worldm bloomberg headquarters in new york, i am mark crumpton and this is the intersection of business and economics with the mainstream perspective. janet yellen and the results from the open market committee meeting in june. peter cook has details. >> there is news within these minutes, particularly about the strategy, the debate about how they are going to normalize policy. that is where the main focal point will be in these minutes.

first off, on the views of the economy, as we heard from janet yellen at that time at the meeting in june, members thought that the economy would bounce back from the harsh winter in the tough first quarter. thermation received since committee meeting in april again, the economic activities rebounding from the decline in the first quarter of the year. there was no great debate around the table, according to the minutes, about whether the fed might be behind the curve with regard to tightening monetary policy. thatinutes go on to say participants generally supported the committee's current guidance about the likely path of asset purchases and its approach to determining the timing of the first increase in the federal funds rate and the path of the policy rate thereafter. there was debate among members specifically over whether the forward guidance would suggest that the greater likelihood the economy would be slowing or that it would be speeding up and they

might have to respond accordingly. there was a debate over that. specifically with regard to the taper, they discussed that the economy was growing at a strong enough case that bond buying would finish off by the end of the year, is expected. the evening up to the point where participants generally agreed, according to the minutes, that the final tapering would be $15 billion, combining $10 billion and $5 billion, increments10 billion . the final move, they suggested, would be 15 alien dollars. the discussion of -- $15 billion. the discussion of policy, they discussed the tools at their disposal and most agreed that the rate of excess reserves should play a central role during the normalization process . it was generally agreed that overnight repurchase agreement facilities within interest-rate set below the interest on excess reserve rate could play a useful supporting role in helping to

firm the floor under money market interest rates. they discussed what the spread should be. they are getting into real details with the staff about how they would execute this exit strategy. the part about whether or not there would still be a need for discussing a federal funds target in the communications. participants suggested -- some of them at least suggested that would be necessary. they also discussed the possibility of other communication tools -- for example, in addition, participants examine possibilities for changing the population -- calculation to obtain a more best measure of funding rates and apply lessons from international efforts to develop improved standards for benchmark interest rates. mark, a lot of discussion here about those tools at their disposal, how they are going to move forward. one thing they did make clear in the mets, they want to communicate this to the markets earlier rather than later. expect more later this year. thanks. cook, let's quickly get a check of the markets. julie hyman is standing by.

julie, some reaction today. >> some but not huge reaction. few look at the s&p 500 on an intraday basis, it came off by a point or 2 after these comments from the fed. worst the gains is the you could say of what we had from these minutes. it looks like the readers that, yes, people need to be aware of the -- raleigh that rates are eventually going to get -- people need to be aware of the eventuality that rates are eventually going to go out. stocks are not seeing a huge movement by the snapback from the 2-data kinds we have seen from the s&p and the dow, and we are not making of the 2 days of the clients we have seen, but it seems like it is holding relatively steady after these minutes came out. >> julie hyman, thank you so much. bloomberg economics editor michael mckee joins me now on

the phone from jackson hole, wyoming. what is your take? >> i think the reason, mark, we do not see any real movement in the markets is this is all about process rather than timing, and what investors want to know now is when is the fed going to move. they do not give any clues to that am other than to let us know that they will probably wrap this up in october and not do an extra taper of a billion dollars in the month of december. the real question coming up is how they are going to exit, when they do, and we did not get details but as peter noted, they confirmed what most people already suspected, that their primary tool is going to be interest on excess reserves. the fed will lend out treasury we'll taketo -- treasury securities from people in the markets and the markets and lend them cash and get money off their balance sheets for the time being. struck in thewas minutes that fed officials did

express concern about low volatility in equity currency and fixed income markets, something that we have been discussing on bloomberg tv. a lot of people on the street say they're concerned about low levels of volatility. >> it is interesting because that is something that janet yellen talked about in her last speech could there has been an issue in the fed of how much attention they paid to market stability am a financial risks, when they make a monetary policy decisions. they are leading the markets know that they are concerned, and that may be part of the strategy. they do not want to raise adjust rates to head off market bubbles because it is such a blunt tool. this may be part of that. conversationhe again always goes back to when, again, is the fed going to raise interest rates. mps sayingme ca probably next year, some saying they could be out farther than that. what is the consensus? what are you hearing in a jackson hole?

a lot of people here that what the fed has told us is that sometime in late 2015 will be too late. they will probably have to move it up, and we have seen some members of the wall street community moving their forecasts ahead. but you have to remember, these are the minutes of the last meeting, at which we got the last forecast. we already know essentially what they think in terms of timing. these minutes don't give us anything new in that regard, what we will want to see is when janet yellen testifies next week in the humphrey hawkins testimony, whether she gives any indication that the fed is thinking the timing might be behind the curve and we will have to wait until september to get the next forecast to see what they think that. in the meantime you have got to pay attention to job state. >> michael, thank you. we have a lot more on the fed minutes coming up. we will get a take on when the

whenay make a ruling and they had to the next fomc meeting on july 30. antonio percent c, portfolio manager at pimco, will join me from california. that is at the bottom of the hour on bottom line. president obama arrives in texas in a few hours. he is facing a growing crisis facing tens of thousands of undocumented children arriving in the united states. phil mattingly joins me now. an emergency funding request has been made. is congress willing to give the president nearly $4 billion? >> like most things that are sent to capitol hill from the white house, this is not tech weakening a warm embrace from either party. there's is one thing there is agreement on, both democrats and republicans. this is a major problem and congress is going to have to do something. senate democrats pledged they would move quickly on the $3.7 billion emergency funding request from the administration.

it is house republicans that, as always, are the big question. house speaker john weiner held a press conference -- john boehner held a press conference and said that they need to do something before july. but the large amount of money the not call concerns in conference, something the speaker alluded to. >> if we don't secure the border, nothing is going to change. aboutesident's request is continuing to do with the problem. we have got to do something about sealing the border and ending this problem so that we begin to move on with the bigger question of immigration reform. >> republicans want actual solutions, not just money thrown at the problem. >> phil, there has been growing pressure on the president to visit the border. why isn't he making that stop?

>> it is a great question, one that democrats have been asking publicly. he is going to be so close, why not make a trip down there? the white house says that the president is more than knowing of what is going on at the border and will meet with faith leaders on this issue today. but there was a major optics issue they are dealing with today. we have 4 republican senators including ted cruz and john mccain questioning why the president is making fund-raising stops in colorado and texas and won't make a short trip down to the border. on some level the white house feels that they made dispositions include because people are calling on them to change their minds doesn't force them to do that. i don't think you will see any type of secret visit, at least not at this point. >> are there any substantive policy changes the administration is seeking along with the emergency funding? >> this is where the administration is running into

problems with people and their own party. there is a 2008 law that right excerpt protection to children coming through central america. those added legal protections are causing problems for an administration that would like to figure out a way to send many of these kids home in a quick fashion. the idea are wary of of putting tens of thousands of children on planes and sending them home. they want fixes now and if those come is a big question. >> phil mattingly, thank you. when "bottom line" continues in a moment, more on the fed minutes.

>> the u.s. federal reserve saw the economy rebounding but offered no guidance about when it will raise rates. the chief economist at sterne agee joins me from las vegas. welcome back to "bottom line." good to see you again. >> thank for having me. >> what was your take away?

wasn'trtunately, there much to learn from the minutes and it is more about what we didn't see than what we did is he. about theo hear more longer-term fed funds rate. while committee members increase their expectation for rates in 2015, we did see a decline in their expectation for the longer-term level, taking us from 4% to 3.25. i was hoping to see more conversation about that, but not much detail there. i was hoping to see more in terms of the reasoning behind the fed's decision to lower their forecast for near-term growth. also in the june expectation -- excuse me, economic projections -- they lowered their forecast for 2014 growth, taking us from the upward round of 3% to just 2.3 percent. we were hoping to see what the indicators suggested that they needed to do that, but also, why they didn't lower the forecast even further.

remember, against the backdrop of the decline of 3% in the first quarter, we're still going to have to see 3.5 to 4% growth in the remaining three quarters, meaning it is going to be very difficult to get to that expectation even though the fed has lower this twice. fed's exit strategy, i was discussing this with michael mckee, who was on the phone with us. how much concern is there that the strategy will be completed? >> i think there is a lot of concern and the market was looking or more specifics in terms of timing. we continue to see a discussion that suggests maybe the fed doesn't have a clear idea of how they are going to unwind all of these unprecedented policies that have been in place for years. essentially, the fed growing their balance sheet over $4 trillion, that remain to very big bird in area that the fed is going to have to deal with -- that remains a very big burden an area that the fed is going to have to deal with. while we hear this discussion

where they are suggesting to the market that they are going to have a strategy, it is clear at this point that they don't have a specific strategy in place. economist at sterne agee is joining us from las vegas. is it now question of keeping the markets away from speculation on rate hikes or is it, as michael mckee told us, about process? >> it is going to be difficult because on the one hand, as we saw from the june economic projection, the fed is lowering expectations for growth. on the other hand, committee members are increasing their expectation for the brevity and timing of the first said rate hike. it will be difficult to clarify the conversation between market between what we are seeing, the lackluster reality, and the hike in next rotation of growth and rates going forward. you put out a note that although job creation has been impressive, it is not leading to wage gains. our business is looking for

low-cost, parts and labor? >> they certainly are -- temporary, part-time, low-wage ofor is the vast majority the employment gains that we have been seeing. while topline headlines -- excuse me, headline job creation has been quite impressive -- we have seen five consecutive plus 200,000 reports, so i do not want to take away from the gains we have seen, but that hasn't been enough to lead to wage pressures. it has not translated into income growth, which is the precipice to add to the consumer's ability to spend in the market place. this is what janet yellen is talking about when she says we can't look at headline job creation, we can't just look at the on employment rate. we have to look at those in the context of a broader measure of labor market conditions, which continue to show very stagnant average hourly earningsl, decades low of the participation rate, long-term unemployment levels. we are still not seeing a healthy labor market, certainly

not indicative of a near-term rate hike. "it is clearrote, that the fed's focus is first and foremost u.s. labor market, not inflation nor received financial market imbalances." if the labor market appears to be healing, why is inflation taking a backseat? >> when it comes to inflation, the fed's concerned about prices comes from the wage-price spiral. when we start to see the labor market improved, employers grow their business and they take on money and they put that work and they take on additional employees and they drawdown that pool of available labor and that begins to translate into wage pressures. that is deflationary spiral that they are concerned about. right now with 13 million americans actively seeking employment, we are not seeing that translate into wage pressures. while we do see these temporary or transitory price pressures as a result of whether or geopolitical issues, that is not enough to drive monetary policy.

well -- wegoing so are going to take a commercial break could would you mind sticking around for a couple more minutes? >> i would be happy to. >> thank you so much. she will rejoin us when "bottom line" continues.

>> we are back, talking about the fed with lindsey piegza, chief economist at sterne agee. she joins me from las vegas. thanks so much for staying with me through the commercial break. signs of increased risk-taking reviewed by some the dissidents as an indication -- some participants as indication that market participants were not factoring in sufficient uncertainty about the economy and monetary policy. are investors at this point too

complacent about the direction of the economy? of the certainly is one concerns of the fed and several committee members have talked about financial market stability . an unofficial third mandate of the fed could but regardless of how complacent the market is, the fed's focus will remain on the labor market. that is their concern first and foremost, getting the labor market to a healthier condition, getting americans back to work, making those high wage jobs translate into the income pressure that is needed to get the economy back on track via the consumer. despite market volatility -- excuse me, the lack of market volatility, the fed's concerned about financial market stability, that will take a backseat to labor market conditions. >> lindsey, i have to circle back to labor market conditions. goal of fulls length limit approaching faster than perhaps they anticipated, what are they to do? >> again, when we talk about

full employment, we are talking about the civilian unemployment rate could but we have to take that in the context of the participation rate that is still at a 3-decade low. it goes back to yellen's comments about looking at the labor market through a much broader lens. she is looking at the civilian on limit rate at the backup of a youth unemployment rate that is over 12%. >> but we also looked at the participation rate, the share of working people who are actually in the labor force. last month it was at 62.8, matching the low of any. 78 there is a -- matching the low of 1978. there are a lot of people who have left the labor force for one reason or another. >> that is exactly right, and we are getting a lot of misinformation about the visitation rate, pointing to the fact that we have an aging calculation. the vast majority of the decline in the participation rate has

been in the age range of 25 to 45, individuals with a significant number of potential income earning years left. >> lindsey piegza, chief economist of sterne agee, always good to have you on the broadcast. >> thank you so much for having me. >> bloomberg is "on the markets." julie hyman joins me now. how are the markets doing? >> they have pretty much stabilized after the minutes. the read, as mike mckee talked about, is that we are still sort of data-dependent and waiting to see what happens next. the s&p and dow are remaining steady -- actually, they have gained a little bit versus earlier. if you look at what individual stocks we are watching, american airlines is on the list. those shares are on the rise and are pulling up stocks of other u.s. airlines also. the second-quarter pretax margins exceed forecasts. the companies producing a 6% rise in revenue each seat flown per mile.

that is the benchmark gauge for the industry. we will have more in 30 minutes and talk a little bit more about the fed reaction and the outlook for the earnings season. ♪

>> welcome back to the second half-hour of "bottom line" on bloomberg television. i am are crumpton. thanks for staying with us. chinese vice president xi jin ping, u.s. secretary of state john kerry, treasury secretary jacob lew gathered for a strategic dialogue in beijing. kerry said that differences over individual issues must not be interpreted as what he called an overall u.s. strategy because "the u.s.

does not seek to contain china." citigroup may reach an agreement with federal prosecutors as early as next week. a person familiar with the negotiations tells him bloomberg news the deal would result her program to sales of mortgage-backed bonds -- resolve a probe into sales of mortgage-backed bonds. "the new york times does quote reported the deal would be set up "the new york times" -- "the new york times" reported that you would be $7 billion. rayer new orleans mayor nagin has been sentenced to 10 years in prison. that is a look at the top stories in the news at this hour . let's get you more on the release of the minutes from last month's fed meeting. is executive vice

president and market strategist and portfolio manager at pimco. welcome back to "bottom line." your take away what did you hear and didn't you hear from the minutes? >> there wasn't a lot fresh there but there was something helpful to us giving guidance as to what the fed will be doing. it gave us a sense as to when bond buying will actually end. the fed is tapering by $10 million each time it needs. october 29 when it meets there will be $15 billion remaining. in the marketplace, what will 15?fed do, cut by 10 or it might determine when the first rate hike will occur. in the fed's policy statement, each time it meets it will be a considerable time between the end of asset purchases in the first rate hike. fed here said we will and -- if we continue at the current

pace we will cut $15 billion in october rather than $10 million, so that is the end of that. it said that the markets are not to take any meaning from it. it showed to a great extent that the fed doesn't want markets to sniff out a rate hike too soon. that is one signal on top of many, many signals that it will be patient with removal of accommodation. >> 10 year treasuries have fallen 20 of their last 22 times the fed release minutes. write now the fed at 2.55. what is the market trying to tell us you don't -- what is the market trying to tell us? >> the fed is exiting by not buying bonds as much as it used to. the market is worried about -- not much, because yields haven't moved. yields have been remarkably stable the past year. 2.4% andading between 2% -- pimco expects volatility

to stay low. when it moves, it won't move my much. does move on rates its balance sheet actions have to be combined with that way thinking about rates in general. there has been unconventional easing and there will be unconventional tightening. year, 2015, when the fed doesn't by those trillion dollars, it is almost like raising the funds rate a wide. -- a point. it is like raising the funds rate equivalent by 2 points and combining that with the 2% expectation for the funds rate, it looks like 4, and there are other factors that mean additional tightening. stable.e likely to stay >> for three years the fed has said that the risks for the economy are balanced. as the been any changed -- has there been any change?

>> no, and one of the most contentious issues for the fed and elsewhere is they said "we are not sure." know --that it will this is page seven of the top for the wonks who want to check -- wages for americans are up just 2% year-over-year and the3 typical rice historically is. 70% -- typical rice historically is 3. the fed is still confused. it is not really know what begin to pickages up because there are so many argument spoke people working part-time. many who have left the labor force -- they just don't know. they would rather give americans the benefit of the doubt and see paychecks rise rather than trying to stop it by pressing on the brakes too soon. >> i was just speaking to

lindsey piegza of sterne agee and let me continue this narrative with you -- it seems that some of the fed policymakers were concerned -- and we talk about this on bloomberg.com -- that some fed officials see investors as too complacent on risks. do you see that? >> well, no, because the markets have it right that the policy won't be rising materially in years.t three to five there are powerful forces that are keeping them down. the investment implication is that a low policy rate, very important to equity prices and credit spreads and yields. it is rational that credit spreads will tighten and equity markets seem fully valued. the powerful forces the fed sites -- cites include demographics and credit -- for example, credit creation. our banks lending the way they used to lend? no. are they likely to?

probably not. negatives are telling them to keep more of a cushion a side. gdp microbeominal 3, that might grow 3, 4, 5. -- nominal gdp might grow 3, 4, 5. it is rational to think that the policy rate won't be rising materially in the future and are fine,valuations you could say. to the extent that there isn't this high level of speculation, as some might presume. one last point -- there isn't a recession on the horizon and it is usually required for equity prices to weaken and credit spreads to widen the u.s. does not have high inflation, does not have high inventory, there ,s no financial imbalance

nothing external we can envision that would upset this or cause recession. it is probably several years away at the least and that is good for market valuations. >> county crescenzi -- tony crescenzi, good to see you, too. the thrill for germany and the agony of defeat and what a it was for brazil. the world cup fallout when "bottom line" continues.

--it is time for today la today's latin america report. brazilians cried as they saw the chances of winning the world cup that home crushed. the 7-1 score was the worst defeat in the soccer-crazed nation's history. ubs says the loss will likely hurt their reelection chances of

president rouseff. plus, it could hurt consumer and investor confidence in brazil. plays benevolence and that game starts at 4:00 eastern plays- argentina benevolence and that game starts at 4:00 eastern time. that is your latin america report for this wednesday. cleveland is all but certain to nowthe republican party's terminating convention in 2016. we will go behind the scenes when "bottom line" continues.

>> republican leaders went public with their pick. cleveland will likely host the 2016 republican national convention. tens of thousands of republicans will flock to the city in june or july 2016. washington correspondent and

native clevelander megan hughes joins us with more on the win for her city. what this cleveland offer beyond the rock 'n roll hall of fame? nc officials were clear, saying it was a business decision that had to do with logistics and the resources that cleveland brought to the table. cleveland was able to offer them an earlier convention, ideal for republicans. they wanted to give their nominee more time to raise general election funds. in dallas there was concern about conflict with the nba finals and with using the arena there. in cleveland you have the quicken loans arena and the field where the indians play come right next door to each other. they have added hotel rooms and a convention center since the last go around in 2008. they're looking at an earlier date, and to 28 or july 18. -- june 28 or july 18. >> politics being what they are,

what were the considerations? a hugeously, there is opportunity for political narrative around ohio. the ultimate swing state -- as does ohio, so goes the nation. it has voted for the winner in every presidential race since 1964. republicans haven't carried ohio since 2004. openedpublicans were about hoping this is a win-win for approving the city's image and the party's image. going toonvention is give cleveland the opportunity to be elevated in the eyes of the nation but it is also going to give republicans an opportunity to be elevated in the eyes of cleveland. >> history has not shown this strategy to work. the last 4 republican conventions, none of them have gone for the republican candidate in the general election. >> democrats are looking at cleveland as well for the convention. where are they likely to go now?

>> they are a lot farther behind in terms of the process. they had it narrowed down to 6 cities, and that included cleveland. also, columbia, ohio. -- columbus, ohio. clinton couldn't host -- cleveland couldn't host the democrats and the republicans but i talked to folks at the dnc yesterday and said that they haven't signed the contract yet so cleveland is technically still on the list. we will see what could happen there. >> megan hughes in washington, thanks. can the gop does it make it polls -- make a difference of the polls? al hunt says republicans won't win in ohio. saying thatcolumn it will not matter in such a pivotal state. >> i don't know who is going to carry ohio in '16. the gop may well carry ohio in

'16, but it won't be because they held a convention in cleveland. people don't sit in november and say, gosh, they held a convention here. is if they have a good convention. mostly that is the candidate. >> the democrats, what is their answer to this? a redy and the dnc pick state? >> not necessarily true to charlotte, north carolina was a great convention city in 2012 and democrats lost north happyna but they were with their charlotte convention. more importantly, there is such a thing as a convention bump. do you want that bump in june or closer to labor day? >> let's talk about politics. says he does not

support calls from his party to impeach president obama. is this going to hurt the speaker? >> no, it won't. the crazy fringe right who froth ofthe mouth and mention president obama, a man also a 1998,at -- they remember the only cycle where the party in power gain house seats. >> president obama was in colorado earlier today and senator mark udall, democrat in, fighting for reelection. it is considered one of the more vulnerable states in the cycle. senator udall canceled an appearance with the president. is the president radioactive? inif he is radioactive colorado imagine what he is like in georgia or louisiana or arkansas or north carolina. the president's popularity is probably in the low 40's and that is not good. these guys -- and women, there

are more women candidates -- will have to win on their own, not count on obama. >> the president is asking congress for nearly $4 billion to help on the crisis of the u.s.-mexico border. he got criticism because he's going to texas but he not visiting the border. is congress going to oblige? >> i think they will give him most of what he asked for. they may put conditions -- >> why? >> because it is such a political football. immigration may hurt obama and the democrats this year -- >> how so? >> because of people coming across the border and the border and effect of these are headlines. long-run, it is a loser for republicans. if the republican party continues to stiff immigration reform -- we have seen a model of this, california. the republicans have not one statewide election other than on

which was maker since -- -- other than arnold schwarzenegger since -- [indiscernible] errez. have luis guti >> very interested to hear what he says about how obama has or has not responded to the crisis. i don't think it is the issue. the economy is the issue and some cultural issues, but it certainly matters and it matters a lot in the long run, particularly in the presidential year. >> al hunt, good to see you. you can see his full interview with connor cement -- congressman gutierrez friday night. another check of the market makers is on the other side of the break.

>> get the latest headlines at the top of the hour on bloomberg radio and streaming on your tablet and bloomberg.com. that does it for this edition of "bottom line" on bloomberg television. i am mark crumpton. i'm off for the next couple days. matt miller will be in on thursday and friday. "on the markets" is next. >> bloomberg television is indeed "on the markets." i am julie hyman. let's see how the stocks are trading ahead of those fed minutes. some of the stocks have added onto the gains from at least for the s&p and the dow, up about half of 1%. nasdaq is up nearly two thirds of 1%. let's look at treasuries as well

and how they have been reacting. earlier we have been seeing yields move higher and now it looks like they're moving a little bit lower but it is a small move. the yield to a looking at from the 10-year note. let's look at the currencies here. what we are seeing in terms of reaction there. a little bit of a drop in the dollar versus the comments from the fed, or the comments from a little while ago that were released today. let's look at gold prices. we are seeing some gains there and that continues at this point. because ofbeen gains increasing tensions in the middle east and people looking for a little bit of safety. for more on the market reaction to the fed minutes, i want to bring in someone who covers the u.s. markets for us. overall, when you look at what the minutes said, what are we

hearing from investors? >> the reaction has been very positive. talking to people leading up they are expecting a hawkish consensus, something that might move the rate hike up a little bit. the fed cannot do that. -- the fed did not do that. warninge pretty dovish, people about not getting too confident in the economy and taking risks. >> but they are not doing anything about it. >> they were a little bit positioned for weakness in the equity market, which would've resulted in a more hawkish statement. >> also if you look at the context of the past few -- 2 days specifically. pretty negative, the most negative we have seen in quite some time. >> middle of the new correction, the bull market might be over -- ity just goes to show that might offend people positioning ahead of the fed and they would

come in with an adjustment to the rate hike trajectory. now we are back up and it is as if nothing ever happened. i heard from one strategist that it might be suggestive of a deeper bull market -- >> just because we are up today doesn't mean it is off the table. the correction doesn't necessarily go straight down the way a bull market doesn't go straight up. >> very true, but they are willing to dump equities and see the sorts of losses we saw on monday and tuesday shows that there is more upside the markets. people will eventually need to be convinced of the bull market. >> we are getting into earnings season. alcoa has numbers, relatively positive. people are pretty optimistic. is it the same for you? >> some of the highflying likeds that did well telecom and tech are forecast to see the biggest earnings growth

in the second quarter. some of the banks are forecast not do as well. storyleague wrote a good that wells fargo is one of the only banks coming out of the earnings season unscathed. we will see how the big banks respond. >> those numbers come out on friday. we will see what they have to say. more later.ave >> we have markets snuffing a two-day losing streak, but could it correct it? that is what our first guest has to say. "street smart" starts right now. ♪ welcome everyone to the most important hour of the session. he minutes to go until the closing bell.