in this show. i still think it can recover and a safe stock in a volatile market. >> s&p global. it's been in a holding pattern with lower weights possibly. >> joe? >> datadog. we own it. if you're thinking about ai cloud and security. >> "the exchange" starts right now. ♪ ♪ >> thank you very much, frank. welcome to "the exchange." i'm kelly evans, and we're in the final countdown to the fed's decision on rates at 2:00 p.m. eastern. and to jay powell's press conference at 2:30. now it all comes after we got that cooler than expected cp ireport this morning, giving stocks an initial boost as you can see here with the s&p and the nasdaq hitting records. i was going to give that a big star. stocks are pairing some of those earlier gains. dow is up 44. s&p is up 1%. nasdaq nearly 2%, and the small caps flying. the flip side of that is that yields are moving lower with the

ten-year below 4.30. we're at 4.25. the two-year plunging, as well. the 30-year showing moderation. the two-year is at its lowest level since beginning of april. gold is at the highest level since june 7. i'm showing some softening here, wti crude largely flat, and off its best levels after that u.s. creed inventory build. so this is an area to watch. and it's worth pointing out, bitcoin up more than 3%, on track for a second straight positive week, back towards the $70,000 range. that's the market setup as we wait for the fed. let's get to it. cnbc senior economics reporter steve liesman is live in w with what to expect today. welcome to all of you. steve, kick things off for us, and what a different panoply of

expectations after that cp ireport. >> very good way to put it. a lot is in flux under the surface for a fed that's expected to be on hold for the 11th straight month. a big question, how the committee thinks about what is a second good inflation report in a row after three bad ones that started the year. here's what we will look for in the statement. a possible economic downgrade with that lower gdp number. do they characterize inflation progress as stalled or continuing now? i suspect they'll say they're still not confident enough to cut given there's a 3-2 split so far in the first five months of the year. now, looking tat projections, cuts reduced to maybe one, but more likely two from three in the prior forecast. unemployment rate has to tick up a little bit. they're already at 4%. and of course, there will be some debate as to the long run rate. 2.6, some talk about it going higher again, meaning the fed would see itself as less

restrictive. the probabilities, a big surge in rate cut probabilities. july, up six points this morning to 15. september, 73%, up 18 points. and november, 85%. the market is bracing in a 30% chance of three rate cuts by the december rolling around. i'll be watching the fed's own forecast for core pce inflation this year. the average fed official in march looked for 2.6 for the full year. it was 2.75 in april. goldman this morning says that pce is going to come in right at 2.6, so it should go down more at the end of the month. what does that mean? even while everyone is up in the arms about the lack of inflation progress, the fed will be close to its forecast mid year for the entire year. that was in context of three cuts. so a question becomes, kelly, how much are they dialing back rate cuts if they're where they thought they wanted to be on inflation? >> great point. steve, do you think this is an

overreaction to the cp ireport this morning, which the fed claims it doesn't even follow or might we now see two or three or at least one cut in the next couple of months? >> to react to it makes sense for the following reason. we were very concerned the beginning of this year, kelly. there was a robust debate is what was going on in the inflation numbers the start of something new, in terms oh of a reacceleration of inflation, or the beginning of the year phenomenon that had to do with price cuts -- or price hikes and would they go away? today's evidence, the second in a row suggest that the first quarter phenomenon is what we would call residual seasonality that the data -- or the bean counters could not or did not adjust for. so it gives a little more confidence that we're on the track we thought we were on back in december. >> it's almost like we've come full circle.

steve, thank you. we'll seeyou next hour. steve liesman. my next guests all differ when it comes to how many rate cuts we may get to none at all to maybe three. let's bring in the head of u.s. rates strategy. remind me, jay, where are you, in the middle? >> we're in the middle, two. >> in two-cut camp by year end. that was before the cpi data? >> i think it made it more likely. if we were talking about 8:29 this morning, you would have said where are we? i said at two, but the risks are skewed towards one. this number was a really good number. you need to see a few of these before we tee up a september rate cut, but we're in the two rate cut camp at this point. what is about you? i was not shocked but it's remarkable how much the ten-year dropped going below 4.30, now at

4.25. we're away from the 5% benchmark we were worried about. >> it seems to be forecasti ingn track for this year. as we progress through the year, we expect the fed to be on hold the remainder of the year. coming into, as jay was saying this morning, if you asked me at 8:29, i would have asked the docs would show just one cut, now i'm maybe in the cut of two cuts. ultimately the fed might choose to be on hold. the earliest time for when the fed could cut is after the election. the data has been good. inflation has been coming down, the disinflationary trend is resuming. but growth is also very strong. employment is strong. so i don't see any reason for the fed to cut rates any time before the election. so we think the fed's probably going to be on hold for the

remainder to have year. >> just to follow up on that and to quote steve liesman, if it looks like inflation is on track to come down to that number on core pce, what they expected if not historical norms, why not cut rates from restrictive territory to something with a little more breathing room? >> so for now, the market's pricing in less than 100 basis points of cuts for the next year. an extra cut here or there really doesn't change the narrative for the fed in our view. so if you look at say what the ecb is doing or the bank of canada is doing, this sort of path where they cut once and then they don't put for a while. the state of flux, as steve liesman was talking about, is just not really necessary for the u.s. i think they can wait until the data starts to slow down before they start embarking on rate cuts. >> pivot to you, steve. you think we could still get three this year, is that right?

>> well, look, i think we have to remember that the federal reserve never sets monetary policy with the assumption that it's sitting in a sustainable way for the long run. the fed micromanages. it sets monetary policy. if we continue to see deceleration in inflation to satisfy them on the inflation breadth, what we expect out of unployment, one month upwards surprise, prior month, 100,000 below. if we continue to see that the forces downward in terms of demand for labor, the fed easing by september and giving us three rate cuts is possible. you know, i would bear in mind that three 25-rate basis points is 0.75. so you just take a look at where they are, 2.6% is what they

think the average policy, the long-run average would be. you know, they could take, and they have -- once they do actually hit the threshold of easing monetary policy, it will be easier to continue that path. and at 5.5% from the top fed funds rate, they believe that monetary policy is unduly restrictive, and again, it depends on the outlook for employment. >> so jay, let's dive into this for a second. so we're currently, and i hate the target range. i wish we could stick with the number. we're between 5.25 and 5.5. what do you think roughly, and i know it's an area of debate, what would roughly neutral interest rates be, 2.3, 3.5? >> look at the fed, their long-run sustainable growth thing is at 2.6. i think it's closer to 3. >> say it's closer to 3. so we're 2.5 points more restrictive than we need to be. they probably need to start messaging this to the public,

that they want to explain they're cutting rates now because inflation is going away so we're not so tight. if we're three points tighter than neutral, do you think that's way tighter than we need to be right now? >> i do think that's true. but the fed needs to see the xlct, the data in that. what you could see with the fed in the coming months here is what the ecb did. they cut rates by 25 basis points. no one expects them to go at the next meeting. but the ecb is saying we think rates are restrictive right now. we need to back that off. i can see the fed doing that with a 25 basis rate cut in september, wait for a while, see how things are going and progress from there. >> and it was interesting when they did the rate hikes. they could get that immediate feedback and watch the markets. it was having an immediate impact on inflation. this is different. so i imagine they would just be watching what, the stock market to say we got a quarter point, but we have already levitated. so what would they be watching

to see if a quarter point is working? >> i think we would be clearly watching the employment indicators. we get initial jobless claims every week. clearly you don't want to put too much weight on one week, but looking at the employment indicators, looking at the data in terms of inflation, as well. but right now, they would overweight the inflation data and overweight the labor market data, as well. >> what would you add to that, subadra? >> i think they will -- they should wait for as long as they can before they start embarking on cuts. and then perhaps use a very steady path of rate cuts afterwards, once a quarter or something of a regular pattern to that the market knows to anticipate well ahead of time what their policy prescription is. but as i mentioned earlier, if you're looking at less than 100 basis points of cuts over the next year. so the impact on the economy for the most part is still one where the fed is cutting rates to

orchestrate a soft landing, not necessarily providing accommodation in a meaningful way. >> why do they need to wait and keep policy so restrictive right now? wouldn't they already have started cutting rates and say we're doing it once a quarter to get us back to that glide path of neutral. >> so the risk to cutting too soon and too aggressively is that you see a resumption in services side inflation. and we saw that in the first quarter of this year. the first three prints came in a lot hotter than expected. part of that had to do with the fact that the fed leaned to easing prematurely. so that's one of the things why the fed should wait to make sure that inflation is durably on a trajectory toward its 2% target. you can see super core has been

coming down but not as fast as the fed would like. >> steven? >> i think pce inflation, the fed's preferred measure, maybe it's inflation -- a lot of these measures are much more subjective than anyone would argue. it's been doing but making new cycles. and yes, the reading is 2.75 to be precise. that is continuing to come down. the inflation scare in the first quarter is because of the exaggerations to the downside in the fourth quarter. and the cpi data, we are seeing corrections to some of these trends. if they look at pce inflation data, they're saying we're on our way to where we need to be. is it fast enough to act by july? probably not, not with committee dynamics. but when they see that they're satisfied on this front, they could take policy down 25 basis points per meeting at a clip and do that for a while. even without collapsing rates towards zero or seeing a

collapse in the economy, which sun likely. >> jay, what do you think they're looking for to embark on something like that? >> what they want to look at is the core pce, the three-month annualized change. if you get that down to roughly 2.5 range, at that point, they feel a little more confident that inflation is going to go to 2% and i think that -- >> we're close to that now, right? >> we're up above 3%. >> on the core? >> right, yeah. but we'll -- we have a core pce print at the end of this month. we'll have three more of those before the next fomc meeting. >> you think if that goes from 3% to 2.5% on the core, that gives them the go ahead to cut. what about those that say it's not 2%? >> there's a lag. inflation is a lagging indicator, right? you want to be looking ahead of that. if you're get ting 0.2s every month, that's good enough reason

to go. >> the lags with housing and education or health care and some of these insurance, still feel like they're lagging from the pandemic. thank you all for a great conversation. appreciate it. we'll see what happens in an hour. after the decision we'll speak with don peebls. he was the only member who said he would vote to cut rates today. look forward to his reaction there. mortgage rates are on the move following the cp ireport. diana olick finally with good news. >> that's right. mortgage rates dropped this morning after the release of the cpi. the average rate on the 30-year fixed down 18 basis points to 6, yes, that's 6.98%, the lowest since the end of march. rates dropped much of last week, causing mortgage demand to surge 16%. but a stronger than expected jobs report on friday caused rates to jump back up again, so

it's been a little volatile. applications to refinance a home loan last week, which are most sensitive to quick rate moves, jumped 28%, compared with the previous week. we're 28% higher year over year. applications for a mortgage to buy a home rosed% for the week, but still 12% lower than a year ago. homeowners are dealing with high interest rates and high home prices. 86% of consumers said now is a bad time to buy a home. but we are not out of the woods yet. we still have the fed meeting coming up shortly. matthew graham's mortgage news daily said cpi is the meat the fed will season to perfection or oversalt. kelly? >> okay. so what are people in the housing market saying about the significance of rates below 7%? cope keeping in mind we have to get them to settle at a level where people feel clarity and say wow, it's down, let me buy a house. >> it shows how sensitive

consumers are to rates. when we used to see these tiny rate moves, we didn't get a lot of move. but when you get back into that 6% range, we saw it in march that buyers came back in. we were in the high 6s, and we saw good home buying opportunity and said spring is starting early. it stopped in april when rates went back over 7%. so there's this line between 6% and 7% for buyers to get back in. they're still contending with high prices. even though there is more supply coming onto the market, it's still very pricey. a lot of it is just sitting. we need to see home prices come back. that 6% handle does help buyers. >> diana, thank you very much. we appreciate it today. coming up, do you remember when the first television commercial was aired in 1941? i do. ryan reynolds does. >> we are teaming up to announce

the biggest rev nolution in tv advertising since that day. >> that's mountain's new ai powered plat tomorrow that matches customers with products. we'll ask the ceo how it works and what it means. pair mount shares are coming off their worst days since april since the controlling shareholder called off the merger talks with skydance. is she opening up to a shareholder lawsuit and what's left in the playbook? we'll ask laura martin, ahead. less than 45 minutes until the fed's decision on rates. stay with us. "the exchange" is back after this. >> this is "the exchange" on cnbc. the all new godaddy airo helps you get your business online in minutes

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welcome back to "the exchange." another big week for ai. during monday's developer's conference, apple announced they're bringing openai's chatgbt to the iphone, a move elon musk called an unacceptable security violation. and another headline from musk is he's dropping his lawsuit against openai founder sam altman and greg brockman. musk was suing them for breach of contract and fiduciary duty. as we cover where ai is a business catalyst versus killer, my next guest is banking on the former. his firm launched a product that matches customers with products. the tool was geared towards small and mid-sized firms but is

attracting bigger brands. let's dig in deep we are mark douglas. doesn't hurt to have ryan reynolds showing the product. not the worst way to launch it. what is the innovation here? >> well, so the problem we're trying to solve is that in mtn, we have essentially brought the market into television, small and medium sized businesses. and so these big brands that previously dominated tv, they just broad cast the ads out, they're spending tons of money. but these smaller brands, they're passionate about what they're doing. we have customers like one wheel, the -- and other customers. they're passionate about what they're building. all they want to do is just more people discover it. so they haven't been able to use television. now that they can, the key is they don't have massive budgets. so we have to pick the consumers. >> i see. >> that are going to potentially love these products. so we're using two layers of ai

technology to do it. >> so you exist to kind of almost in the middle. the ads -- they say we need an ad, but the catch is your clients can't afford for it to be a national ad running eight times a day. >> exactly. even if they have bigger budgets, it's a big country, right? so that's where -- and there's an old thing in advertising where people say i know i'm wasting half of my money, i don't know which half. but now you don't have to waste half of your money, even if you're a big brand advertiser. let's pick the consumers who will have a lot of affinity for your message, what you are offering. this is not the age of jingles anymore. this islike, people just want to discover cool stuff and from all-size companies. that's what we're doing. and leveraging ai, we're not like removing jobs, we're enhancing people's ability to do this in terms of the market.

>> where do you get the data that the ai is using to figure out i'm watching tv and this lady is interested in buying diapers. how do you know that about me? >> so there's multiple sources. you have what you callinterest level data, which there are companies like live gram that you probably heard their name, they're publicly traded. oracle data cloud. what's really interesting, we talked about in a previous show, a lot of that data is very valuable. retail media is going to be more about the data than it is just the impressions. and there's also event data like maybe a lease on your car is expiring and things like that. you combine that together. the two things we're doing, one is we're using generative ai to understand your business. and then we're showing the company, this is who -- generative ai tech thinks your customer is, these are the key words, and things that describe

your business. it's almost like a personality profile for your company. if you have confidence in that, then we can use machine learning in order to essentially say okay, this is who you are, and this is who if consumer is. i actually was the head of engineering at eharmony way back in the day, so matching -- i know, we kind of invented the matching on the internet. it's not quite the same now, but it's the same concept. this is the company, here's the consumer, i think you guys are going to be in love and we make them match. and then the ad is like the swipe on tinder. >> it all comes together. so people might see this or see the headline and think you're doing ai apps. so the creative itself, is that changing at all? >> well, we are also doing ai creative tools and partnering

with a lot of companies on a lot of major ai companies. but that's a separate problem. this problem is, we know someone loves this product. we just have to find them, so that you're not having these huge ad budgets to connect with them. or if you do have ad budgets, they're being spent efficiently. so we're literally matching the consume we are the company and product. >> mark, you going straight back to miami? >> i'm hanging out in new york for a few days. >> i was going to say fly safe. thank you for your time, mark douglas. coming up, oracle hitting an all-time high today. now, they missed on the top and bot tom lines, and the openai ad cloud deals they reported yesterday. it's been a top pick by many names on this program.

we'll look at that and more. "the exchange" is back after this. car, this isn't the way home. that's right james, it isn't. car, where are we going? we're here. (♪♪) surprise!!! the future isn't scary. not investing in it is. car, were you in on this? nothing gets by you james. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

new projects means new project managers. you need to hire. i need indeed. indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. visit indeed.com/hire and get started today. good day and welcome back to "the exchange," everybody. i'm tyler mathisen with your cnbc news update at this hour.

commuting hunter biden's sentence could be in the cards. the press secretary refused to rule out the possibility earlier today, but according to the white house, it's still too early for such discussions. joe biden said after his son's verdict that he would respect the judicial process and not pardon his son. a massive settlement just announced today against singapore based teraform labs and its founder. the company agreed to resolve a lawsuit brought by the s.e.c. and pay $4.5 billion. the company was sued for misleading crypto investors in the leadup to the collapse of stable coin back in 2022. that led to $40 billion in investor assets of being wiped out. the settlement without a dollar amount was first announced back in may. and the tennis star carlos alcaraz will team up with his childhood hero raphaefael nadal

play doubles at the olympics. alcaraz is widely seen as the heir to nadal's throne. he's one of the best in the world. >> so fun. love that. tyler, thanks. coming up, sherry redstone shocking the business world by calling off merger talks with skydance. we'll ask laura martin what could be the next step. and cnbc is celebrating pride month throughout jup. here is wayne tim. ♪ ♪ >> pride is about genuine alleyship. we need it not just during pride month or out once a year, but every single day as part of your daily life, especially in the workplace. when i think about the qualities that create success, at the top of the list are resilience, grit, and empathy, which lbgtq plus people have in spades.

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then i started taking lipo flavonoid. with 60 years of clinical experience, it's the number one doctor recommended brand for ear ringing. and now i'm finally free. take back control with lipo flavonoid. welcome back to "the exchange." another twist in the paramount skydance merger saga, as the deal is called off by sherry redstone. shares closed down 8% yesterday

after the news. they're fractionally barely higher today. let's see how we got here. the talks began on january 10th, when skydance submitted an all-cash bid for paramount's national amusement. but the two companies entered into exclusive talks in april and the merger seemed certain until yesterday. shares have fallen 22% since january when this began. my next guest says it's now arrived at a crucial point. joining me for more is laura martin, senior media analyst. great to have you here. wow, what a twist and turn. what now? what options does she have left? >> we need a new reality from here, kelly. mergers that collapse is my pitch. she has to do something. we have three ceos in the office of the ceo, and there's no harvard business school case ever that says three leaders is better than one. so she doesn't have -- she needs

to do something. this walking away after six months after wasting shareholder and skydance's time really may rupture a relationship with a critical partner for paramount. >> who else is left as a genuine possible suitor? and whoever is going to get these assets now would get a much better deal unless there's some ace up her sleeve that i'm not understanding. >> so we're hearing in the press, of course, that -- i think apollo will come back at a lower price, because she's in a disadvantaged point of view. i think shareholder litigation was always probable here. so the fact that she broke the deal over potential litigation is ridiculous, because it was always a risk. it didn't just pop up now six months in. i think the problem we're seeing is self-made billionaires like her father are used to making difficult decisions and having them work out. that's why they're self-made billionaires. she has inherited wealth and not

used to making these risky decisions. >> it's an interesting point. the market cap of this company is $6.8 billion, and people say they owe $30 billion just to the nfl. is that true? >> i think that's too high. but those rights i would assume they could license to somebody else and lay off to amazon or apple. so i'm not worried about that contingency. but they have $14 billion of debt, and the equity is worthless if they can't pay the debt. >> exactly. so let's step back and say there might be some gambit that she can use here to get herself out of what appears to be backed into a corner. what other possibilities might there be? >> i think she has -- maybe she'll approach warner brothers to see if they would be willing to take over her shares. that might be interesting for her. maybe like a strategic, maybe she'll try to take a more active hand in who she's selling to. but she will try to minimize her

litigation risk so shareholders would get a better deal. >> that's a great point. if anything, you wonder if the litigation risks are higher. let's put that to the side, laura. what do you make -- i haven't checked apple shares today. 6% yesterday, $205 on this delayed enthusiasm over the ai announcements. >> yeah, it's my thesis that apple, because they have $100 billion share repurchase, and they're very excited and they're in a developer's conference all week, that they want to make the market feel like, you know, they have really exciting things going on. no institutional investor i talked to is excited about what they announced, so i think this is apple supporting its own share price, because it has $100 billion share repurchase. >> so many people saying that. i'm like, why would they go in with shares at an all-time high

and have a buyback? it seems like it could be an explanation. >> well, it could be they have a lot more faith in their future than institutional investors do. they have real limited period where is they can buy shares of their own stock. one of those periods is right now, right after wwdc, where they announced everything to the market. and then a week from now, they go in a quiet period because of the june quarter results. so this -- they have two weeks a quarter that they are not restricted from buying their own shares. so they're buying their own shares right now. >> today, up almost 5%, $217. this stock sup 10% in two days? this is extraordinary. apple has had share repurchase programs, but i haven't seen a two-day move like this in a long time. >> it could be that the developers really like, as they go through the meetings with the engineers, what they're going to like to be able to do on their

own apps. wall street has a bigger point of view, which is does this drive ai replacement cycle in the next 12 months? and even if app developers are excited, they'll roll out apps after the september launch of the new phones, and then they would come to market the subsequent year, pushing off the upgrade cycle. >> that is fascinating. laura, thank you for being here. we appreciate it. laura martin. still ahead, auto insurance inflation climbed more than 20% year on year in may. and that was still a surprise drop. we'll dig into powell's super core problem when it comes to spending, coming up.

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welcome back to "the exchange." we're on record high watch for the s&p and for the nasdaq. which is the territory we're in right now. the s&p up 1% today. i think it's up 15% for the year now. the nasdaq up almost 2%. the small caps are even stronger than that. the dow, even though apple is doing so well, is only up 1%. apple is akback on top, look at how many dijgits there are here surpassing microsoft by a little bit, which is not too far behind. apple has traded more than 160 million shares already today, nearly double the 30-day average of 64 million. it's been a huge move, all going back to monday's ai announcement. although the stock took off yesterday up 6%, now up nearly 5%, to $217, on pace for its

best two-day performance since august of 2020. this is a huge and significant move by apple, significant for the whole market. elsewhere, gamestop higher today, up 8% this week, around $30 again after roaring kitty seemingly is holding onto his position, but posting on x, it's out of the gme short, not because they think the company will turn around, but their $3 billion cash sales will give them enough to appease their followers. the kitty live stream, they say, was an incult to capital markets. coming up, the fed's steep rate hikes, increased borrowing costs across the board. but one economist says he says inflation might be beyond the fed's reach and is acting like a tax on consumers. that's next.

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flat. it was much lighter than expected, but the against guest says it's not the goldilocks scenario, saying it will slow down the consumer and economy, but powell and company may disregard as they focus on their core targets. jake, great to have you here. this is important to mention. welcome. >> hey, kelly, nice to see you. >> explain what's going on, the things that people have to buy is running at what inflation rate versus the things they prefer or want to buy. >> there's no doubt we have seen progress in inflation. the shelter component has all kinds of problems, and inflation is right around the fed target at 2%. but beneath the surface, the stickiness is in these parts of consumption that the consumers can't diversify away from, like health care, insurance, auto

insurance, housing insurance, a plae plethora of things that you can't diversify away from. that basket is running at about 6% year over year, even after today's lighter number. that is a couple of things. it's putting pressure on discretionary discretionary consumption because it squeezes consumer pocketbooks essentially. so it reduces the amount of money that's available to spend on other things. and if you see the transmission mechanism from that sticky inflation to the discretionary part of consumption, discretionary inflation's all the way down to zero. printed 0.1% year over year. >> it was zero. wow. >> yep. 0.1. and if you look at within pockets, some of them are running negative. i think this squeeze on consumers from very limited non-discretionary is having a feedback loop effect to discretionary pricing power in a negative way. >> yeah, there's deflation already. if you look as you've highlighted and others the digital numbers that adobe puts together, those have 5% deflation in the latest report. apparel, furniture, electronics, all the usual suspects.

it's been going on for two years now. what should the fed do? do they then say okay, these -- in a lot of the parts that are needs-based inflation are also very, very lagging. so why are insurance premiums up? because car prices and home prices rose. so first we have to get car and home prices down before we're going to get any -- we're talking about a five to eight-year change if it even resets lower. when if ever should we expect some relief in kind of needs-based inflation and what should the fed do about that? >> well, i think you're going to get it with a lag like you said. unfortunately i don't think you can do anything about it which is why it's super interesting that they focus on supercore which has essentially been a one-trick pony which is auto insurance. and you saw supercore this morning printed actually negative if you kind of unround it. and that was because auto insurance actually printed negative kind of weirdly for the first time i think since 2021. so focusing on supercore is kind of the wrong thing if you want to look at the things you actually have influence over. but i think we are going to get relief because again, it is a

catch up to asset values that went up for durable goods, autos, goods, et cetera. but you're seeing downward pressure in particular. in the auto space in particular. new vehicles down five months in a row now in terms of price. this was in the cpi. down seven of the last nine months. and look at the inventory. look at the supply and demand mix there. inventories in real terms, in inflation-adjusted terms across the supply chain are hitting record highs. >> that really surprised me. >> right. during the pandemic we were starved of inventory. now we're hitting record highs and we're hitting record highs in an environment where affordability stinks. right? because rates are very high and we're still seeing these elevated prices even though they're down recently. so unit sales are still running very weak into an increasing supply backdrop. production schedules are ramping up. so you're going to see downward pressure on price there. and eventually you're going to see a cooling off on the insurance premium side from that as well. but i think it's going to take some time. >> and in listening to your answer i've never gotten my question but i was basically

going to ask you then if the fed is running things too tight, if they're effectively keeping rates higher than they should because auto premiums are up and all the rest of this, i mean, would this argue then for them to cut rates significantly in the near term or risk a slowdown or -- now i remember it was our guest top of the hour she said no, no, if they start easing too quickly service inflation is going to pick back up. >> i think they're hard pressed to point to service inflation that's actually on the discretionary side that has any risk of ramping back up. i would argue that the fiscal impulse you saw over the course of the pandemic the 2 trillion plus in excess savings to the household sector that was the main driver of inflation. excess savings had negative in april. the first time it went negative. so you've taken that ammunition out. i think again you're going to be hard pressed to see discretionary prices move higher from here and in fact i think what the fed's doing is putting more -- creating more bifurcation in the economy. >> exactly. >> on the aggregate things like okay. earnings look fine. look at the s&p 50600.

they're down. mid to low income tiers. they're suffering from high interest rates. >> jake, i appreciate it. thank you for joining me today. read the nslewetter for more. jake oubina from piper sandler. perfect way to tease the fed decision. it will be right after this break on "power lunch." don't go anywhere.

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alongside kelly evans i'm tyler mathisen. glad you could be with us. and we are just minutes away from the fed's decision on interest rates. let's get a check meantime on where the markets stand. the s&p 500 and nasdaq both hitting records today up more than 1% each. apple shares continuing to rally following its ai announcements on monday. i guess the information starting to sink in there. the stock gaining nearly 10% so far this week, which is about $300 billion worth of market cap. >> just extraordinary. i'm excited about the fed but i'm really excited about that apple story. here's the ten-year as we head into the decision. 2.64. the lowest since the beginning of april after this morning's cpi data came in lower than expected raising hopes the fed might turn to cpe data and see a similar downward trajectory. the market pricing in as many as two rate cuts this year after that release. >> let's get right to our all-star panel as we are just minutes away as we mentioned,

about two minutes away from the fed decision. we've got kristen bitterly of city wealth, david kelly of jpmorgan asset management, michael cushma of morgan stanley asset management. let's go around horn quickly. michael, what are you expecting the fed to do? i can anticipate. and what do you expect it to say? >> i expect them to make no changes in terms of the interest rate strategy. but talk about inflation is now doing a little better than it was before. they highlighted last month that inflation was disappointing. probably take that out. and not comment on disappointing. but that we're making progress but not enough progress going forward. and that we're still on track for rate cuts at some point later this year. >> but you think that it opens the door a little bit but you're skeptical that there will be a rate cut this year. am i correct? >> i'm skeptical there will be more than one. but i will be the first to admit that today's inflation data was quite shockingly low. maybe just a correction from the

excessive numbers we saw earlier this year. but to average them out inflation is still reasonably perky, although still coming down on a year on-year basis, there's a stalling out of inflation which would suggest the go slow attitude with regard to rate cuts. >> kristen, what do you think? and i'm tickled by that reasonably perky characterization. >> so i would agree in terms of inflation. it gave a little bit of relief this morning. i'm looking for particularly within the statement as well as the conference more information about the employment backdrop. because we did get conflicting signals whether you were looking at non-farm payrolls or looking at jolts. there is a cooling that's happening in the labor market, not a contraction but a cooling. and i think chair powell will give us some signs as to how they're viewing that which will then determine the trajectory of whether we get two or three rate cuts this year. >> david, give us about 20 seconds of thought. >> okay. i think two rate cuts as opposed to three rate cuts in march.

but that's not too bad. i think they'll say there's less progress in inflation but not a lack of progress in inflation. i think the messaging will be reasonably dovish. they'll be encouraged by seeing some moderation in inflation. i still think we'll get a first cut in september. >> i said 20 seconds and you hit it on the nose. thank you very much, david. we'll get back to you in just a little bit. and meantime let's go to steve liesman now for the fed's eagerly awaited decision on interest rates. >> the federal reserve in its june meeting leaving interest rates unchanged and continues to say that it won't be appropriate to cut interest rates until it's gained confidence that it's headed toward its 2% target. the fed on average now projecting one rate cut this year, down from three in the march forecast. four officials in fact are projecting no cuts this year, up from only two in march. one official actually says no cuts this year or next year, no cuts for you. they are projecting five cuts through 2025, which is down only one. so they kind of get it done over the same period of time, just