Purchases, weve asked those questions and the answer has been yes, we think inflation stabilized, and well gradually move up, and yes, we think the labor market will continue to improve and we have cut and we use the term measured pace or 10 billion a meeting. Now our forecast is that for the next that we will continue to see those conditions. I think the evidence we are seeing is consistent with that. If we continue to see progress in the labor market, as i expect, and inflation stabilizing or moving up to toward 2 , we would continue on the course we are in. As i mentioned, purchases would cease after october, but if there would be some very significant change in the outlook we see between now and october, so that we lost confidence that the labor market will improve, for some reason, or that inflation would move back up to 2 , then we would have to rethink that plan. That is the plan. Excuse me. Let me ask you a question. Im running out of time here, about the labor market. Because i think this is a very, very concerning issue for the economy and for the country. The proportion of americans in the labor force is now less than 63 . We havent seen those numbers since jimmy carter was president many, many years. I dont know if thats you or me, but its annoying. We havent seen those kinds of numbers since jimmy carter was president. The fed has said that youll look at the labor market. You just reiterated that in your testimony. Originally it seemed like the benchmark you were trying to achieve was 6. 5 . Its now 6. 1 , but to me that doesnt tell the story. The fact that our Unemployment Rate is at 6. 1 doesnt reflect the reality people are taking parttime work, whether thats obamacare or another reason, we could debate for a long time. Tell me what youre looking for when you constantly refer to the labor market. Are you looking for fuller participation, more fulltime employment . What are you trying to achieve . I ask you to be brief because i am out of time. Briefly, Labor Force Participation certainly moved down. Part of that, i believe, is an aging population and demographic. But when we see diminished Labor Force Participation among prime age men and women that suggests something that is not just demographic, and so my personal view is that a portion of the decline in Labor Force Participation weve seen is a kind of hidden slack or unemployment. It may be if thats correct that as the labor market strengthens that Labor Force Participation will remain flat, instead of the demographic trend continuing to pull it down. That as people who have been discouraged come back into the labor force and start looking at getting jobs, we will see Labor Force Participation rate flatten out and the Unemployment Rate may not come down as quickly as it has been. But well need to look at that. Thats a hypothesis. What we said about 6. 5 , as long as inflation was not a concern, we would not think about raising the federal funds rate, we would not raise it until unemployment declined below 6. 5 . 6. 1 is not our target either. Participants in the fomc are asked what they think a socalled number employment or normal longer run Unemployment Rate is. In the Monetary Policy report, weve distributed in june, they thought this was 5. 2 to 5. 5 . Of course we dont know and we are looking at all the things you mentioned in judging the labor force, judging the labor market, not just Unemployment Rate but a broad range of indicators, including voluntary parttime employment, as you mentioned. And a broader metrics concerning the labor market. Thank you, madame chair. Senator menendez. Thank you. You were quoted saying while the economy is improving, the head winds are still there even when the head winds have diminished to the point where the economy is finally back on track and its where we want it to be, its still going to require an unusually accommodative Monetary Policy. That was your statement. That seems pretty consistent with the concern of prominent economists outside of the fed. That current Economic Conditions and fiscal policy are producing an environment that requires lower than normal Interest Rates to generate Economic Growth and create jobs. Can you explain to me what you mean about the need for, quote, unusually accommodative Monetary Policy . And do you agree with the views being discussed by many that larry somers and others about lower than normal Interest Rates and the dangers of tightening too soon . So, i do agree with the view that there are substantial head winds facing the economy. One example would be that we see in surveys of households that their expectations about their future finances and growth in their real incomes are exceptionally depressed. I think thats a factor that is depressing spending. We see in the Housing Market where we had some progress but it now looks like its stalled. A lack of Credit Availability for anyone who has anything other than a pristine credit rating, i think, remains a factor. And thats in many complicated ways, a legacy of what we have lived through. I think there are and fiscal policy has been a factor, in my view, holding back the recovery. And thats what Monetary Policy has had to counteract. Thats in part why we have needed such an accommodative Monetary Policy for so long. The economy is making progress. I do believe its making progress, and eventually if we continue, a day will come when i think it will be appropriate to begin to raise our target for the federal funds rate, but to the extent that even when the economy gets back on track, it doesnt mean these head winds will have completely disappeared. In addition to that productivity growth is rather low. At least that may not be a permanent state of affairs, but its certainly something that we have seen in the aftermath. Weve seen it during most of the recovery. Thats a factor that i think is suppressing Business Investment and will work for some time to hold Interest Rates down. These concerns and these factors are related to what economists are discussing, including secular stagnation. The committee, when it thinks about what is normal in the longer run, the committee is recently slightly reduced on their estimates of what will be normal in the longer run. The median view on that is now something around 3. 75 , but we dont really know. Its the same factors that are making the committee feel that will be appropriate to raise rates only gradually. Theres some of the same factors that figure in the secular. Let me ask beyond what the fed is doing. Are there fiscal policy steps congress can take to improve the situation and reduce head winds against growth . For example, we have Interest Rates at near historic lows and construction employment is still below the precrisis levels. For example, wouldnt it be time to invest in repairing our nations transportation and other infrastructure as a way to help against such head winds . As i said, fiscal policy for a number of years has been a drag on growth. We can translate that into a factor that has necessitated lower than normal Interest Rates to get the economy moving back on track. Of course, its a judgment for congress what the appropriate priorities are, but i would certainly say that fiscal policy has been unusually tight for a period like weve lived through. I understand you dont want to dictate what congress priorities are, but if congress were to say investing in significantly robust, transportation infrastructure and other similar projects, would that be something that would help against the head winds . Certainly, it would be a counter to those head winds, yes. Thank you, mr. Chairman. Thank you for holding this particular hearing. Chairman, thank you for being here. I apologize, i havent been here for all of the questioning. The Ranking Member and myself are running back and forth to the Energy Committee talking about fire suppression. You get a lot of credit and blame. Im not blaming you for the fires out west, all right . We can take that question off the table. I know you do take a lot of blame. I just want to thank you for taking time. You said in your opening remarks that the recovery is not complete from the Great Recession. Weve had a lot of lively debates in this committee over soundness and safety, we had a hearing last week on High Frequency trading. Some are claiming markets are perhaps rigged. If you talked to individuals in 2008 and told them we are going to go five years through a Great Recession and youll see the stock market go from 6500 to 17,000, not too many people would have believed that. The question is, books are being written about this, individuals are going as far as to claim the markets are rigged. I want to get your feelings. Do you believe the stock markets are rigged . Well, i think there are a number of concerns that have been outlined about High Frequency trading, and i believe it was in june mary jo white, the chair of the s. E. C. Gave a very important and very detailed discussion of High Frequency trading, outlining where she saw problems and what potential solutions might be to those problems. The quantitative easing, do you believe the unintended consequences of qe1, 2 and 3 with all the bond buying, that its forcing people into the stock markets creating this bubble . I think an environment of low Interest Rates in general, which have been promoted by our, both our keeping the federal funds rate at zero and additional by our purchases, low rates do have an incentive to push individuals to look for yield, to reach for yield. That is both a good thing and a bad thing. On the one hand, we need healthy risk taking in order to spur a recovery. And low Interest Rates, i think, have had a positive effect on helping the recovery, but of course we have to be careful about looking for situations where low rates may be incenting behavior that can be dangerous to Financial Stability. I particularly outlined in my remarks an area like leverage lending where we are seeing a marked deterioration in underwriting standards. It looks like it may be part of a reach for yielding. We are trying to deal with that through supervisory, through supervisory means. The kind of broadbased increase in leverage in the economy and maturity transformation and credit growth that one tends to see in this situation where there are intense Financial Stability risks, i dont think we see those things. At this point, they are more isolated and not broad based in general, at least in my asse assessme assessment. Thank you, i want to go back to senator johanns question about quantitative easing. Do you see when the Federal Reserve stops the Bond Buying Program . As i indicated in my opening remarks, if things continue on the current course, and as the committee expects, the purchases would cease after october meeting. If they cease, my question today would be, would you ever see the restarting of quantitative easing . Once it ends, do you believe this is now the new normal the federal government buys these bonds or would you commit to saying the quantitative easing has come and gone and weve seen the last of it . It really depends on what the economy does. The Economic Outlook is very uncertain. I hope were on a solid course of recovery and that it will continue and not encounter some serious setback. I wouldnt take it off the table forever as a tool the Federal Reserve might need to some day in some circumstances use again, but my hope is were on a path of recovery and Monetary Policy will, over time, normalize, that our purchases will end, eventually our Balance Sheet will begin to shrink back toward more normal size. And when the time is right, that shortterm Interest Rates will begin to move above their current very, very low levels, too. Dr. Yellen, thank you. Senator brown. Thank you, mr. Chairman. Madame chair, thank you for being here. These hearings so often focus when the fed will change its policies so Financial Markets will rally and wall street lenders can make money. Too often we forget about the human side of these issues. As Federal Reserve chair, you worked to put a face on economic numbers. Were appreciative of that. Last february you talked about the toll on unemployed workers being simply terrible and mental and physical health on their workers, on their marriages and on their children. It seems too many people around here still view unemployed workers as lazy, shipless people who do not really want to work, so we simply dont extend programs like unemployment insurance. Talk for a minute or two about the psychological effects unemployment has on workers, why the psychology is so important and why it should matter to all of us, even a senator who goes to work in a suit every day and speaks with an upper class accent. Well, i think when workers lose jobs they depend on for their livelihoods experience a special psychological trauma, and especially when the unemployment is a Long Duration has it has been for many individuals who find themselves unemployed now. First of all, there is a very significant loss in lifetime income. Many studies have documented for workers who experience job loss when unemployment is as high as it has been and they find it difficult to get another job. Of course, theres the fear that goes with that of how will i support my family . How will i take care of my children . I gave a speech in chicago in february and talked to a number of unemployed workers and heard personal stories about individuals who were supporting children and concerned that because in some cases they could only find parttime lowpaying jobs that they couldnt continue to support their children adequately. There are a number of studies. When i use those words, that it takes such a toll on families and children and psychologically thats based on a number of studies that have documented that, that there are health costs to workers who lose their jobs. That in terms of the progress of their children, there are losses to their children when a parent loses a job for a significant amount of time. In terms of the odds of divorce and breakup of family, that is obviously present, too. For people the jobs are often their identities. When an individual cant find a job for a prolonged period of time, who am i and what is my role and how do i contribute to my community and to my family become real psychological toll. I think anyone who ever talked to people experiencing significant unemployment realizes what the psychological toll is and the ways it affects their well being and that of their community. Thank you for realizing thats an important part of your job, to forcefully speak out about the human side, the human cost of economic policies. Too many meshes look at washingtons response to the financial crisis and feel nothings changed. After all the four largest banks are 25 larger than they were in 2007. Federal reserve vice chair said last week what about breaking up the large Financial Institutions . There is no simply actively breaking up the largest banks would be a very complex task with uncertain payoff. Its troubling to me that the largest banks are so complex. One of our nations top regulators cant understand these institutions, particularly since he worked at one of them. Dr. Fisher liked your views expressed in 2009 that break up the banks is more of a slogan. Governor torillos views, he praised a plan i worked on with the senator from delaware. My question is, do you agree with vice chair fisher or do you believe with governor torillo . I think one of the things vice chair fisher said that i certainly agree with with is that Systemic Risk in the Financial System is not purely a question of too big to fail institutions. We shouldnt lull ourselves into thinking if we deal with ways to resolve or diminish the role of those institutions that Systemic Risk is not still a real phenomenon that we have to worry about. During the Great Depression when we had a financial crisis, it was mainly a large number of small banks that were affected, and then we saw runs on the Banking System that had the potential to, and did cause a collapse of credit in the economy. So i think he pointed out and i agree that we have to worry about more than the too big to fail firms, and we could have Systemic Risk if a large number of smaller institutions are hit for some reason. It is certainly, i agree with my colleague governor tirullo, we are committed with trying to deal with too big to fail. We have put into place numerous steps and have more in the works th that, reduce their odds of failure if they do fail, its important to be able to resolve these firms. On one hand there will be much lower odds that a systemic firm would fail. Should that occur, well have better tools to deal with it. Throughout living will prospect and other aspects of our supervision, we are trying to give these firms a feedback object way