that's a magic number. so i would buy it here. >> jen? >> financials. lower rates, increasing capital market activity. >> elevated volatility plays to brockers. >> i'll see you on "closing bell." "the exchange" is now. ♪ ♪ and look at the nasdaq today. wow, scott, thank you. and welcome to "the exchange." i'm kelly evans. here's what's ahead. we're in the final countdown to the fed decision. of course, more importantly to jay powell's press conference. will he cement a september cut? the market has priced it in. we'll game out the scenarios that could derail it and the market impact of it all. and when the cuts come, there's one particular in payment our analyst says will benefit. he brings us the name and how much upside he sees ahead. and kamala harris could be announcing her running mate any

day now. we'll look at who's in play, and you'll hear from senator bill cassidy in a bit. let's start with the markets and dom chu has the numbers. again, dom, look at the nasdaq. >> solid gapes right now. take a look, the nasdaq is up almost 2.5%, to 17,546, up about 400 points. we're in the broader large cap s&p 500, up 83 points, 1.5%. even at the low points of the day, up 57 points and up 98 at the highs. that gives you the state of play. and the dow lagging, if you l up 2/3 of 1%, 255 points. 41,000 almost on the dot for the dow. one of the reasons for that outperformance, ship news. if you look at technology, one of the better performing sectors, some reports that asml may not be subject to as onerous

of restrictions as they thought, and nvidia, though, qualcomm, some of the large names seeing a big bid in the market. even the etf that tracks it is up 6.5%. that's the semiconductor side of things. that plays more into sector wise and that big rotation overall. over the last month in the s&p 500, the two best performing sectors, look at this, have been real estate and financials. more value oriented sectors. meanwhile, the worst performers, communication services and technology. that gives you an idea how the month of july played out. and that's gone into the broadening out trade. that's been the theme for july. the s&p 500 large cap etf, one month, up about 1%. not terrible. the mid-cap index etf up 6.5% and the small cap up 11%. and because it is fed day, kelly, the ten-year treasury

note yield, this is where it stands right now, about 4.09. you have to go back to march 12th to find a yield this low in the ten-year. so that is the state of play for the month of july, for today entering the fed, kelly. back over to you. >> yields are down half a point just this month. dom, thanks. we have less than 60 minutes until the fed decision. let's get straight to steve liesman with what to watch for. steve? >> yeah, as we await this decision, three reports this morning coming in maybe giving the fed greater confidence that inflation is headed down toward 2s%. along with lower and expected unit labor costs, better adp wage data. it's been coming down for job stayers and job changers, combining with two good months of inflation data. put that together and ask, well, why isn't the fed coming now if the data is moving in the right direction?

there's a few reasons perhaps for that. one is, once burned, twice shy. the fed has seen these inflation numbers tick down and then back up. overall, we're about a half point from target. not all members indicated a readiness to cut right now. and there's no need for a surprise, because the economy is doing reasonably well. finally, rate cuts are seen as a process, meaning once the fed gets going, it will do more than one, so it has to be really confident, unless it's in the uncomfortable position of having to reverse course. 100% chance of a september cut and pretty good confidence in a second cut in november and a third in december. so we're looking for hints today. one way to put it, kelly, the market is lined up to get into the show. the fed has indicated there might be a show in september, but they're not selling tickets quite yet. >> good analogy from you, steve.

thanks. we'll see you next hour. my next guests all agree that powell is likely to open the door wider for that september cut. let's bring in my three guests. welcome to all of you. i'll go in reverse order. julia, where is the drama going to be today? >> we're going to get a policy statement with a few key changes. i think they're going to tell us that they see inflation progress as resuming, and that their confidence is growing and they'll use those major tweaks to the statement to tell us where the -- that their confidence is growing and a rate cut is the next move in the not too distant future. in terms of the press conference, i expect powell to stay pretty cagey. the question is not direction of travel, it's pace, and are we

going to have an initial sequence of steady cuts followed by more feeling their way, or are they going to start very cautiously? that's going to be determined by the data. i think that's what we'll hear from powell, just data de depe dependance, no promises made. >> you and your colleague both are on our mock fed, you both voted for a cut. why are there still holdouts at the fed? i know the intellectual case, which is some parts of growth are better than expected, jobless claims are hanging in. there jolts was encouraging, you know, things of that nature. is that the case for holding rate where is they are? >> i think the case for not cutting comes down to inflation ptsd. we've seen some head fakes on inflation. as long as the economy is still fine, why not get more information? the case for cutting is yes, the economy is fine now, but

inflation is in the rear view mirror. yes, growth is okay, but it is cooling. the direction of travel is what we have to keep our eye on. so yes, things are still looking fine, but growth is 2% in the first half of the year, down from 4% in the second half of last year. that's a pretty pronounced cooling, coming with slowing job gains, rising unemployment. now is the time to start moving towards neutral. the time is already here, but there's a lot of people that are still sort of burned by having been behind the curb on inflation. >> steven, i'm curious. i want to talk more markets with you, but on the central issue of the unemployment rate, if it keeps moving up, it solidifies the case to cut. if it holds steady, i pointed out those comments from steven stanley yesterday, then maybe they feel differently. unfortunately, we're not going to get that data point until friday. >> i think fed chairman powell

has to make the case that policy action isn't there only for periods of booms and recessions. when they set monetary policy at a strict level, this is not meant to be the steady state. what we have seen in the labor market, the revisions over the last 12 months have been negative by about 33,000 per month. chairman powell mentioned the narrowing breadth of employment gains. second quarter, 146,000 for private sector job gains. if we looked at ten of the last 11 easing cycles since 19830, this is really the time where they start to move back from restrictive monetary policy historically. sometimes it's not enough. if a shock comes, we are in a boom we're still going to have a recession. but they don't need to have a recession, we don't think they do. this is primetime for them to consider their impact a year or more out.

and that's the case that he has to make to the public, to really prepare more than those in the fixed income markets are 100% about september. >> it's interesting to look at the stock market and say, and steve, what's your take on this, it's so high and it should be frothy and the fed needs to tighten or not? >> the financial markets are not really, you know, the purpose of the fed. it's maximum employment, stable prices the way they defined it at 2% inflation. it really is sometimes difficult, again, to take into account that we have relatively -- we take a look at the exchange rate. take a look at mortgage rates. and take a look at the behavior of interest rate sensitive parts of the u.s. economy. we're pretty suboptimal right now, and there's really no reason to continue that.

if >> fair enough. sue, we get to dig in here. so many juicy developments with the yield curve, and the fact that we have unfound that move to 5% a year ago, and i think the treasury refunding was a big part of it. when they cut borrowing estimates, suddenly you feel like you can get your arms around the fiscal piece. >> that plays in the back of the ambassador's mind, but for the most part, this has been a gradual decline towards that 4% level that we were kind of anticipating heading into the election. so you're seeing a bit of caution, because of the geopolitical risks. you're also seeing the markets broadly pricing in a pretty, you know, healthy pace of cuts for the next several meetings, or i should say three cuts by the end of the year. that is supporting easier financial conditions. so telling you should gradually

decline, as we were anticipating heading into the lekions. but once we get the outcome of the elections, that's when you're going to see that yields are going to rise, especially as the fed starts to cut rates or get away from restrictive territory. to me, the biggest question is, is the market joef pricing the path of cuts, given how strong the data has generally been. >> you think what per quarter? do you think the ten year is going sub-4% or is it headed higher once again? >> so was that for me? >> yes, for you. go ahead. >> yeah. i think that we see a garage w -- gradual decline in yields before the end of the year. beyond that, we were talking about coupon issue sizes, they

will remain stable for several quarters. but at some point next year, the treasury is going to have to increase its coupon issuance sizes. that's when you'll start to see that term premium start to build up. >> do all of you think a cut is coming in november or december? >> i do. >> all right. our panel is uniform then, even if the markets aren't fully on board. so we should think of this getting us to the start of the rate adjustment. thank you all for your time this hour as we get ready to hear from the chair. coming up, we'll get an update on the rice to become vice president harris' own vice president. we'll speak to senator bill cassidy about his big idea on one issue that impacts one in five americans. and here is a lock at the home construction etf, up 20% since july.

leaders include mohawk and dr horton. we have about 47 minutes until the fed decision. stay with us here on "the exchange." back after a short break. >> this is "the exchange" on cnbc.

ryan t. writes, "moving is stressful. can you help me take one thing off of my to do list?” ugh, moving's the worst. with xfinity, you can transfer your internet in just a few taps. just a few easy moves. did somebody say “easy moves”? ♪ ♪ oh no. no, i was talking about moving your internet. this will move the internet. ♪ ♪ ooh, ooh. -let's keep it professional. professional dancers! -ok! stay connected during your move with the best in home wifi. easily transfer your services in the xfinity app. bring on the good stuff. the race to become vice president harris' running mate

is heating up, so we're taking a look at the economic policy records of some of the front-runners. megan? >> hey, kelly. so kamala harris is getting very close to choosing her running mate. we have a short list that includes a number of governors and arizona senator mark kelly, and pete putbuttigieg. minnesota governor tim walls has the most progressive economic record. he increased pay on welfare and he passed the largest tax cut in minnesota state history. pennsylvania governor josh shapiro is definitely considered more moderate. he's been pushing to slash corporate tax rates in pennsylvania and cut regulation to lure more businesses to his state. third on this list is senator mark kelly. he's seen on top on border issues and notably, he's been h

out support for the pro act that's supported among democrats. now, there are still other names in the running. andy bashir has overseen massive private investment in kentucky. but we are down to the wire. we're expecting the news as soon as tomorrow. we're at the latest by tuesday when she will appear in philadelphia. >> megan, thank you very much. got a few days left to go on that time. joining me with more on the presidential race is republican senator bill cassidy of louisiana. senator, great to have you here. welcome. >> thanks for having me. >> oh many big important issues to delve into, but right off the bat here, do you think -- i mean, i'm asking the question as if we were just having a drink, your party, do you think they can pull this off in november? >> the republicans, absolutely. you look at the things which mean the most to voters, the border, which kamala has been a

total failure on, tamdz economy, specifically inflation. inflation is eating people alive. someone in washington with government incomes and cost of living increases, oh, inflation is not a big issue. you talk to the people back home with their property and casualty insurance as one example -- >> bingo. >> the price of food, then it's way too much for them. >> this might be a little unfair, but there seems to be a trend story. it goes back to the issue you raised. for louisiana, flood insurance, incredibly expensive. some analysts suggest people will move back to the northeast because of that. i've seen some of the louisiana cities that had some population declines. do you think that's what's going on here? >> i think that if you look at the tax policy of some of the big blue states, definitely people are living. i asked if someone would move your business out of california, he says nobody sets up a business in california.

not if you're a small business person. you can't afford the regulations. so i think that their hostile environment to job creation is going to make sun belt states the place to be. >> we have some experience of that in new jersey. one of the big issues you raised, whoever is president, harris or trump, will have to discuss is what to do about social security. it could go broke in nine years. the program needs to be overhauled by investing $1.5 trillion over the next five years into a separate investment fund. tell us how this would work, how it could save social security, and maybe avoid some of the fights we're gearing up to have over it. >> yeah, you have a sophisticated audience. in the trust fund, that by law is easter in cash or treasuries. the yield is 1%, 2%, 3%. we are losing -- it's the worst investment profile of what you would do in the social security

skus trust fund. we suggest that you manage it like a 401(k). put 1.5 trillion in over five years, put it into the market. but not just stocks, but real estate, et cetera. and allow it to grow over 70 years. the investment fund would offset any borrowing required and at the end of 70 years, it just blossoms out, and you take care of 70% of the unfunded accrued liability. with a couple more things, it's the way to go. >> can you imagine if we announced tomorrow that social security is going to buy into the market? what would the s&p do, would it double? that would be an incredible pool of capital. >> but it's true. it's one of the criticisms we get. but the stock market has a value

of about $40 trillion. we're talking about putting $300 billion in per year over five years. i think we can afford that. >> this market goes up on stock splits, on some level of the margin it would excite some people to invest. how would that preserve benefits or perhaps prevent the tax increases that might be coming? that's where people are curious to hear, because look, i think we can get on board with the idea we should be in riskier assets. you're losing trillions of dollars by sitting in treasuries in the meantime. >> yeah. so all the risk to this fund falls upon the fund. you would repeal the law that currently says when the trust fund -- social security fund becomes insolvent, that benefits are cut so inflow matches outflow. that's a 24% cut. you eliminate that law. in the interim over the next 70 years, you borrow money to pay

scheduled benefits. but most people think congress is going to do that any way. nobody thinks congress is going to cut benefits 24% to people using it. so you offset the borrowing required to pay, and you cap on that rule of 72, and for this just to explode in value. and when that occurs, 70% of it is taken care of. >> why don't you think something -- could we kind of take steps in that direction? because you know the debt and deficit situation is bleak, especially with interest rate where is they are right now. so we've got to contend with this in some way. so if you could solve social security, but medicare, you know, the other big government programs that -- i don't know how to solve them otherwise in the next 5, 10, 15 years. >> for social, if we address this, we would address 20% of our nation's long-term indebtedness. i spoke to a man who has been

highly successful in the bond market, ran a big company. he says he thinks that long-term yields may fall because wall street would see that the federal government is serious and not taking on more entitlements. we do it in a way that not just preserves benefits but for some make it better. we repeal webb and gpo. we repeal that. and so we do it in a way that makes the program fairer, but also makes it solvent, and thereby addressing 20% of our long-term indebtedness. >> listen, final thing from retires to the younger ones, you're a big part of the bill of the child safety protections online. talk to us about what you think that will splish. there's a few different variations going around in the tech world about what the best way to do these things. and i just think do you feel comfortable we're coming to a

place where we're going to significantly change things for the better, you still don't think this comes down to parents keeping phones away from kids and things like that? >> we know that suicide risk is rising among teenagers. teenage girls, i've seen it for the last ten years. there's probably no single reason for this, but we know that social media is playing a role. a young lady is bu bow bulemic she goes down that threat of pathology. the parent comes in and calls the tech company, they can't stop it. we give them an eraser button, so if the parents find these images are downloaded, they can hit the erase button. but it shouldn't be gathered, because if you're 17 or below, big tech has told you can't track this person.

so we put a belt and suspenders on how to protect the young person. there's not a silver bullet, but we think there's silver buckshot and this can address some of the pathology that's been occurring in the younger people. >> growing up in virginia, i know what buckshot is, so i appreciate the analogy, senator. thank you very much. i like to see what utah is doing on this. virginia looking to ban it in schools. so it feels as though the tide is turning. thank you for the time. appreciate it. >> thank you. >> senator bill cassidy of louisiana. meantime, a new bipartisan proposal to solve america's child care crisis is also gaining steam on capitol hill. emily has those details. >> reporter: yeah, concerns over the cost of child care have long been on lawmaker's radars, but they're going to have a unique opening to do something about it next year in that upcoming battle over taxes. democrater senator tim kaine, republican senator katie brit

rolled out a new proposal today, expanding the number of caregivers out there. one part is to expand a tax credit for kids and dependants and make it refundable, which is key for low-income families. plus, their legislation would triple a tax credit for businesses to provide child care for employees. it would allow a maximum credit of $500,000 and cover up to 50% of expenses. small businesses could stand to benefit even more. their maximum cap would be $600,000, and businesses could partner with each other, team up to provide child care to a larger pool of employees. now, a lack of child care has resulted in the economy losing an estimated $122 billion each year. the bill is endorsed by the chamber of commerce, and the senators are hoping that it's going to get enough support to make a tax package, and we'll be watching that fight very closely next year on capitol hill. >> explain how it would work

again. they're making it more affordable for the buyer by subsidizing it, and then there's making it more affordable by lowering the costs. what are the details here? >> yeah, so it's this two-part thing. through a series of tax credits that families can take advantage of, the cost for child care should come down. plus, they have a separate measure that is part of this larger package that would create a grant program, and that would go to helping states fund additional child care workers. a lot of them said look, we love what we do. we want to do it, but unfortunately, we can't charge as much as we need to pay folks because then families would be priced out. our folks are leaving the industry because it's so easy for them to find better paying jobs elsewhere, even though they want to stay in that child care. so working on the supply side and the demand side, and really trying to tackle an issue that spans both sides of the aisle

right now in terms of what lawmakers see as the need. >> at some point, is it universal pre-k or something. it's like another mortgage. emily, thank you. appreciate your time. coming up, visa and mastercard solidly in the green over the past week. we'll look at the challenges that have been facing the group, and one buy now, pay later name our analyst is bullish on. a little more than half an hour to the fed decision. ishe exchange" is back after th.

a lot of green as you just saw there. welcome back to "the exchange." i'm tyler mathisen with your cnbc news update. ukraine received its first delivery of f-16 fighter jets from nato allies. bloomberg reporting the delivery honors the deadline to send some of the american-made warplanes by the end of the month. the first batch of aircraft came from denmark and the netherlands. a federal judge upheld lbgtq protections in four republican-led states. the alabama judge rejected the

arguments the states made in challenging the education department's regulation that says a federal law barring sex discrimination in education extended to gender identity. this breaks with six other judges who said the rules were invalid. in singapore, workers at bytedance's office were hit by food poisoning. authorities said most of the employees affected were in hospitals getting medical attention. a spokesperson says they are investigating the matter, and working with local authorities. kelly, back to you. >> tyler, thank you very much. also coming up, muhammad arian, we'll talk to him about the fed policy. ehae"s ckft aer this. (♪♪) sofi is helping me get my money right to achieve my ambitions. like a saving for a better swing. loosen that grip. (♪♪) with sofi, i earn more money on my money

and pay no account fees. plus i'm investing in my game. sofi can help fund all your ambitions. (♪♪) no matter hoambitious. (♪♪) bank with sofi to score a higher apy and an epic welcome bonus. sofi. get your money right.

doors take us places. so you bought a place. to new adventures. -oh. mwah. -planned... -and unplanned. -surprise! -they lead to goals. -for you, mama. and connect us to family. i didn't get the part. your dedicated fidelity advisor can help you open those doors. but i did get waiter number 2. because they know you. they can help you create a comprehensive plan for your full financial picture and personalized money management with the right balance of risk and reward. doors were meant to be opened.

welcome back to "the exchange." mastercard shares up about 3% today after a second quarter profit beat and uptick in consumer spending activity. but my next guest isn't filling too bullish, he just downgraded mastercard and visa, saying clouds could be gathering and he likes one buy now, pay later

thing. joining us for more is jason cupp. great to see you. listen, if crypto and defy couldn't disrupt visa and mastercard, i've given up that anything can. >> thanks for having me. i would tend to agree, this is not a call about disruption of visa and mastercard, this is simply a call that we have become a little more concerned about the multiyear revenue growth algorithm of the three different components of their business, feeling like the cash-to-card conversion cycle that has been going on for decades has still got some steam but not as much as it once did. and we're concerned about the potential outcomes of litigation where there were some unfortunate developments about six weeks ago. >> so there's something macro in here. usually you see mastercard and

visa and you say that's it, throw in the towel, the economy is over. >> we're not throwing in the towel on the consumer or the economy. this is not a call that says the consumer is going to fall off the cliff in the second half. last week when visa reported during their earnings call, they did suggest that the lower income cohort has seen a little bit of a slowdown in spending. mastercard, however, did not call outdynamic. so our call is that there's going to be a little bit more revenue softness potentially on a multiyear basis than what consensus currently assumes, and the stocks are fully valued a t this valuation multiple. >> it's important to highlight that. mastercard is not calling a slowdown in spend. every time you turn around, there's a restaurant name or someone that isn't able to put in the topline they were hoping for. it points to a shifting consumer, but not a story of a

broader slowdown. so there's stock specific things going on here. what about a firm which you're more positive on, what's going on there? >> we did upgrade a buy from neutral yesterday. they are a leading provider of buy now, pay later solutions. that's primarily in the e-commerce world. we upgraded for, number one, we think they're going to be able to achieve profitability on a gap basis, not adjusting out or any other types of expense on a gap basis stooner than consensu believes. and the second reason is that a lower interest rate environment, which is obviously what's now priced into the market, should benefit a firm in the in terms of lower funding costs. and the third point i would make is that the stock is down 40% year-to-date, so we see attractive risk/reward here. we do believe that their earnings report in late august

could be a positive catalyst. >> do we go so far as to think of them somewhat countercyclical, meaning a lot of people thought they would be the first place to feel the pain and maybe people could turn to a service like this. >> this can be a backup option as an alternative to a traditional credit card. the terms are much more friendly to the consumer. if you are struggling to make ends eat, you want that $200 pair of shoes, you can make four payments of $50 each, that fits your pay cycle much more neatly and much friendlier to your pocketbook. so we could see some of that. we believe that buy now, pay late as a category is going to take share on an ongoing basis, because the penetration rates are still quite low. >> indeed. jason, appreciate your time. >> thank you.

coming up, meta on deck to report. its massive ai spending plans are in focus. this as the company just scratched a one ai effort eyth had hoped to monetize. we have those details, next. ts on track. sometimes they need help cutting through the noise, to ensure fresh investment ideas keep flowing, and to analyze the market from every angle. at allspring, we deliver the unexpected, by relentlessly exploring where others don't. allspring, follow the insight.

your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire weathertech products are designed and manufactured in america using only american raw materials. most competitors make things seven thousand miles away... and then wonder why they don't fit. with weathertech in your vehicle you may hear angels singing as you marvel, how do they do it? simple. american technology and american workers deliver quality... not imported junk for a few bucks less. get the world's best floorliners and support america. find your fit at wt.com (♪♪)

welcome back to "the exchange." we're keeping an eye on the price of oil amid escalating tensions in the middle east. it's up to almost $78 a barrel. year-to-date, only up 8.5%. in the broader markets, gains across the board today, led by the nasdaq. the dow is up 172. the s&p is up 1.3%. the russells are positive, as well. and the nasdaq is up 2% today, which is helping to undo some of the selloff we have seen in recent weeks. one of thosemeta higher, but itis down 12% from its all-time high.

wall street is looking for sales growth of 12% from $32 billion a year ago. and a 19% jump in ad revenue. and today, pinterest is down 12%, citing softness in the ad market. meta, the company is dealing with questions around its ai investments after reportedly scrapping its celebrity ai chat bots. and while up 60% since september, it's another example of big tech trying to figure out how to turn ai into a profitable consumer product. maybe we'll get more answers in today's earnings report after the bell. coming up, mohammed el-eran joins us next with a potential fallout if we don't get a cut in september. honestly, i don't do a whole lot here. i'm really just here for the at&t internet, it's super-fast so, any pre-launch concerns? what if nobody buys them?

that's mean or, what if everybody buys them? oh, i hadn't thought of that that's probably not gonna happen can we handle that kind of traffic? the network can handle it! i downloaded eight hours of true crime stories just during our last video call i'm learning a lot ♪ (alarm sound) ♪ amelia, turn off alarm. amelia, weather. 70 degrees and sunny today. amelia, unlock the door. i'm afraid i can't do that, jen. ♪ (suspenseful music) ♪ why not? did you forget something? ♪ (suspenseful music) ♪ my protein shake. the future isn't scary. not investing in it is. you're so dramatic amelia. bye jen. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com. something amazing is happening here. climate researchers are weathering a data storm. that's because cdw transformed their devices and infrastructure with lenovo thinkpads

and powerful edge to cloud solutions, delivering faster insights and increased performance, giving them the scale to stay ready for whatever's next. make amazing happen. lenovo and cdw.

welcome back. the fed is poised to hold rates steady today, and our next guest says that move could be the first step in a policy mistake that could spoil the chances of a soft landing. he sees a 50% chance of the market getting out unskcatheuns. joining me now is mohamed el-erian.

great to see you. welcome. >> thanks for having me, kelly. >> do you think they should cut today? >> i do. i'm in the camp that they should cut today, because the economy is weakening much faster than they are -- than they realize. >> what do you point to for that? >> so first, i listen very carefully to what the companies are saying, and whether it's starbucks, mcdonald's, go down the list, they're all pointing to softening demand, and a loss of pricing power. secondly, i look at the cracks in the labor market, and i worry about that. and then i also look at what's happened to the lower segment of the consumer, and there's real pain there already. so when you put those three things together, there is a risk that they build on each other. and the next thing you know, you are very close to a recession. >> you know how i know we're close, because i'm starting to feel bullish. so that must be a sign. i have to tell you, i've been waiting, because the leading

indicators have been inverted for like two years. we know that the classic signs have all been pointing towards a slowdown, ism, manufacturing and so forth, but jobless claims are holding in. there yesterday, the number of job openings rebounding the way that it did, consumer confidence, you could quibble with some components, but overall it's improving. yet, michael darda says kiss the soft landing goodbye, a harder one is coming. >> i'm not kissing it goodbye, i'm saying 50% a chance. we are totally dependant on the labor market. most households have run down their pandemic savings. too many have maxed out their credit cards. if we lose labor income, then we are in trouble. so yes, the labor market becomes critical. but there are no other spare tires right now in this economy. >> i wonder if the labor market looks fine. the best leading e ing indicato

jobless claims are tame. we have some structural things going on with this immigration surge. so if it keeps rising, okay, i respect claudia somm for saying in defiance of her own indicator, maybe it's different this time because of those factors. >> it's a of risk, ultimately. so on the inflation side, we've made progress. and today's statement will welcome further progress in reducing inflation. i think the inflation rate will settle between 2.5 and 3%, where most people would view this as price stability. most would view it as consistent with anchored inflation expectations. so that side of the mandate, if you don't overobsess is fine, it's the other side of the mandate that's becoming more risky. and you'll see this again today. i suspect chair powell in his press conference will seek a much more balance d, and the rik

of the employment mandate being threatened? >> i wish we could know friday's report today. that's always the case with fed meetings, but especially right now. is it possible that the immigration surge is throwing a wrench into these figures? in other words, the reason why the unemployment rate is rising is just because we're not absorbing all of those new workers, and the potential gdp is higher than we realize. >> could be. and that surge has been a positive supply shock. there's a question mark as to how long it's going to last. some economists think we've had the best of it, but it has been, you know, this has been an exception economy. the u.s. economic exceptionalism has been incredible. you know, we got numbers that germany slipped into a negative gdp growth recently, again. the u.s. has been really, the star performer, and we don't want to ruin this. >> i completely agree. and i'm sure you could say, look, a couple of cuts on the margin would probably do the most to support the continued expansion. you would say, if they don't cut

by september, that would definitely be a mistake? >> yeah, whether they cut in july or september, won't make that big a difference. but the problem is, this is a highly data dependent fed. it's overly data dependent. and high-frequency data, as you know, is noisy. we saw today with the eurozone inflation number going back up, they could get a bad inflation print. and if they are overly data dependent, the next thing we know, they don't cut in september, and then they'll look at november, and by that time, you have the lagging effects of the interest rates, you have the higher for longer, and you have already, the weakening structure, and then you really start to work. that's why, look, i would rather they cut today. i know they're not going to cut today. if they cut in september, it's not the end of the world. if they get derailed from september, then the 50% chance of a soft landing goes down quite a bit. >> you could see that, maybe a couple -- if they're not data dependent, what are they? how else do you make a decision? >> you should be forward looking

as well. you never drive a car looking just at the rearview mirror. you also look at the road ahead. and you have quite a bit of indicators suggesting what the road ahead looks like. they got burned badly in 2021, when they did take a look forward, and ended up with this transitory inflation narrative that really hurt them. so they've been very cautious, but they've become overly data dependent. so what would be good for the u.s. economy is to be more balanced between backward looking and forward-looking indicators. >> all right. it's, you know, it's a tricky thing. even the people looking at that are having two different conclusions right now. mohammad, thanks for being clear on where you stand. it's good to see you this afternoon. appreciate it. as mentioned, claudia sahm will be on "power lunch." we'll get her thoughts on what this all means for the economy. we're just moments away from the rate decision coming at 2:00 p.m. eastern and chair powell's press conference at 2:30 p.m.

i'll see you on the other side of this quick break.

good afternoon, everybody. and welcome to "power lunch" alongside kelly evans. i'm tyler mathisen. we are just a couple of moments away from the fed's decision on interest rates. most fed watchers not expecting a change today, but this could be the meeting before the meeting. in about 30 minutes, we'll be listening closely to fed chair powell for any clues about

september. >> let's get a check on the markets ahead of that decision. we've got the dow up 283. it's really broken out back towards session highs in the last hour or so. the s&p is up 1.5%, 5522, the nasdaq is up 2.4%, a monster move to retrace some of the sell-off we've seen in recent weeks. speaking of which, check out microsoft, slightly lower, as the markets were hoping for even more from the company's results, but well off those after-hour lows. and they're continuing to spend on ai and that's helping amd and nvidia. nvidia up almost 11%. >> let's get right to our all-star panel, as we are a couple of minutes away from the fed decision. a little less than three minutes. joining us, david kelly, stephanie roth at wolf researc and jim karen with morgan stanley investment management. welcome to all of you. stephanie, let me begin with you. you say that the fed has effectively delivered a rate cut by coming out with such a

consistent message over the past couple of weeks. explain what you mean there and what are you hearing that tells you that the rate cut is basically already baked in? >> yeah, you heard a chorus of speakers coming out, all delivering the same message. they've been saying the labor market has softened. they said the risks are more imbalanced, between the inflation side and the employment side of the mandate. and they're basically talking about a rate cut in september, and by doing this and having this consistent message, that has eased financial conditions, which is doing the job of a rate cut, but in advance. they're effectively delivering this ratecut now, because markets are doing the work for the fed now, they're still going to have to of course to deliver on that, but that's very, very likely that will be the case. >> david kelly, you agree with what stephanie just said? >> i think so, but it is important that they deliver. i think what you'll see in the statement today and in the press conference are sort of a few gentle chimes just reminding investors that their rate cutting act is about to begin

here. nothing to get alarmed about right now, but we will see rate cuts, i think, begin in september. i think it's very important for the federal reserve to lay it out and be pretty consistent and steady in cutting rates, because it's actually -- this is a dangerous time. you don't want to be cutting rates too quickly here and alarm people. i think they'll get a clear message that september, we'll get that first rate cut. >> in september, we get that first rate cut. jim, i guess, the question is, what else do they signal, or do they rtry to maintain something kind of hawkish to push back. >> i think what the fed is trying to figure out right now is, is the economy weakening or is it just normalizing? are we coming off of strong jobs we've had in the past post-covid, inflation is coming down, is all of this a normalization, or truly a weakening that really deserves a significant dovish statement today, that leads us into thinking that september is a first cut. i was the first one to say, i think it's 50/50 in september, i think it's a close call, but i

think it's really a question. this is what i'm going to be listening to with powell, is how they phrase this. i don't think they do anything today. i would be worried if they did, because i think the economy is cooling, not collapsing. but i think it's more of a normalization of conditions, as opposed to a weakening. i still think it's a close call. >> we'll come back to you on that 50/50 proposition, but now to steve liesman for the fed's decision on interest rates. steve liesman. >> the federal reserve left rates unchanged, but changed its statement in a way that meay la the groundwork for future rate cuts. it doesn't necessarily guarantee it. the fed said the risk to its employment and inflation goals continue to move into better balance, rather than just have moved into better balance. and the committee says that it's attenda attentive to risks on both sides of the mandate, not just highly attentive to the inflation risks, which it had been saying for quite some time. they did continue to say that there won't be cuts or don't believe that there should be cuts until they have greater