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tv   Federal Reserve Announces Quarter Point Rate Hike  CSPAN  June 14, 2017 2:30pm-3:30pm EDT

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>> you will agree with me that whether dynamics scoring is of the public's imagination, you cannot count it twice. >> we have no intentions of counting it twice. the budget will be updated with updated projections and there is no intent and obviously we understand that and no doubt counting. i did not think -- >> watch the rest of this hearing at cspan.org. we are leaving you now to janet yellen on an update of monetary policy. >> good afternoon, before i get started, i want to say that our thoughts are with those who are injured this morning. today, the federal open market committee decided to raise the target range of the federal fund
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rate by one quarter of percen percentage point. our decision reflects the progress the economy has made and is kpekexpected to make of maximum employment and price stability objectives that's signed to us booy law. we released today of principles and plans and additional information on the process that we'll follow in normalizing the size of our balance sheet once we determine it is appropriate to do so. i will have more to say of our interest rate decision and our balance sheet policy. first, i will review recent economic developments and the outlook. following a slow down in the first quarter, economic growth appears to free bounded and of a
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moderate growth so far this year. household spending which is particularly soft earlier this year has been supported by the solid fundamentals including con going improvement in the job market and relatively high levels of consumer sentiment and wealth. business investments which was weak from much of last year has continued to expand and exports showing greater strengths this year in part reflecting pick up of global rogrowth. we continue to expect that the economy will expand at a moderate case of the next few years. in the labor market job gains average of 160,000 per month since the start of the year. a solid rate of growth that although a little slower than last year, we mean well above estimate necessary to absorb new
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trans of the labor force. a low level by historical standards and modestly below the median of participants estimates of its longer level. the market utilization have improved this year. given the under lined downward trend in participation, stemming largely from the aging of the u.s. population relatively steady participation rate is a further sign of improving conditions of the labor market. looking ahead, we expect that the job market will strengthen some what further. turning to inflation, the twelve months changed and price index
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for expenditure was 1.7% in april. down some what over the past few months. core inflation which excludes the volatile food and energy categories and better indicator of future inflation have inch slower. slower readings on inflation have driven significantly by what appears to be one off reductions in certain category of prices such as wireless telephone services and prescription drugs. these price declines will as a matter of arithmetic restream of the figures until the low mark readings drop out of the calculations. however, with employment near the maximum sustainable level,
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the market continuing to strengthen, the committee expects inflation to move up and stabilize around 2% of the next couple of years in line with our longer run objectives. nonetheless, in light of the softer readings, the committee is monitoring inflation developments closely. let me turn to the economic projections that committee participants submitted for this meeting. as always, participants condition their projections on their own individual views of appropriate monetary policy which in turn depends on each participant assessments of many factors that shape the outlook. the median projection for growth of inflation adjusted growth domestic product where real gdp is 2.2% this year, slightly
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above its estimated longer run rate. the median projections for the unemployment rate stands a at -- it takes down to 4.2% of 2018 and 2019. modestly below the median estimate of its normal run rate. finally the 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 change and unemployment rate follows a lower path and inflation although marked down this year is unchanged.
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returning to monetary policy for the past year and a half, the fomc have been gradually increasing its target range for the federal fund rates as the economy is continuing to make progress towards our goal of maximum employment and price stability. our decision today continues this process. we continue to expect of the ongoing strengths of the economy will warrant gradual increases of funds rate to sustain a healthy labor market and stabilize inflation around our 2% longer runobjectives. that's based on our view that the fund rate remains below our mutual level, it is movie theater expansion nar nor
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contractionary. the federal funds rate would not have to rise all that much further to get to a neutral policy stance. because we expect neutral of the federal funds rate to rise some what overtime, additional gradual rate hikes are likely to be appropriate over the next few years to sustain economic expansion. everyone so the committee continues to anticipate that the longer run neutral level of the federal funds rate is likely to remain below levels that prevail in previous decades. this few is consistent with participant projections of monetary policies. the median projections of the federal fund rates is 1.4% at the end of this year and 2.1% of the end of next year and 2.9% at the end of 2019 in line of its estimated longer run value.
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compares with the projections made in march, the median path to 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 of the federal funds rate in response to changes to 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 statement, we are continuing to maintain the size of our balance sheet by reinvesting proceeds for securities and principle payments from agency debt and mortgage back securities. provided that the economy evolves broadly as the committee anticipates, we currently expect to begin implementing a balance
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sheet normalization program this year. consistent with the principles and plans, we release in 2014. this program would gradually decrease our reinvestment and initiate a gradual and decline of our security holdings. our policy normalization principles in plans that we release today provides further information. for both treasury and agency securities we'll reinvest proceeds for holdings only to the extent that they exceed gradually rising caps on reductions of our security holdings. initially these caps will be set at relative lily low levels. $6 billion per month treasuries and $4 billion per month in
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agencies. these caps will gradually rise over the course of the year to maximum $30 billion per month for agencies and securities and will remain in place through the normalization process. by limiting the volume of securities, the private investors will have to absorb as we reduce our holdings of outside interest rates and other potential market strains. as i noted when our security holdings begin to gradually decline so will to of the reserve balances of the banking system. at some point down the road, the community will bring the decline of the balance sheet to an end as quantity reserve is
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normalized. i cannot tell you of the normal run of reserve balance will be because that'll depend on the committee's decisions about how to implement monetary policy most efficiently and effectively in the longer run as well as a number of as yet unknown elements including the banking system's future demands for reserves in various factors that may affect daily supply of reserves. what i can tell you is that we anticipate reducing reserve balances and overall balance sheet to level below those scenes in recent years but larger before the financial crisis. as readers of our minutes know the committee have discussed potential long run frameworks for implementing monetary policy. decisions about appropriate
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longer framework do not need to be made for quite some time and our future's deliberations will benefit from the experience that we'll gain during the normalization process. at this point, i will just point out our current system is working well and has some important advantages. in particular it is simple and efficient to operate does not require active management of the supplier reserves and most importantly provides good control over the federal funds rate and effective transmission of 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 the balance sheet does not constrain our future's options for implement monetary policy. finally as noted in today's
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addendum, the committee affirmed of 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 act of tool for monetary policy in normal times. however, the kmicommittee would prepared to resume investments of the economic outlook to warrant a sizable reduction in the federal funds rate. more generally the committee will be -- if future economic conditions were to warrant a more accommodating monitoring policy can be achieved solely by reducing the federal funds rate. thank you and i will be happy to take your questions.
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>> the principles that you released today of interest rate normalization is well under way. with the latest rate increase, do you believe normalization is now well under way? >> that's something that we have set for some time and i have previously been asked what well under way means, i said i don't want to define that in quantitative terms but in qualitative terms so there is no specific level of the federal funds rate that means we are well under way but it is also a question of not only the current level but our conference in the outlook and our projections for the future path of the federal
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funds rate. 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 federal funds rate and our statement indicates that the economy continues to evolve in the manner that we expect that we would feel the conditions will be in place to begin this process this year. >> i am wondering if you have talked to the president or members of the staff of the possibility of staying on as chair for a second term. i am wondering if you would consider doing that, is it something that you thought doing and finally there are three vacancies on the feds from you
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have any comment for the president to nominate any positions? >> what i have said for my situation that i fully intend to serve out my terms as chair which ends in early february. i have not had conversations with the president about our future plans and i do very much hope and 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 not too distant future and the senate will take that up. i look forward to having a full board. >> do you desire to stay on? >> i don't have anything for you at this point. >> i am from the financial times. we now have a long streak of weak inflation numbers by the
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cpi this morning as well and expectations are dedeclining. how does that interact with our policy outlook and further disappointments for rate hikes or delaying balance sheet run offs. how do you think those two responses for inflation? >> let me just say as i emphasized in my statement and always say monetary policies is not on a pre-set course. we indicated in our statement today that we are close closely monitoring inflation development and taken note of effect that there had been several weak readings on core inflatio inflations. our statement indicates that we expect inflation to remain low
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on the near term. we continue to fill with a strong labor market that's continuing to strengthen, the conditions are in place for inflation to move up. now obviously, we need to monitor that very carefully and ensure especially with roughly five years of inflation running under our 2% objective that is gold to which the committee is strongly committed and we need to make sure that we have in place the policies that are necessary to achieve 2% inflation and as i pledge that we'll do that but let me say with respect to recent readings, it is important not to over react to a few readings and data on inflation can benoit noisy. as i pointed out there is been
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some factors held down inflation in recent months of a huge in cell telephone service plan prices. some declines in prescription drugs. we had an exceptionally low reading on core pc in march. that will continue to hold down 12-month changes until that reading drops out. but we are this morning's reading on the cti showed weakness in a number of categories. and it's certainly something that we will be closely monitoring in the months ahead. we're focused on making our policy decisions on the medium term outlook. and we will, you know, be
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looking carefully at incoming data. and as always, revising our outlook and policy plans as appropriate. [ inaudible question ] so "continue" as today's actions show to feel that the economy is doing well, is showing resilience. we have a very strong labor market. an unemployment rate that's declined to levels we have not seen since 2001. and even with some moderation in the pace of job growth, we have a labor market that continues to strengthen and policy remains accomodative. it's important that inflation move up to 2%, we continue to
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expect that and believe that conditions are in place. but we will monitor incoming data, obviously, and be attentive to rethinking our outlook if it seems appropriate. >> reporter: from bloomberg news. i hate to belabor the point on inflation, i was wondering, i hear a lot of the so-called niru, your confidentiversation d other committee members. it's unobservable thing, at best it's an estimate. and the assumptions in there seem to me like the economy today is much like the economy yesterday, when, if anything, we've learned that the post-recession economy is vastly different than it was before the recession. so i'm wondering, something you've talked about is to focus more on the change in inflation, actual inflation, and something going up or is it go down and
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basing 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? >> we are closely looking at the actual performance of inflation. and altering our views on the basis of discrepancies between what we see and our expectations. and while it is very difficult to pin down what is the longer return normal rate of unemployment, and there's a great deal of uncertainty about it, and it's hard to pin down, especially given the fact that the so-called phillips curve appears to be quite flat, that means that inflation doesn't respond very much or very quickly to movements in unemployment. nevertheless, that relationship i believe remains at work. we have seen that operate historically. now, in the face of very low unemployment that we have seen,
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wage growth has picked up somewhat, but it remains low. and inflation is influenced by a number of different factors. but we certainly haven't seen much or any evident upward pressure on inflation. in light of that, the committee has successively moved down the normal run of rate of unemployment and in this projection it's moved down to 4.6%, a tenth lower than it was last time. so while the unemployment rate is below that, it's not that much -- it's not that much below it. >> reporter: "the washington post." we saw measures of consumer rises based on tax cuts and infrastructure spending. some of those policy changes have been slower to materialize than initially expected. how do you view the positive and
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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, although many forecasters have pushed back somewhat on 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 haven't seen very much evidence that thus far expectations of policy changes have driven substantial changes in either consumer spending or
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investment spending. so i really wouldn't expect any significant pullback. many of our business contacts, i think their confidence remains high. they've not really changed their plans yet. and the have a wait and see attitude. >> reporter: daniel applebaum, "the new york times." measures of financial conditions show that since the fed started raising interest rates two years ago, financial conditions actually have loosened. consumer business borrowing costs in many cases are down. do you have a sense that the market is not listening to you? how much of a concern is that for you? and at some point does it convince you that you need to raise rates perhaps more quickly? >> in deciding what the appropriate path of rates is, we take many different factors into account. we have certainly noticed the
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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's been a modest decrease recently in the value of the dollar, although it's 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. but other things also affect the stance of policy. so there really can't be any simple relationship. we're not targeting financial conditions. we're trying to set a path of the federal funds rate, taking account of those factors and lows that don't show up in a
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financial conditions index, we're trying to generate paths for employment and inflation that meet our mandated objectives. >> reporter: reuters. on inflation, what's the possibility that something more -- i mean, the sort of weight of central bank credibility now for a generation really, plus globalization, has just pushed the world into a low inflation environment that's going to be very hard to get wages and prices moving then. and then related to that, if 4.2, why not 4, why not 3.8? you've banked the quarter a full percentage point now, so there's no risk of falling behind whatever curve exists. why rush? >> so i don't think central bank credibility, at least the fed's credibility, has been impaired. we look at a whole variety of indicators of inflation
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expectations. professional forecasters, whether it's in the blue chip or the survey of professional forecasters, those expectations have remained quite steady and in close alignment with our 2% inflation target. tips-based measures of inflation compensation do not provide straight reads on market participants' estimates and expectations about inflation. they embody other elements, risk premia and liquidity premia as well. they have moved down and now remain at low levels. but they've moved back up again. it is true that some household surveys of inflation expectations have moved down. but overall, i wouldn't say that
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we've seen broad undermining of inflation expectations. but you asked also i guess about structural changes, perhaps, have they impacted the inflation process. that certainly is possible. and estimates of the normal longer run unemployment rate, they are quite uncertain. i agree with your assessment there. we're really not certain what they are. and policy is not being -- is not based on some firmly-held preconceived notion. we're watching very carefully how the actual economy performs. and, you know, i continue to believe, though, that with job growth running well in excess,
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even with a moderation of the level that's needed to provide for new entrants in the labor market, we do have a strengthening economy, with policy accomadative, all we're doing in raising rates is removing a bit of accommodation heading toward a neutral pace. i see that as appropriate. we're not moving to aggressively as to put a break on continued improvement in the labor market. but i think that that's a prudent move, to move in a gradual way to remove accommodation with unemployment now, and not only i should say the unemployment rate, but i think any indicator of labor market performance and tightness that you could look at, whether it's household perceptions of
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the availability of jobs, difficulty that firms report in hiring workers, the rate at which workers are quitting their jobs, the rate of job openings. all of these indicators do signal a tight labor market. now, with inflation below 2%, i think it's appropriate that the labor market be that tight. but on the other hand, i think we want to avoid the risk. we want to keep the expansion on a sustainable path and avoid the risk that at some point we find ourselves in a situation where we have done nothing and then need to raise the funds rate so rapidly that we risk a recession. so moving to some extent in a timely way to remove accommodation with a strong economy and continued labor market strength, the committee
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believes is an appropriate management of risks. but we are attentive to the fact that inflation is running below our 2% objective, that we have faced that situation now for a long time, and it's really quite essential that we put in place policies that will succeed in moving inflation back to our 2% objective. and it's a symmetric objective, so that's a -- that's a risk that we face as well. the committee believes we have conditions in place for inflation to move up. but that's also a risk. and those things point i think to a gradual pace of reducing accommodation. >> reporter: hi, nancy marshall from "marketplace." recently a group of economists sent the fed a letter earlier this month disagreeing with your 2% inflation target and saying
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they would like the economy to run a bit hotter. they don't think the labor market is so tight. you say you're committed to the 2% target. but what do you say to them? >> so at the time that we adopted the 2% targets back in 2012, we had a very thorough discussion of the factors that should determine what our inflation objective should be. and, you know, i believe that was a well-thought-out decision. now, at the moment we're highly focused on trying to achieve our 2% objective. and we recognize the fact that inflation has been running below, and it's essential for us to move inflation back to that objective. now, we've learned a lot in the meantime. and assessments of the level of the neutral likely level currently and going forward of
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the neutral federal funds rate have changed and are quite a bit lower than they stood in 2012 or earlier years. and that means that the economy is -- has the potential where policy could be constrained by the zero lower bound more frequently than the time that we adopted our 2% objective. so it's that recognition that causes people to think we might be better off with a higher inflation objective. and that's an important set. this is one of our most critical decisions. and one we are attentive to evidence, and outside thinking. it's one that we will be reconsidering at some future time. and it's important for our
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decisions to be informed by a wide range of views and research, which is ongoing inside and outside the fed. but a reconsideration of that objective needs to take account not only of benefits of a higher -- potential benefits of a higher inflation target, but also the potential costs that could be associated with it. it needs to be a balanced assessment. but i would say that this is one of the most important questions facing monetary policy around the world in the future. and we very much look forward to seeing research by economists that will help inform our future decisions on this. >> reporter: tom lee with "the l.a. times." the federal funds rate at 3%,
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the markets are expecting 2%. how big of a concern is that gap in your mind? what are the reasons for the disconnect? and, you know, what are the implications and the risks for the real economy? >> so let me first say, it's not straightforward to determine exactly what expectations are embodied in market prices, because there are term premia that affect these rates. and they may not really be as low as one would infer from a straight read. that said, in part expectations reflect estimates of what the neutral federal funds rate is, and how it's likely to evolve over time. and views have changed about that over time, and there is a
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good deal of uncertainty about it. so we've recently put out charts that try to show what the range of uncertainty is around our path for the federal fund rate, especially as one goes further out, there is a good deal of uncertainty, and that reflects all the shocks that can affect the evolution of the economy, and also the fact, we're quite uncertain ourselves about what the likely -- what the evolution will be of the neutral federal funds rate. so we do try to write that down and provide the public with information about our current expectations. and the median now stands at around 3%. but we have uncertainty about that. many of my colleagues and i think that the current neutral level is lower than that. and as i said in my opening statement, the fed funds rate
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path reflects an expectation that that neutral rate will be moving up some in future years. but that remains uncertain. and i think that's something that market participants are trying to assess. and we will be as well. [ inaudible ] >> reporter: the difference in the gap between the expectation and what the fed's projections are for longer run federal funds rate? >> our expectations are little changed. i mean, the projections we released today are essentially identical to those, and i think the market is aware of the views of participants and is assessing evidence itself to form their own views. and it's important that the market take an independent look,
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and that we get to understand and see how market participants are interpreting evidence on the evolution of the economy. so it's not an unhealthy thing to have such a gap. and as i just said, our own views are not set in stone, but are likely as well to evolve over time. >> reporter: associated press. back in 2013, when the fed first raised the possibility of trimming its bond purchases, it created a bit of turbulence in financial markets, to recess your communication of that process. this trimming of the bond holdings, the financial markets seem to be taking that in a better way. if down the road, though, you see that there is more of an adverse reaction, are you
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planning to make any changes, perhaps change the caps to $30 billion in the $20 billion caps, how do you assess how you'll ham that going forward? >> so we have indicated for quite some time, i guess since our -- at least since our 2014 normalization principles, that we wanted to reduce our balance sheet in a gradual and predictable way. and we have tried systematically to communicate more about how we would do that as our plans have evolved. and today's announcement is another step in providing further details about how we plan to proceed so that when this plan does go into effect, no one is taken by surprise and market participants understand
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how this will work. i think that we -- the plan is one that is consciously intended to avoid creating market strains, and to allow the market to adjust to a very gradual and predictable plan. my hope and expectation is that when we decide to go forward with this plan, that there will be very little reaction to it, that it's clear how we intend to proceed, and that this is something that will just run quietly in the background over a number of years, leading to a reduction in the size of our balances she and in the outstanding stock of reserves, and that it's something that the committee will not be reconsidering from time to time. we think this is a workable
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plan, and it will -- as one of my colleagues, president hartford described it, it will be like watching paint dry, that this will just be something that runs quietly in the background. so that's my expectation and our intention. look, of course if it turns out that there is a surprise and a substantial reaction, that is something we would have to take into account in deciding on the appropriate stance of policy. >> reporter: michael aki from bloomberg television and radio. a couple of comments from administration officials. the treasury secretary and others have suggested that dodd/frank regulation, the way it's been applied, have restricted credit growth in the economy. banks are not making loans that they otherwise would, and that has slowed growth. do you agree with that? and if you get a new vice chair of supervision who wanted to ease up on regulation, would you go along with that?
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also i wanted to ask you, it's been reported the president has congratulated you on being a low interest person. would you agree with that characterization of your philosophy? >> well, with respect to the impact of credit conditions and bank regulation and slow growth, i've previously in testifying indicated that i don't think that our regulations have played an important role, at least broadly speaking, in impeding credit growth and the growth of the economy. and i've pointed in the past to a number of statistics suggesting that credit growth continues to be healthy, including among smaller community banks that are most concerned with regulatory burden. i think when banks are
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undercapitalized and weak, that impedes credit growth. and when banks are strong, they're in a much better position to lend. so that's been a view that i've stated previously. now, in terms of regulation, the treasury recently issued on monday a detailed report. and that's quite a complicated document with lots of recommendations in it. i haven't had a chance to review it thoroughly. so i don't want to comment on too many details. but i would say it underscores the importance of capital liquidity, stress testing, and resolution planning, in having a safe and sound banking system, which are views that i and my colleagues have long espoused.
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regulatory burden, when it's possible to ease it, and a good deal of the treasury report is focused on regulatory burden, that's something that all regulators should be looking to do. we strongly believe in the importance of tailoring our regulation to the size and complexity of institutions, of finding ways to relieve burden for community banks. we have been focused and had a number of initiatives already in that direction, looking for ways, for example, to simplify capital requirements for community banks. and we'll continue in that direction and in that sense in those areas certainly share the views expressed in the treasury report. so there are a number of areas and suggestions where our
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thinking the lines, well, there's probably some areas where we're likely to have differences. but, you know, quite a number of areas where we're, you know, likely to be able to -- and already are taking actions that are consistent with those recommendations. >> reporter: the characterization of you as a low interest rate person? >> well, i have felt that it's been appropriate for interest rates to remain low for a very long time. we are in the process of, as the economy strengthens, normalizing interest rates. but certainly we've had a lot of years in which interest rates have been low. i thought it was necessary to support the economy at that time and was strongly in favor of those policies. >> reporter: thank you, karen marachek with "market news
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international." today you outlined the plan over reinvestments. you stopped short of saying when it would be implemented, except to say this year, and adding that depended on how the economy evolved. can you tell us why you decided not to go ahead with it today? are there certain conditions you're looking for? as a second question, do you think that you could raise rates and begin implementation of the plan at the same time? thank you. >> so we have tried as meticulously as we can to provide advance warning to markets about how we would go about doing this so that market participants can prepare. and today's announcement is another step in that process. so we certainly wanted to get this information out before we actually undertake the beginning of this plan. and, you know, as the statement
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says, we've made no definite decision on the timing of the plan. but the timing of initiating the plan, but if the economy evolves in line with our expectations, which we will be watching, always are, we could put this into effect relatively soon. you asked about whether or not we would do that and raise rates at the same meeting. and i would say we've made no decision about that. and it really hinges on the outlook and our assessment of conditions. >> reporter: hi. victoria guido with politico. you mentioned the treasury report. how much weight do you give those recommendations in considering potential regulatory changes moving forward? also more specifically, one of the recommendations relates to the volcker rule. i know you've said in the past
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it might be a good idea to reduce the burden on community banks. but it also talks about potentially exempting banks with trading assets and liabilities above a certain level. and i was wondering if you think that's an idea that's worth exploring, that might be a good idea. >> so we have previously suggested exempting community banks, smaller banks, entirely from the rule. and a number of my colleagues have spoken about the volcker ru rule. implementation of it is frankly complex. and i'm certainly open to looking at ways to reduce regulatory burden in that area. the report endorses a restriction on proprietary
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trading. so in that sense, it endorses the main objective of the volcker rule, which i was pleased to see. but on implementation, it's true that the rules were in part reflecting the way the legislation is written, were i think necessarily complex, but we do have some ideas for how we might simplify the rule. and certainly it's something we're quite open to looking at. [ inaudible question ] well, i mean, treasury has a -- set out a list of objectives for regulation that i'm sympathetic to and endorse. i think looking for ways to reduce regulatory burden when it can be done without sacrificing safety and soundness or creating systemic risk, that's something
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that all regulators should want to do. we've done an awful lot of rule-writing over the last five or six years. and coming back and looking at where we've created burdens and ways in which we can simplify to reduce, that is an objective that is core to the treasury review, and that we are very sympathetic with. while we may not agree on every detail, certainly the suggestions that are made there are ones that we will pay attention to, when in many cases we're already on our own list of things we should -- we should review. >> reporter: mike derby from dow jones news wires. in light of the plans to trim the balance sheet hopefully later this year, what are you learned about kiwi and buying policies as a tool for monetary
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policy? when it launched, you hadn't engaged in it at that scale before. there were fears of hyperinflation that hasn't seemed to come to pass. in light of kiwi as potentially a tool for the future, it might come back again, what have you learned about how it works in the economy, like where do you see it affect things? what are sort of the lessons learned of the experience? >> well, thanks, that's a great question. i mean, staff ain the federal reserve and outside economists have done a great deal of work in trying to evaluate kiwi. i think the general conclusion is that it has worked, in that it has put some downward pressure on longer term interest rates, so-called term premiums embedded in longer term interest rates. there's disagreement among economists about exactly how large those effects are, and it's something that's difficult to pin down.
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but obviously it has not caused r runaway inflation. quite the contrary. i mean, that was never my expectation, but i do remember when people were afraid that that would happen. we do have the tools. we have -- you know, even with a large balance sheet, we intend to shrink our balance sheet now. but even with a large balance sheet, we retain the ability to move the fed funds rate and set it as appropriate to the needs of the economy. so i think we have learned that it works, it's a valuable part of a toolkit. it's something that if we were to encounter an episode in the future of extreme weakness, i've said we want the fed funds rate and movements in short term interest rates, that's our go-to, number one main policy tool. but if we were to hit the zero
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lower bound and constrained in our use of that tool, certainly balance sheet policies and forward guidance of the type that we provided, i believe based on the evidence of how they worked, ought to remain part of our toolkit. and we have said in the bullets that we released today on our balance sheet that in such an episode of such extreme weakness in the future, those are things we would consider going forward. >> reporter: is 4.5 billion sort of a natural limit of how high you might want to push the balance sheet or do you envision it going higher if you needed to? >> we've had no discussion of that issue. and our focus now is on getting it back to a more normal size. but i would say use of qe in the united states relative to the size of our economy is not as
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high as it's been in some other countries that have employed it. but that's something we haven't seriously even discussed. >> reporter: patrick gillespie at cnn. it's workforce development week at the white house. and you highlighted several successful job training programs in your speech in march. the president's budget has a 40% cut to job training programs. what is your response to the budget cuts to job training programs, even though they expect to expand apprenticeship programs? do you believe job training programs and apprenticeships are needed to fix the job skills gap in the economy? >> i'm not going to comment on the president's budget. these programs can be undertaken at many different levels. i've seen many nonprofits and states and local authorities put in place programs that look to me to be successful.
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i do think we have a tight labor market, and one where employers have jobs where they're finding difficulty identifying workers with the appropriate skills. in my own discussions with businesses, what i hear more of, and this is something i think is a great aspect of a tight labor market, larger firms are spending more on training and trying to, given that they can't higher workers with the ideal skills, are training people to fill jobs that they have available. what i hear from ceos of smaller firms is that they don't have the ability to launch such programs. they would really very much like to participate along, for example, with community colleges or nonprofits to see such
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programs launched and have jobs that people could fill if they received the appropriate training. so i do think that this is an important area. and especially given the pressures of that existed for a long time, downward pressure on wages and job opportunities, especially for those with less skills, i think that this is something that deserves priority. thanks. fed chair janet yellen, the federal reserve, hiking a key interest rate. and janet yellen, federal reserve chair, announcing that for the second time this year the interest rate will go up. they're planning to reduce the
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size of the $4.5 trillion balance sheet as well. fed officials voted 8-1 to raise the federal funds rate to a range of 1 to 1.25%. the rate sets what banks can charge each other for overnight loans and influences the availability and flow of money in the u.s. economy. c-span. where history unfolds daily. in 1979, c-span was created as a public service by america's cable television companies, and is brought to you today by your cable or satellite provider. sunday night on "after words," utah republican senator mike lee talks about forgotten historical figures who fought against big government in his book "written out of history." senator lee is interviewed by former

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