Yellen spoke for an hour, but the market only heard three words: “around six months.” 
 
 She was asked how long the Fed would wait after the tapering ends before it begins to raise interest rates. 
 
 Her answer: “So the language that we used in the statement is considerable period. So I, you know, this is the kind of term it’s hard to define. But, you know, probably means something on the order of around six months, that type of thing.” 
 
 She added lots of qualifiers to that, including the assessment of the labor market and the inflation outlook, but the markets only heard “around six months.” 
 
 Which would mean the first rate hike could come in the middle of next year, rather than toward the end of the year as implied by the Fed’s “dot plot.” 
 
 Did Yellen mean to be that specific? No, but she’s now the Fed chair, and markets will react to what she said, not what she means. ||||| 1 of 3. Federal Reserve Chair Janet Yellen answers a question at a news conference following the March 2014 Federal Open Market Committee meeting, while at the Board of Governors of the Federal Reserve System in Washington, March 19, 2014. 
 
 WASHINGTON (Reuters) - The U.S. Federal Reserve will probably end its massive bond-buying program this fall, and could start raising interest rates around six months later, Fed Chair Janet Yellen said on Wednesday, in a comment which sent stocks and bonds tumbling. 
 
 Yellen's remarks at her first news conference as the head of the central bank pointed to a more aggressive path toward higher interest rates than many had anticipated, and bets in financial markets shifted accordingly. 
 
 The comments came after a two-day meeting in which Fed officials made another reduction in their bond-buying stimulus and decided to jettison a set of guideposts they were using to help the public anticipate when they would finally raise rates. 
 
 The Fed said the change in its rate hike guidance did not mark a shift in its intentions and that it would wait a "considerable time" after shuttering its asset purchase program before pushing borrowing costs higher. 
 
 Yellen, who had fielded numerous questions without a hitch, hesitated when asked what the Fed meant by "considerable." 
 
 "I -- I, you know, this is the kind of term it's hard to define, but, you know, it probably means something on the order of around six months or that type of thing. But, you know, it depends -- what the statement is saying is it depends what conditions are like." 
 
 Several analysts wondered whether her answer was an unintended slip, given the deliberately vague language of the Fed's statement. 
 
 Either way, the reaction in financial markets was swift and sharp. Prices for U.S. stocks and government bonds added to earlier losses triggered by fresh Fed forecasts that showed policymakers are inclined to raise rates a bit more aggressively than they had been just a few months ago. The U.S. dollar rose. 
 
 "The forecast change could be interpreted as a relatively hawkish shift ... and as such the general market reaction seems well-founded," said JPMorgan economist Michael Feroli. 
 
 Futures traders moved to price in a first interest rate hike as soon as April 2015. Previously, it was July. 
 
 Most top Wall Street economists, however, continued to see the first rate hike in the second half of 2016, according to a Reuters poll. 
 
 MIXED MESSAGES 
 
 Yellen sought to use her news conference to emphasize that rates would stay low for awhile and rise only gradually. She also said they could end up staying lower than normal "for some time" even after the jobless rate drops to a healthy level. 
 
 The Fed would look not only at how close inflation and unemployment are to its goals, but how fast, or slowly, those measures are approaching those goals, she said. 
 
 At 6.7 percent, the unemployment is well above the 5.2 percent to 5.6 percent range Fed officials see as in keeping with full employment. The central bank's favored inflation gauge is barely more than half of its 2.0 percent target. 
 
 The Fed has held interest rates near zero since late 2008 and has pumped more than $3 trillion into the economy with its bond purchases to try to foster a stronger recovery. 
 
 Of the Fed's 16 policymakers, only one believes it will be appropriate to raise rates this year; 13 expect a first rate hike next year, and two others see the first rate hike coming in 2016, according to the new forecasts. 
 
 But once rate hikes start, Fed officials see slightly sharper increases than they did in December, when they last issued forecasts. They now see rates ending 2016 at 2.25 percent, a half percentage point above their December projections. ID:nL2N0MG1AP] 
 
 The unease in markets "might be a sign that people think Yellen will tighten sooner rather than later," said Wayne Kaufman, chief market analyst at Rockwell Securities in New York. 
 
 MEASURED WIND DOWN 
 
 The central bank proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion. 
 
 The decision to further scale back its stimulus keeps the Fed on track for the measured wind down laid out by Yellen's predecessor, Ben Bernanke. The Fed repeated that it plans to continue trimming the purchases in "measured steps" as long as labor conditions continue to improve and inflation shows signs of rising back toward the Fed's 2.0 percent goal. 
 
 The Fed's assessment of the U.S. economy chalked up recent weakness partly to adverse weather. 
 
 It had said since December 2012 that it would not consider raising short-term rates until the jobless rate fell to at least 6.5 percent, as long as inflation looked set to remain contained. 
 
 But the unemployment rate has fallen faster than anticipated, and officials dropped the guidance, saying they would look at a range of economic indicators to judge the economy's readiness for higher rates. 
 
 Minneapolis Fed President Narayana Kocherlakota dissented, saying that getting rid of the numerical guidance could hurt the credibility of the Fed's commitment to return inflation to 2.0 percent. 
 
 (Reporting by Ann Saphir and Krista Hughes; Additional reporting by Jason Lange in Washington and Chuck Mikolajczak in New York; Editing by Tim Ahmann and Andrea Ricci) ||||| The Federal Reserve gave itself room to keep borrowing costs low at least until next year by dropping a linkage between the benchmark interest rate and a specific level of unemployment. 
 
 “We know we’re not close to full employment, not close to an employment level consistent with our mandate, and unless inflation were a significant concern, we wouldn’t dream of raising the federal funds rate target,” Chair Janet Yellen said today after her first time leading a meeting of the Federal Open Market Committee. 
 
 In deciding how long to keep rates low, the committee will look at a “wide range of information,” including labor market conditions, inflation expectations and financial markets, she said. The Fed also reduced the monthly pace of bond purchases by $10 billion, to $55 billion. 
 
 Treasury yields climbed while stocks fell for the first time in three days as Yellen said the central bank’s stimulus program could end this fall and benchmark interest rates could rise six months later. 
 
 Related: U.S. Stocks Fall as Fed Tapers, Forecasts Higher Rates 
 
 The FOMC statement repeated that the federal funds rate will stay low for a “considerable time” after asset purchases end. Asked in the press conference to specify how long that might be, Yellen said: “you know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing.” 
 
 Photographer: Andrew Harrer/Bloomberg Janet Yellen, chair of the U.S. Federal Reserve, during a news conference following a... Read More Janet Yellen, chair of the U.S. Federal Reserve, during a news conference following a Federal Open Market Committee meeting in Washington, D.C. on March 19, 2014. Close Close Open Photographer: Andrew Harrer/Bloomberg Janet Yellen, chair of the U.S. Federal Reserve, during a news conference following a Federal Open Market Committee meeting in Washington, D.C. on March 19, 2014. 
 
 The 10-year note yield rose 10 basis points, or 0.10 percentage point, to 2.77 percent as of 4:15 p.m. in New York. The Standard & Poor’s 500 Index fell 0.6 percent to 1,860.77. 
 
 Overhauling Guidance 
 
 The Fed is overhauling forward guidance after unemployment declined toward 6.5 percent, its previous threshold for a rate increase, faster than policy makers predicted. Yellen last month told lawmakers that the unemployment rate alone isn’t an adequate gauge of economic health and “there’s a great deal of slack in the labor markets still that we need to work to eliminate.” 
 
 Quarterly forecasts by Fed policy makers also showed more officials predicting the benchmark rate, now close to zero, would rise at least to 1 percent at the end of 2015 and 2.25 percent by the end of the following year. 
 
 Yellen downplayed the importance of the forecasts. 
 
 “These dots are going to move up and down over time,” she said in a reference to the forecasts, which are illustrated as dots on a chart. They moved up “ever so slightly,” she added. “The committee’s views on policy will likely evolve.” 
 
 Photographer: Mark Wilson/Getty Images People visit booths of prospective employers during the Hiring Our Heroes job fair at... Read More People visit booths of prospective employers during the Hiring Our Heroes job fair at the Washington Convention Center, on Jan. 10, 2014 in Washington, DC. Close Close Open Photographer: Mark Wilson/Getty Images People visit booths of prospective employers during the Hiring Our Heroes job fair at the Washington Convention Center, on Jan. 10, 2014 in Washington, DC. 
 
 Measured Steps 
 
 The FOMC repeated that it will reduce asset purchases “in further measured steps at future meetings.” At the same time, “asset purchases are not on a preset course.” The committee announced $10 billion reductions in purchases at the previous two meetings. 
 
 “Growth in economic activity slowed during the winter months, in part reflecting adverse weather conditions,” the Fed said. Even so, “there is sufficient underlying strength in the broader economy to support ongoing improvement in labor-market conditions.” 
 
 The central bank’s preferred gauge of consumer prices climbed 1.2 percent in the year through January and hasn’t exceeded its 2 percent goal since March 2012. That gives policy makers “ample scope to continue to try to promote a return to full employment,” Yellen testified to lawmakers Feb. 27. 
 
 Minneapolis Fed President Narayana Kocherlakota dissented, saying the statement “weakens the credibility of the committee’s commitment to return inflation to the 2 percent target from below and fosters policy uncertainty that hinders economic activity.” 
 
 Economist Survey 
 
 Seventy-six percent of economists in a Bloomberg survey March 14-17 predicted the Fed would drop its unemployment threshold. Economists also predicted a $10 billion reduction in the monthly pace of bond purchases, according to the median of responses. 
 
 Source: FOMC via Bloomberg In deciding how long to keep rates low, the committee will look at a “wide range of... Read More In deciding how long to keep rates low, the committee will look at a “wide range of information,” including labor market conditions, inflation expectations and financial markets, Chair Janet Yellen said. Close Close Open Source: FOMC via Bloomberg In deciding how long to keep rates low, the committee will look at a “wide range of information,” including labor market conditions, inflation expectations and financial markets, Chair Janet Yellen said. 
 
 Yellen, 67, took over as Fed chair last month after three years as deputy to Ben S. Bernanke. In that role, she helped shape the communications policies the Fed wielded as it sought to nurture a recovery from the worst recession since the Great Depression. 
 
 After cutting interest rates to zero in 2008, the Fed embarked on large-scale asset purchases as well as forward guidance intended to convince investors that borrowing costs would stay low for a long time. 
 
 Starting in December 2012, the FOMC said the federal funds rate would stay low at least as long as unemployment was higher than 6.5 percent and the outlook for inflation didn’t exceed 2.5 percent. 
 
 Becoming Obsolete 
 
 With the jobless rate at 6.7 percent last month, that guidance was fast becoming obsolete. 
 
 “It’s a relic of days of yore,” Brian Jacobsen, who helps oversee $241 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said before the FOMC statement. 
 
 Policy makers met this week as economic reports indicated the world’s largest economy is pulling out of a slowdown linked to unusually harsh winter weather. 
 
 Factory production rose in February by the most in six months as assembly lines churned out more cars, business equipment and chemicals, a month after snowstorms hampered deliveries of parts and materials. 
 
 Employers last month added more workers than projected following the weakest two-month hiring gain in more than a year. The jobless rate rose from 6.6 percent, a five-year low, as more people entered the workforce. 
 
 Retail Sales 
 
 Retail sales climbed in February for the first time in three months, claims for unemployment benefits declined and consumer confidence improved, reports showed last week. 
 
 “The economy is getting better, and it’s likely the softer patch we’re seeing is weather related,” Josh Feinman, the New York-based global chief economist for Deutsche Asset & Wealth Management and a former Fed senior economist, said before the statement. “I don’t know that all the headwinds are gone, but they’re clearly blowing with a lot less intensity.” 
 
 Consumers are getting a boost from stock-market gains fueled by the Fed’s unprecedented stimulus. The Standard & Poor’s 500 Index rose yesterday to 1,872.25, near the 1,878.04 record March 7. The S&P jumped 30 percent last year for the best advance since 1997. 
 
 Scaling Back 
 
 As the economy improves, the Fed is slowly scaling back the large-scale bond purchases that have expanded its balance sheet to a record $4.18 trillion. The purchases have prompted concern among some policy makes that the Fed is fueling asset-price bubbles. 
 
 The Fed on Dec. 18 announced its first reduction in bond purchases, to $75 billion from $85 billion, then followed up with an equal cut in January to $65 billion. 
 
 “The task for monetary policy will be to provide continued support as long as necessary, and to return policy to a normal stance over time without sparking inflation or financial instability,” Fed Governor Jerome Powell told lawmakers last week. “This will require a careful balancing, as there are risks from removing monetary accommodation too soon as well as too late.” 
 
 To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net 
 
 To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net Mark Rohner
– The Federal Reserve will no longer rely on the unemployment rate as its be-all, end-all indicator of economic health, it announced today. Until now, the Fed has set its goal at 6.5% unemployment. But as the jobless rate nears that threshold, the central bank said it would keep rates low, and start looking to other economic metrics, Reuters and Bloomberg report. "A highly accomodative stance of monetary policy remains appropriate," the committee said in a statement. It said rates would remain below normal levels "well past the time" that unemployment fell below 6.5%. But the bank also announced that it would continue slowly scaling back its bond-buying stimulus, cutting security purchases from $65 billion to $55 billion. And once tapering ends, how long will the Fed wait to start raising interest rates? “The language that we used in the statement is considerable period," said new Fed chief Janet Yellen in her first press briefing. "This is the kind of term it’s hard to define. But, you know, probably means something on the order of around six months, that type of thing.” That would put the first rate hike in the middle of next year, reports MarketWatch. "Did Yellen mean to be that specific?" asks the site's Rex Nutting. "No, but she’s now the Fed chair, and markets will react to what she said, not what she means."