until the extraordinarily low march reading drops out of the calculation. However, with employment near its maximum sustainable level, and the labor market continuing to strengthen, the Committee Still expects inflation to move up and stablize around 2 over the next couple years, in line with our longer run objective. Nonetheless, in light of this softer recent inflation reads the committee is monitoring inflation developments closely. Let me now turn to the Economic Projections that Committee Participants submitted for this meeting. As always participants conditioned their projections on their own individual views of appropriate Monetary Policy. Which in turn depends on each participants assessment of the many factors that shape the outlook. The median projection for growth of inflation adjusted gross domestic product, or real gdp, is 2. 2 this year and edges down to 1. 9 by 2019, slightly above its estimated longerrun rate. The median projection for the Unemployment Rate stands at 4. 3 in the Fourth Quarter of this year ticks down to 4. 2ers this in 2018 and 2019, modestly below the median estimate of its longerrun normal rate. Finally the median inflation projection is 1. 6 this year and rises to 2 in 2018 and 2019. Compared with the projections made in march, real gdp growth is little changed. The Unemployment Rate follows moderately lower path and inflation, although marked down this year for reasons i mentioned earlier is unchanged over the following two years. In addition, the median estimate of the longerrun normal Unemployment Rate moved done a 10th to 4. 6 . Returning to Monetary Policy, for the past yearandahalf the fomc has been gradually increasing its target range for the federal funds rate as the economy has continued to make progress toward our goals of maximum employment and price stability. Our decision today continues this process. We continue to expect that the ongoing strength of the economy will warrant gradual increases in the federal funds rate to sustain a healthy labor market and stablize inflation around our 2 longerrun objective. Thats based on our view that the federal fun rate remains somewhat below its neutral level, that is the level of the federal funds rate that is neither expansionary or contractionary and keeps the economy operating on an even keel. Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance but because we also expect the neutral level of federal funds rate to rice over time, the additional gradual rate hikes are likely appropriate over the next few years to sustain the economic expansion. Even so, the committee continues to anticipate that the longerrun neutral level of the federal funds rate is likely to remain below levels that prevailed in previous decades. This view is consistent with participants projections of appropriate Monetary Policy. The median projection for the federal funds rate is 1. 4 at the end of this year, 2. 11 at the end of next year, and 2. 9 at the end of 2019, about in line with its estimated longerrun value. Compared with the projections made in march, the median path for the federal funds rate is essentially unchanged. As always the Economic Outlook is highly uncertain, and participants will adjust their assessments of the appropriate path for the federal funds rate and respond to changes in their Economic Outlooks and views of the risks to their outlooks. As i have noted previously policy is not on a preset course. Let me now turn to our Balance Sheet. As i noted in our policy statement we are continuing to maintain the size of our Balance Sheet by reinvesting proceeds from maturing treasury securities and principle payments from agency debt and mortgagebacked securities. Provided that the economy evolves broadly as the committee anticipates, we currently expect to begin implementing a Balance SheetNormalization Program this year. Consistent with the principles and plans we released in 2014, this program would gradually decrease our reinvests and initiate a gradual and largely predictable decline in our Securities Holdings. The addendum to our policy normalization principles and plans that we release today provides further information. For both treasury and agency securities, we will reinvest proceed hes from our holdings only to the extent that they exceed graduallyrising caps on reductions in our security holdings. Initially these caps will be set at relatively low levels. 6 billion per month for treasurys, and 4 billion per month for agencies. So any proceeds exceeding those amounts would be reinvested. These caps will gradually rise over the course of a year to maximums of 30 billion per month for treasurys, and 20 billion per month for agency securities. And will remain in place through the normalization process. By limiting the volume of securities that private investors will have to absorb, as we reduced our holdings the caps should guard against outsized moves in Interest Rates and other potential market strains. As i previously noted when our Securities Holdings begin to gradually decline so too will the supply of reserve balances in the banking sector. At some point, probably a few years down the road, the committee will bring the decline in our Balance Sheet to an end as the quantity of reserves is normalized. I cant tell you what the longer run normal level of reserve balances will be, because that will depend on the committees eventual decisions about how to implement Monetary Policy most efficiently and effectively in the long run as well as a number of as yet unknown elements including the Banking Systems future demand for reserves and various factors that may affect the daily supply of reserves. What i can tell you is that we anticipate reducing reserve balances an our overall Balance Sheet to levels appreciably below those seen in recent years but larger than before the financial crease sis. As readers of our minutes know, the committee on previous occasions discussed longer frameworks for implementing Monetary Policy. Decisions about the appropriate framework do not need to be made for quite some time and our future deliberations will benefit from the experience we gain through the normalization process. At this point i will point out our Current System is working well and and has some important advantages. In particular its simple and efficient to operate, does not require active management of the supply of reserves. Most importantly provides good control over the federal funds rate and effective transmission of the changes in the federal funds rate to broader money market rates. Because our Current System is likely compatible with a much smaller quantity of reserves our plan for gradually reducing our Balance Sheet does not constrain the committees future options for how to implement Monetary Policy. Finally, as noted in todays addendum the committee affirmed that changing the target range for the federal funds rate is our primary means of adjusting the stance of Monetary Policy. In other words, the Balance Sheet is not intended to be an active tool for Monetary Policy in normal times, however, the committee would be prepared to resume reinvestments if a material deterioration in the Economic Outlook were to warrant thesizeable reduction in the federal funds rate. More generally the committee would be prepared to use its full range of tools including altering and the size and composition of its Balance Sheet if future Economic Conditions were to warrant a more accommodative Monetary Policy and can be achieved solely by reducing the federal funds rate. Thank you. I will now be happy to take your questions. Nick wall street journal. Chair yellen, the principles you released today say the Balance Sheet winddown should commence once Interest Rate normalization is well underway. With this latest rate increase, do you believe normalization is now well underway . So that is something that weve said for some time, and i previously, when i have been asked what well underway means said that i dont want to define that in purely quantitative terms but rather in qualitative terms. So there is no specific level of the federal funds rate that means were well underway but its also a question of not only the current level but our confidence in the outlook and our projections for the future path of the federal funds rate. So we have increased our federal funds rate target now several times. Our outlook is that we anticipate further increases this year and next year for the federal funds rate and our statement indicates if the economy continues to evolve in the manner that we expect that we would feel the conditions are, will be in place to begin this process this year. Steve liesman, cnbc. Madam chair, wonder if you talk to the president or members of his staff about the possibility of staying on as chair for a second term . Also, wondering if you would consider doing that . Is that something you thought about doing . And finally, there are three vacancies on the fed. Do you have any comment at all for the president on his failure to nominate anybody for these positions . What i said about my own situation that i fully intend to serve out my term as chair which ends in early february. I have not had conversations with the president about future plans. And i do very much hope, i note that they have been working hard to identify appropriate nominees for the open slots. And i do very much hope that there will be nominations in the nottoodistant future. And that the senate will take those up expeditiously. I look forward to having a full board. Your desire to stay on . I really dont have anything for you at this point. Thank you very much. Sam fleming from the financial times. We have now had very long streak or fairly long streak of weak inflation numbers, at least measured bit cpi this morning as well. Marketplacebased Inflation Expectations are declining. What kind of vigilance youre you now saying is needed in terms of weak inflation . How does that interact with your policy outlook, and would further disappointments argue for pressing pools on rate hikes or delaying Balance Sheet runoff . How do you think of those two potential responses to weak inflation . So let me just say as i emphasized in my statement and always say Monetary Policy is not on a preset course. We indicated in our Statement Today that were closely monitoring inflation developments and certainly have taken the note of the fact that there are whack weak readings on core inflation. We expect inflation to remain low in the near term but on the other hand we continue to feel that with a strong labor market and a labor market that is continuing to strengthen, the conditions are in place for inflation to move up. Now, obviously we need to monitor that very carefully and ensure, especiallily with roughly five years inflation running unour 2 objective, that is a goal to which the committee is strongly committed. And we need to make sure we have in place the policies necessary to achieve 2 inflation. And i pledge that we will do that but let me say with respect to recent reads, it is important not to overreact to a few reads and data on inflation can be noisy. As i pointed out there have been some idiosyncratic factors that i think have held down inflation in recent months, particularly a huge decline in cell Telephone Service plan prices, some declines in prescription drugs. We had an exceptionally he low reading on core pce in march. That will hold down 12month changes until that reading drops out but we are, this mornings reading on the cpi showed weakness in a number of categories and it is certainly something we will be closely monitoring in the months ahead. We will, were focused on in making our policy decisions, on the medium term outlook and we will, you know, be looking carefully at incoming data and as always revising our outlook and policy plans as appropriate. Any indications of beginning of further increases in the fed funds rate . So continue is todays action s show to feel that the economy is doing well, showing resilience. We have a very strong labor market. Unemployment rate declined to levels weve not seen sentence 2001. Even with moderation in the pace of job growth, we have a labor market that continues to strengthen and policy remains, remains accommodative. Inflation moved up to our 2 objective is our projections show, we continue to expect that and believe that conditions are in place. But, we will monitor incoming data obviously, be attentive rethinking our outlook if it seems appropriate. [inaudible]. From bloomberg news. Hate to belabor the point on inflation, i was wondering, i hear a lot of the socalled your conversation now and other committee members, it is unobservable thing at best it is an estimate and assumptions in there seem to me that the Economy Today is much like the economy yesterday, when if anything weve learned that the postrecession economy is vastly different than it was before the recession. So im wondering, something youve talked about to focus more on the change in inflation, actual inflation and is it going up or is it going down and bases policy more on that. What would be the risk of that and why not adopt that if you have such a long period of underperformance . Well we are closely looking at the actual performance ever inflation and altering our views on the basis of discrepancies what we see and our expectations and while it is very difficult to pin down what is the longer run normal rate of unemployment, and there is a great deal of uncertainty about it and its hard to pin down, especially given the fact that the socalled phillips curve appears to be quite flat. That means inflation doesnt respond very much or very quickly to movements in unemployment. Nevertheless, that relationship i believe remains at work. Weve seen that operate historically. Now, in the face of very low unemployment that weve seen, while wage growth picked up somewhat it he remains low, and inflation is influenced by influenced by number of different factors but we havent seen any evident or upward pressure on inflation. In light of that the committee has successfully moved down its estimate of the normal longerrun rate of unemployment and in this projection its moved down to 4. 6 ,. 1 lower than it was last time. While the Unemployment Rate is below that its not that much, its not that much below it. [inaudible] washington post. We saw measures of consumer and Business Confidence rise after the inauguration on expectations that the administration would move quickly to introduce policy changes and like tax cuts and Infrastructure Spending but some of those policy changes have been slower to materialize than initially expected. How do you view the positive and negative risks from policy changes to your outlook and has your view changed on that at all in the last six months . So, i would say that business and Household Sentiment remains quite strong. Many forecasters pushed back somewhat the timing of expected policy changes, such as changes to tax policy or fiscal policy more generally. I would say that based on my observation of actual spending behavior and my discussions with our wide range of contacts, that, i havent seen very much evidence that thus far expectations of policy changes have driven substantial changes in either Consumer Spending or investment spending. So i really wouldnt expect any significant pullback. Many of our business contacts, i think their confidence remains high. They have not really changed their plans yet and they have a waitandsee attitude. New york times. Measures of financial conditions show that since the fed started raising Interest Rates two years ago financial conditions have actually loosened. Consumer business borrowing costs many cases are down. Do you have any sense the market is not listening to you . How much of a concern is that for you . At some point does it convince you need to raise rates more quickly . In deciding what the appropriate path of rates is we take many different factors into account. We have certainly noticed the stock market is up considerably over the last year. That usually shows up in financial conditions indexes and is an important reason why some of them show easier financial conditions. There has been a modest decrease recently in the value of the dollar although its up substantially since mid 2014. So, we take those factors into account in deriving our forecasts and deciding the appropriate stance of policy. We have done that and, but other things also affect the stance of policy. So there really cant be any simple relationship. Were not targeting financial conditions. Were trying to set a path of the federal funds rate, taking into account of those factors and others that dont show up in the financial conditions index. Were trying to generate paths for employment and inflation that meet our mandated objectives. Howard schneider with reuters. On inflation again, what is possibility, something nefarious doesnt work here, sort of the weight of Central Bank Credibility now for a generation really, plus globalization has just pushed the world into a low inflation environment that is going to be very hard to get wages and prices moving again . And then related to that, you know, if 4. 2, why not 4 or 4. 8 . You banked a quarter full percentage point, youre less of falling behind whatever curve exists. Why rush . Professional forecasters, whether its in the bluechip or professional forecasters, those expectations have remained quite steady and in close alignment with our inflation target. Tip space measures of inflation compensation do not provide street reads on market participants, estimates and expectations about inflation. They embody other elements with premia and liquidity premia. They have moved down and now they remain at low levels. They have moved back up again. It is true that some household surveys have moved down, but overall i wouldnt say weve seen a broad undermining of Inflation Expectations. You asked also about structural changes, perhaps in flake impacted the inflation process and that certainly is possible. Estimates of the normal longer run Unemployment Rate are quite uncertain. I agree with your assessment. We really arent certain what they are and policy is not based on some firmly held preconceived notion. We are watching very carefully how the actual economy performs, and i continue to believe that with job growth in excess, even