Unlikely to raise federal funds rate if inflation remains below target. Your own proceyour own projecti below target through 2016. Is that consistent with a liftoff in thorough fund rates in that period . Related, is there a case to be made your threshold should be supplemented with lower balance for inflation, i. E. , you wont tighter if inflation is lower bound . So, in the latter part, you know, of course youre seeing Interest Rate projections and inflation projections separately. Youre not seeing them combined by individuals. Each individual is making their own projection. I think youre right. We should be very reluctant to raise rates if inflation remains persistly below target. Thats one of the reasons that i think we can be very patient in raising the federal funds rate since we have not seen any inflation pressure. On having an inflation floor, that would be in addition to the guidance. We are discussing how we might clarify the guidance on the federal funds rate. That is certainly one possibility. I guess an interesting question there is whether we need Additional Guidance on that, given we do have a target. Of course, implicit in our policy strategy is trying to reach that target for inflation. But inflation floor is certainly something that, you know, could be a sensible modification or addition to the guidance. Reporter victoria, dow jones news wire. Many investors were expecting the fed to move at least a little bit in pulling back the bondbuying program today. Given that you all decided not to do that, do you have any concerns that once again the fed is confusing investors and sending mixed signals . Well, i dont recall stating we would do any particular thing in this meeting. What we are going to do is the right thing for the economy. And our assessment of the data since june is that taken collectively that it didnt quite meet the standard of satisfying our or of ratifying or confirming our basic outlook for, again, increasing growth, improving labor markets and inflation moving back towards target. We tried our best to communicate to markets. Well continue to do that. But we cant let Market Expectations dictate our policy actions. Our policy actions have to be determined by our best assessment of whats needed for the economy. Reporter peter barnes, fox business. You mentioned fiscal business in the statement today. Are you concerned about a Government Shutdown . Were hearing more about that possibility. Did that come up in your discussions at this meeting . What do you think will be the impact of a Government Shutdown on the economy . And what could the feds or would the fed be prepared to respond to that and help the economy with additional accommodation . For example, additional asset purchases. Thank you. A factor that did concern us, as in our discussion, was some upcoming fiscal policy decisions. I would include both the possibility of a Government Shutdown but also the debt limit issue. These are obviously, you know, part of a very complicated set of legislative decisions, strategies, battles, et cetera, which i wont get into. But it is the case, i think, that a Government Shutdown and perhaps even more so a failure to raise the debt limit could have very serious consequences for the Financial Markets and for the economy. And the Federal Reserves policy is to do whatever we can to keep the economy on course. And so if these actions led the economy to slow, then we would have to take that into account surely. This is one of the risks we are looking at as we think about policy. That being said, you know, again, our ability to offset these shocks is very limited. Particularly debt limit shock. And i think its extraordinarily important that congress and the Administration Work together to find a way to make sure that the government is funded, Public Services are provided, that the government pays its bills, and that we avoid any kind of event like 2011, which had at least for a time a noticeable adverse effect on confidence and on the economy. Reporter this week marks five years since the financial crisis began. And hank paulson, who youve worked closely with, said his biggest regret is that he wasnt able to convince the American People that what was done, Bank Bailouts werent from wall street, they were from main street. What is your biggest regret as you reflect on the fiveyear anniversa anniversary . And do you believe the fed, congress and the president , have put the necessary measures in place to prevent another deep financial crisis . Well, on regrets, i have many. I think my you know, reasonably, the biggest regret i have is that we didnt forestall the crisis. I think once the crisis got going, it was extremely hard to prevent. You know, i think we did what we could, given the powers that we had. I would agree with hank that we were motivated entirely by the interest of the broader public that our goal was to stabilize the Financial System so that it would not bring the economy down, so that it would not create massive unemployment and Economic Hardship that was even more that would have been even more severe by many times than what we actually saw. So, i agree with him on that. And i guess since you gave me the opportunity, i would mention that, of course, all the money that was used in those operations has been paid back with interest. So, it hasnt been costly even from a fiscal point of view. Now, in terms of progress, thats a good question. I think we made a lot of progress. We had, of course, the dodd frank law passed in 2010. We recently have, you know, come to agreement internationally on a number of measures including basel iii and a number of agreements relating to shadow banking and other aspects of the Financial System. I think today our large Financial Firms, for example, are better capitalized, by far, than they were certainly during the crisis and even before the crisis. Supervision is tougher. We do stress testing to make sure that firms can withstand not only normal shocks but very, very large shocks, similar to those they experienced in 2008. And very importantly, of course, we now have a cool we didnt have in 20 08 which would have made, i think, a significant difference if we had had it which is the orderly liquidation bill dodd frank gave to the fed. Under the authority liquidation, the fdic, with other agencies, has the ability to wind down a failing Financial Firm in a way that minimizes the direct impact on the Financial Markets and on the economy. Now, i should say, i dont want to overstate the case. I think theres a lot more work to be done. In the case of resolution regimes, for example, the United States has set the course internationally. Other countries and International Bodies like the fsb are setting up standards for resolution regimes similar to those in the United States, which is going to make for better cooperation across borders. Were still some distance from being fully geared up to work with foreign counterparts to successfully wind down an international, multinational firm. We made progress in that direction but we need to do more. So, i think theres more to be done. Theres more to be done on derivatives although a lot has been done to make them more transparent and trading of derivatives safer. But it will be some time before all of this stuff that has been undertaken, all of these measures are fully implemented and we can assess, you know, the ultimate impact on the Financial System. Reporter steve beckner. A number of economists and, indeed, some of your fed colleagues, have argued the effectiveness of quantitative easing has greatly diminished, if not disappeared. And they point to the recent performance of the economy as proof of that. And there have been a number of people who have argued there are regulatory and other impediments to growth beyond the reach of Monetary Policy. To what extent are these valid arguments . And if the economy does not speed up, if it does not reach your objectives, how will you ever get out of quantitative easing . Well, on the effectiveness of our asset purchases, its its difficult to get a precise measure. Theres a large academic literature on the subject and they have a range of results. Some suggesting this is a quite powerful tool, some less powerful. My own assessment is that it has been effective. If you look at the recovery, you see that some of the strongest sectors, leading sectors it, like housing and autos, have been interestsensitive sectors. These policy have been successful in strengthening financial conditions, lowering Interest Rates and, thereby, promoting recovery. I do think they have been effective. You mentioned that there hasnt been any progress. There has been a lot of progress, as i said at the beginning. Labor market indicators, while still not where we would like them to be, are much better today than they were when we began this latest program a year ago. And importantly, as actually referenced in our fmoc statement, that happened notwithstanding a set of fiscal policies, cbo said would happen and hundreds of thousands of jobs. The fact we have maintained improvements in the labor market that are as good or better than the previous year, notwithstanding this fiscal drag, is some indication that there is at least a pasrtial offset from Monetary Policy. As you say, there are a lot of things in the economy that Monetary Policy cant address. They include the effectiveness of regulation, they include fiscal policy, they include developments in the private sector. We do what we can do. If we can get help, were delighted to have help from other policymakers and the private sector. We hope that will happen. The criterion from ending asset purchases is not, you know, some very high rate of growth. What it is, is criterion the criterion is substantial improvement in outlook for labor market. We have made significant improvement. Ultimately we will reach that level of substantial improvement. At that point, we will be able to wind down the asset purchases. Again, you know, and i think people dont fully appreciate that we have two tools. We have asset purchases and we have rate policy and guidance about rates. Its our view that the latter, the rate policy, is actually the stronger, more reliable tool. When we get to the point where we can you know, where we are close enough to full employment, that rate policy will be sufficient. I think that we will still be able to provide even if asset purchases are reduced, well still be able to provide a highly accommodative monetary background that will allow the economy to continue to grow and move towards full employment. Reporter chairman, donna with american banker. The Financial StabilityOversight Council has designated two nonbank firms and presumably a third and others to follow. However little has been said in how specifically these firms will be regulated by the fed, which has been a chief criticism of the entire process. Given that, can you provide us any guidance at this point in term of how far along the fed is in terms of letting the banks know how they will be regulated besides, you know, tailoring the plans. Well, the two firms that have been designated, aig and ge capital, actually are have been regulated by the fed because both of them are savings and loan, thrift holding companies. We have already a lot of experience with those firms and and a lot of contact with those firms. We will i mean, i want to use the word tailor because we want to design a regime that is appropriate for the Business Model of the particular firm. But our other objective, and what makes designation by the fsoc, particularly noteworthy is that the primary goal of the consolidated supervision by the fed is to make sure that the firms the firm doesnt in any way endanger the stability of the broad Financial System. So, well be looking at not just the usual safety and soundness type matters or supervision, which both can be again tailored to the types of assets and liabilities that the firm has, but also were going to want to focus on things like resolution authority, practices relating to derivatives and other exposures, interconnectedness, et cetera, to make sure the firm in its structure and in its operations doesnt pose a threat to the wider system. Thats what is going to be distinctive about our oversight. Not only of these designated firms but also of the Large Bank Holding Companies we already oversee and which were already subjecting to tougher supervision, higher capital, stress tests and all the rest. Reporter peter coke with bloomberg television, mr. Chairman. One of my colleagues was remarking as we came in here, we dont often get surprises from the Federal Reserve. This was a surprise. You talked about you hadnt telegraphed anything specifically but youve seen the market reaction, im sure. My question for you is, were you intending a surprise today . And did you get the intended result, judging from the market reaction, and related to that, by taking this action today, continuing the bond purchases going forward, at what point do you believe youre starting to complicate the exit strategy simply by continuing to keep the feds foot on the gas pedal . Do you make life more complicated for the Federal Reserve down the road . Well, its our intention to try to set policy as appropriate for the economy. As i said earlier, we are somewhat concerned. I dont want to overstate it, but we do want to see the effects of higher Interest Rates on the economy. Particularly Mortgage Rates on housing. So, to the extent that our policy makes conditions our policy decision makes conditions a little bit easier, thats thats desirable. We want to mike sure that the economy has adequate support and we, in particular, its less surprising the market or easing policy as it is avoiding a tightening until we can be comfortable that the economy is, in fact, growing, you know, the way we want it to be growing. So, this was a step it was a step precautionary step, if you will. It was an the intention is to wait a bit longer and to try to get confirming evidence to whether or not the economy is, in fact, conforming to this general outlook that we have. I dont think that we are complicating anything for future fmocs. Its true that the assets that weve been buying add to the size of our Balance Sheet. But we have developed a variety of tools. And we think we have numerous tools that can be used to both manage Interest Rates and to ultimately unwind the Balance Sheet when the time comes. So, i you know, im i feel quite comfortable that we can in particular, we can raise Interest Rates at the appropriate time, even if the Balance Sheet remains large for an extended period. And that will be true, of course, for, you know, future fmocs as well. Mr. Chairman, Kate Davidson from politico. Do you think the recent attention paid to who will be your replacement has had any immediate effect on the fed . Could it have any lingering effect on your successor . Do you think the process has become too politicized or is this part of a healthy debate . I think the Federal Reserve has strong institutional credibility. And it is a strong institution, highly competent institution. And its independent. Its nonpartisan. Im not particularly concerned about the political environment for the Federal Reserve. I think the fed will be continue to be an Important Institution in the United States and that it will maintain its independence going forward. Reporter thank you, mr. Chairman. Greg rob, market watch. Was there a discussion among the committee today about changing the Forward Guidance to 6. 5 jobless rate . Could you say why the committee decided to hold that steady in light of the weaker economy . Well, as i mentioned earlier, the committee has regularly reviewed the Forward Guidance. And there are a number of ways in which the Forward Guidance could be strengthened. For example, they mentioned inflation for. There are other steps we could take. There is other information we could take after we get to 6. 5 . If we could provide precise guidance, that would be desirable. Now, its very important we not take any of these steps lightly. We make sure we understand all the implications and that we are comfortable that it will be that the any modifications to the guidance will be credible to markets and to the public. So, we continue to think about options. There are a number of options we have talked about, but today we as of today we didnt we didnt choose to make any changing to the guidance. Reporter l. A. Times. As you may know, the Census Bureau reported yesterday the poverty on medium Household Income saw no improvement last year. I wonder when you see median incomes turning up significantly for most people . And in light of the fact that people in the middle and the bottom have seen very little of the gains relative to higher income households, how would you assess the postquantitative easing and fed policies . Sure. So, that