this has been telegraphed for several months now, the fed says this last round of using would end at the end of this month. the markets are now down as we await the fed's decision. chief washington correspondent peter cook joins us on the phone with the latest. >> mark, quantitative easing has come to an end as expected. the fed cites substantial improvement in the labor market for that change. the fed is maintaining, however, forward guidance at the fed funds rate will remain at the current record low for a considerable time now that the asset purchase program is over. there is which in that guidance as well. there is also new language on inflation and there's also a new language on the economy, suggesting the fed is see some improvement. first of all, the forward guidance language. "the committee anticipates that it will likely be appropriate to maintain the zero to a quarter

percent target range for considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the committees goal provided that longer-term inflation expectations remain well anchored could however, if information indicates objectives, the cleanup expects an increase in the target range for the federal funds rate is likely to occur sooner than currently anticipated. more of the comments with regard to inflation -- inflation continues to run below objectives. survey-based measures of longer-term inflation expectations have remained stable. although inflation in the near term will be held down by lower energy prices, the committee judges that inflation is persistently below 2% has diminished somewhat since earlier this year. finally, with regard to the economy, economic activity is expanding at a moderate pace and

labor market conditions include solid job gains in the lower unemployment rate and the range of the labor market indicators suggest that underutilization of labor resources is rapidly diminishing." they have removed that reference to significant on the utilization of labor resources. we had one dissenter, a dovish dissenter voting against the action, believing that in light of continued sluggishness and the recent slide in market-based measures of longer-term expectations, the committee should commit to keeping the current target range at least hasl the one to two-year returned to 2% and should continue the asset purchase program at its current level. he was the lone dissenter this time around. >> peter cook joining us from the u.s. federal reserve. thank you. let's show you have the equity markets are reacting after the fed decision. the markets have turned lower. s&p 500 down almost half a

percent at 1975. the dow jones industrial average also following this hour. the following is our good -- also following this hour. the nasdaq composite index also the were this afternoon, about three/four of a percent. let's get back to our fed roundtable to the chief economist of alternative investments at kpmg and the eaton vance vice president and the manager of the eaton vance bond fund also with us, mia saini. easing, no surprise it was supposed to come to an end. --k to me first language talk to me first about the language. considerable time low rate pledge. >> and little bit. maybe it was a compromise. we don't have the hawkish dissenters dissenting this time.

it is interesting that has remained and yet we don't have those packages center -- those hawkish dissenters. we saw some nervousness in the equity markets last week, very low interest rates in the u.s. and a lot of that has to do with the international situation, which has gotten worse and continues to deteriorate, i should say. i think the fed is somewhat concerned about the impact, even though they haven't said so explicitly. the other thing is what is happening with the labor market and the concern that there is still very uneven results even though we have very low unemployment rate. >> talk to me about that nuanced language. were you surprised that the fed was -- i guess you would call it in the middle there? was it is surprise about the language? >> i don't think it was a surprise. i think you are right, it was very balanced, because that is where they want to keep the

market. we have shut the door on quantitative easing, but the story isn't over yet. we still have to transition to a new environment, and the economy is giving us the right signals and living in the right direction but there are still some concerns. we are watching what is going on around the world with deflation. there is really no need to tighten. but we have closed the door on quantitative easing. >> mia saini is standing by as well. a momentioned ago, the markets turned lower on that news. >> fascinating to watch. taking a deeper dive into the red with all the major benchmarks firmly in the red and markets -- not just the equity markets. td withching the u.s. fresh has against the yen, including on the waterfront, treasuries extending across as well. pretty much having a

negative impact on all of the major asset classes. >> mia saini joining us from the breaking news desk. the criticism of quantitative easing -- it was hostile, to say the least, when it was first employed under ben bernanke it was misplaced or misunderstood? for thell still wait final analysis on that but when you look at the data it shows that quantitative easing has made a significant positive difference for the economy and one of the indicators i look at is that mortgage interest as a percentage of wages. we are at 4.5%. the average over the past 30 years is closer to 7%. when you look at the impact for households it has been very significant to look at the companies who have been able to refinance their debt and put themselves in a stronger position, it is very significant. one of the criticisms was when we were having higher oil prices

, that it only impacted the wealthy and the households who had to deal with the prices for whom this is mark problematic, they are being hurt by quantitative easing. now we are in a situation where we see oil prices falling and gasoline prices at the pump falling so that turned out to be only a temporary effect. >> what did qe accomplish? where did it fail? >> i don't think it fail that all. they said it did exactly what they were supposed to do. they gave confidence to the market and has constants pointed out, for the consumer to dele ver. but there were some side effects. the technical cap way ahead of the front -- the technicals got way ahead of the fundamentals and that is penalized fixed income retirees. the story is still not over yet and i think the higher rates for those living on fixed income and

it also means more volatility in the markets themselves. >> my colleague mia saini has a question. >> i am curious because the minneapolis fed president has emphasized the need for really a floor on the inflation front and he was a dissenter in the minutes right now, and he is talking about how you need to have that 2%, the inflation target net. i was looking at the most recent data, and the fed did say that the inflation target was going to be persistently below 2%. i am curious to hear where we are going to go from here, given the fact that since september we have shown that inflation has accelerated. >> so i am happy to take that. minus food and energy, you will see that pretty stable at the 1% level. if you look at a headline, you will see that come down a bit, driven by two things -- the moderation in the rise of home prices and of course what has happened in the energy market. >> and i think that the

deflation is, there are pockets of tightness. and that is clearly recognizing that. not seeing it as a tissue to deal with right now. >> but that still holds $4 trillion on its balance sheet. this is going to keep in it on long-term rates, when the fed starts to sell, how will do so without creating shock in the markets? >> i'm probably going to be saying something you hope and pray with but they may -- i hope you agree with but they made that a lot of those roll off. the concern is probably not really found it yet because we don't know how they're going to let the balance sheet run down and they don't really need to get rid of it all at once. >> and i do agree with you, i think that is fair. it is a question of what will happen on the short and. >> yeah, absolutely.

>> what is the shape of the curve going to look like? >> normalizes, he goes from steve to flat -- steep to flatter, and eventually inverted but we are nowhere near that. it is that transition from very short rates where much of the market has gone to, thinking that went higher rates come, i will be where i should be, at the short end of the market. that is probably where all the volatility exists right now. >> we will take a break. kathleen gaffney and constance hunter and mia saini, our markets correspondent, joining us. ladies, thank you. we will be back with more of our brain kindle on the discussions at the fed and the overall economy when this clinician of "bottom line" -- special edition of "bottom line" continues in a moment.

>> seriously think that movie is

going to work? >> always more about strategy than it is about tactics. >> you left yourself exposed in the middle of the board. >> i can't believe the whole game came down to colorado. >> let's get back to our roundtable on the fed's statement. constance hunter, chief economist of alternative investments at kpmg, and kathleen gaffney, eaton vance vice president. also joining us, our markets correspondent mia saini. former fed chairman alan greenspan is here in new york today and he spoke to the council on foreign relations, saying that quantitative easing has resulted in what he called " an explosion of assets and exclusion of reserve balances." why did the bond buying program have more of an effect on the real economy was the question he posed and i post that do you.

taken aback by this, given what has gone on today and what mr. greenspan did when he was at the fed. it was quite ironic. the bond markets have reacted exactly as you would expect. rates were lower and it helped us to take place. the result was that you have a lot of money flowing into riskier assets, and that has been the right path for both the economy and the market. we are at a different juncture now and the fed is doing the exact right thing, closing the door on quantitative easing. >> constance, kathleen mentioned that it is the end of an era. but talk to us about that era. as the artificial floor enough to keep the u.s. economy from falling further down the hill? >> i will answer that i want to go back to the things in common for a moment. -- b greenspan comment for a

moment. i was able to speak to him about the economy a few weeks ago and he is spoken about how loans have really taken time to recover to normal levels and that in the u.s. and globally we have not had real investments for long-lived assets the way we normally do after a recession. of course this recession is different because it was brought on by the bursting of the debt bubble. i think that is what he was thinking about, and perhaps that might be the context in which the quotation could be taken. in this regard, what my work is showing is that we are starting , indicatedal pickup by a bunch of factors, including but not limited to what is happening with capacity utilization. to get back to your question, it is the old adage, we don't have a counterfactual. we don't know what would've happened if we hadn't done one it didn't easing, although the data seems to suggest that it was on balance helpful.

what we are getting to is this inflection point with employment where we are going to begin to see what is structural and what is cyclical and over the next three to six months, we're going to have enough evidence about that debate. colleague mia saini is again out with breaking news -- she has a question as well. >> i want to build off of those recent comments because i am curious. on quantitative easing in the united states we had the unemployment rate with bernanke at 8.1%. we are now at 5.9%. what would we be able to get where we are now on the employment side of things we do not have quantitative easing? >> i think we need a the quantitative easing to give us the time to get there. the magnitude of the downturn in 2008 was tremendous. we are americans and we want to see things fixed quickly and now and it did not happen as quick as we would like it, but as constants pointed out, we are moving in the right direction, a little bit slower.

we are seeing the typical signs of recovery that enormous. >> you mentioned the global situation. certainly with europe and japan, starting the quantitative easing program and japan continuing quantitative easing, if you look globally there will still be a fair amount of liquidity, and that is going to buttress the global economy somewhat and sort of mute or lessen some of the effect of the fed ending the program. >> inflation is still below the target of 2%. when will that play into the decision of when to raise interest rates? >> some of it has to do with inflation expectations. if the current rate is low but people expected to normalize back towards 2%, and by that i mean indicators from the bond market and the surveys that the fed does inflation expectations, and those remain stable, i think the fed will remain comfortable raising rates.

we are getting too big inflection point in the labor market, which we are likely to see play out in the next six months in terms of the underutilized parts of the labor market. some of the people who have been underplayed from a longer. of time -- for a longer period of time getting pulled into the labor market. >> so far this year the brent crude oil index has fallen 23%. falling energy prices, are they the biggest reason why inflation remained -- >> is a positive calendar to have energy prices where they are and a lot of that is due to excess supply. but x is applying meeting stronger demand means we may have lower oil prices for some time but they are not going to continue to move a whole lot lower. we should take advantage of where they are now. it is a question of supply and demand coming back into balance. >> unemployment and inflation --

has the fed focused too much on unemployment and not enough on inflation? >> inflation isn't really a problem right now. it is quite, it is in the background. there's tightness in the labor market and focusing on labor has been the right thing to do for the fundamentals. the old adage is that you don't wait until it rains to fix the roof. should it be more on the fed's radar? >> look at what is happening with the low oil prices and it is a huge benefit to the economy with the consumer confidence numbers and people expect that price to remain lower and they will start spending a bit more money. they will have a bit more income to spend. that will cause a positive virtuous circle of consumption, which put on balance cause of the prices in the economy to start to increase. >> where are we at now at the end of october 2014?

what is the overall u.s. economy look like from now towards the end of the year? >> i have downgraded my forecasts lately for next week just because of what happened with the durable goods data. 2.7.2.5 to it could come in at three once we have had all of the revisions. >> kathleen, i will let you get the last word. what do we look like from now until the end of the year? >> i think we look good, it is continuing to move in the right direction. >> kathleen gaffney, eaton vance vice president, and constant center, chief economist for alternative investments, in my thank youmia saini, so much. we will continue to follow the fed this hour. trish regan will weigh in on the latest fed statements. returns with an "on the markets" update. ♪

>> we are urging 26 minutes past the hour. that means bloomberg television is "on the markets." for more, here is my colleague mia saini. >> you have to understand the play-by-play. right before the 2:00 announcement, stocks all in the red. not much movement in the hour before. before the new satellite you have the u.s. stocks spending the losses. they are back to the levels we saw right before the fed announcement. i am referring to the dow and the s&p. not just that, you saw treasuries extending the drop. particularly against the yen as well as the euro. extending those declines. it was seen as less of a safe haven compared to the u.s.

dollar. markets are reacting against the dow and s&p and back to levels they were at before could pretty much in the red for the rest of the session. back "on the markets" in 30. ♪

>> welcome back to the second half-hour of "bottom line" on bloomberg television. i am mark crumpton. let's get you to the top stories we're following this hour. the federal reserve sees further improvement in the labor market while claiming it will end its asset purchase program. program hasrchase added almost $1.7 trillion to the fed's balance sheet. earlier, in an exclusive interview with erik schatzker, bank of america ceo ryan moynihan discussed his biggest

worry about the economy. >> if the economy doesn't grow, how do you manage the slow growth environment? that is what we have been getting the past five years and that is what we are prepared for thatthe problem is not rates are rising, it is why are they rising. if it is because the economy is growing faster that is a great thing. it is not because the economy is growing faster, focusing on taking out the excess costs, it has been relentless. that. moynihan told erik most of the litigation overhang is behind them and the bank spent hundreds of millions of dollars on cyber security. a bloomberg exclusive -- betty liu reports that try and fund management, the activist fund manager that is coming for a breakup of dupont, increased its

stake in the chemical company to 2.7%, according to a person duly with the situation. the company exercised a combination of put and call options. no comment yet from either. a nurse in isolation in maine after treating ebola patients in west africa since she is prepared to go to court if the state tries to quarantine or. casey hickox says that if the restrictions are lifted by tomorrow she will go to court to fight for freedom. isne governor paul lepage monitoring the home where the nurses under a voluntary quarantine. the investigation into the explosion that destroyed a commercial supply ship homes after liftoff is underway. crews are searching the ground pieces of the orbital sciences rocket. officials are warning people in virginia not to touch any debris they might have crossed from the craft.

we spoke with the former nasa deputy director and general manager of the airline has association. -- airline close association. >> the fact that nasa is using the cargo this way is fully appropriate and not in question after this accident. there will be an investigation and they will determine if the vehicle can fly again on the vanessa has back up. we are contracted -- nasa has back up. their contracted with two entities. one is scheduled to launch in just over a month. >> hours after the rocket exploded, a russian supply ship arrived at the international space station with a motive precious life --with a load of precious supplies. commodities report. su keenan joins me with the details. >> the fed statements are a bit of cold water on the oil rally. close to 82. meanwhile, there is an

one today, soybean meal futures, of almost 8%. adding for the biggest monthly gain since like 1012 -- since july 2012. what is going on here? the soybean harvest has been slow will stop there is also a slowdown in soybean meal. the traders got caught off guard and appeared to be scrambling to reposition, one veteran says. we saw unusually large trading volume and options activity as well. judy chu oil and gold, the fed is the version prices lower. >> it certainly did for oil. if you check out the chart you can see that prices had a bigger ,eaction to the fed's statement with supply gary shilling earlier than forecast supplies,

and a strong patent -- strong pace at which the supply seven holding a. -- the supplies have been building up. it looks like there was a knee-jerk reaction lower, but then the fed says things about johnson that is good for demand. when trader says the oil prices could be astonishing a floor here. gas inventories fell. opec meets next month and appears to be trying to talk to market up a bit. the goal. extended declines on the announcement. goldman says that you can expect to see prices lower as the economy improves. >> su keenan, thank you so much. it is the most expensive midterm election ever. we will look at where all the money is coming from and the numbers involved. ♪

>> we are less than a week away from election day. we know one winner, all the tv stations carrying those ads. this year it is chairing a hefty price tag. peter cook has been crunching the numbers. could we be seeing some record numbers this time around? >> we could be seeing a record midterm election. we don't have the numbers in yet, but the center for responsive politics is projecting that this midterm could become the most expensive and midterm history.

their latest projection was just updated in the last little bit. it is not as much as the 2010 presidential race, because we had presidential spending in that one could that cost us 6.2 billion. the total will likely exceed the three point $36 billion spent in the last midterm in 2010, but not by much. it is light years from the $1.6 billion spent in the 1998 midterms. the biggest difference between now and then, the explosion of outside money in the wake of the citizens united decision by the supreme court. the candidates and parties combined to spend an estimated $3.3 billion this time around. -- outside groups will kick in another $600 million towards the effort, much of that spent in just a handful of races. >> very targeted and looking at just competitive races, the money in the close races may in fact be determinative.

>> who was winning the big picture? republicans will likely be the total money winners. democrats and their backers are likely going to spend about $1.6 billion. remember, these totals don't capture everything. spending by some groups does not have to be reported to the fec. you could probably add another $100 million or more to this total and it is all a setup, a warning, if you will, for the kind of expense you will see in 2016 for the presidential race. >> peter cook joining us again. remember, mark halperin and john heilemann will host our all-night election coverage on tuesday starting at 7:00 p.m., new york time. it is now time for today's latin american report. the brazilian government says one company will have to wait longer for permission to increase gas

prices. the 22% plunge in the price of crude this year has brought international benchmarks more into line with brazil's subsidize refinery crisis. the government will not introduce a tax on gasoline for now. as oil prices fall, mexico is prepared to open it is energy industry to foreign investment. earlier in a bloomberg interview, the owner of the studio come but -- the state owned company talked about the oil crisis. >> oil prices are important, and any major oil company -- however, in the context of the process we have embarked on in mexico, the short-term impact of divert us from taking long-term decisions. x'she also said that peme sentences -- finances will be strengthened by energy reform. at acer latin america report on this wednesday. the federal reserve ends its

stimulus program. we will have more on what we can expect in a post-qe environment. ♪

>> the u.s. federal reserve has ended its biggest financial intervention in history. over the past five years the fed spent more than $3 trillion buying bonds. that is about the size of the german economy. we canalk about what expect from a post-qe environment. trish regan joining me on the set. also, and alice from the new york fed. -- an analyst from the new york fed. you can give us the fly on the wall perspective. the arc from the beginning of qe until now, what did it accomplish? a i think it accomplished whole lot. sure, it hasn't been everything

we have hoped for but when you look at the problems from fiscal policy, the headmans from -- headwinds from europe, the fact that we have had the economy we have had, there is not a lot of fiscal policy to make up for it. >> i was talking to kathleen gaffney and constance hunter about the initial criticism of qe, and there was a lot of it. a lot of people thought it was going to wreck the economy -- >> i think that the reality is we do not know yet. we do not know if it created an asset bubble unintentionally. it could be credited with preventing us from going into some kind of deep recession. had this been more quick -- here , and weix years later are looking at this in the mix growth. had they been less active and less supportive, mike economy

has hit a deep downturn but then bounced back in a significant way, rather than being this look good scenario, we seem to be turning into a lost decade here. >> now that the asset purchase program is over, is the fed going to sharpen the focus on guidance? >> trish is completely right that we may not know for sure, we may not ever know for sure. people will be debating for years and there is a like an economic policy. but i think that history will back on this period of the fed it that they did a lot to support the economy. >> the fed has push people further and further and further out on the risk curve. if you are a retiree you have got to go all around the globe to look for colombian bonds or whatever you can get, high yield. anything that will get you a bit of a return. by pushing people out on the risk curve, they are putting people into things that they

might have otherwise, and that is what you get the criticism for the potential of the asset bubble. >> i spoke to our guests earlier about the balance sheet, which is $4.48 trillion, and the concerned that has always been expressed at how does that get wound down without causing some sort of seismic shock in the u.s. economy? is it a question of wanting to a little bit at a time -- winding it down a little bit at a time? >> they say they may not get to what they consider a study balance sheet until the end of the decade. there is the passive runoff from the portfolio and the markets will be able to absorb it. >> you have got to hope that you get some growth. you have got to hope that the economy -- that everything works out well. they are walking a very fine line, and what do we have left?

maybe they could do qe4. but if europe is as bad as some it isk is -- some predict an asia is weakening as well, does that krakauer economy -- does that drive our economy into a significant slowdown? >> we talk about this on "street smart," it is all about jobs, jobs, jobs. are they living wage jobs? >> are they paying? we have seen basically no inflation in this economy. i scratch my head and say how can that be? how can you have six years of record low interest rates, three rounds of qe, and not have any kind of inflation? this is an issue when it comes to wages. we are not seeing wages grow. we are not seeing any inflation to speak of, which is somewhat worrisome. >> josh, art of the criticism of qe was that it may income inequality worse. how does the fed responded that?

>> we got a series of responses a couple weeks ago when they held a conference on income inequality and they pointed out that short, the fact that the fed bought assets has pushed investors into riskier assets, equities and other kinds of securities, so that has benefited people with more wealth. but by lowering interest rates, the people who tend to borrow have the world, that have lower wealth -- the people who tend to borrow have lower wealth. order problem is that in to have benefited from increase in stock prices or real estate prices, you have to own these assets, and not everyone owns these assets. that is where you get the issue of are they in fact inadvertently creating or helping to create the income inequality issue, where the rich are getting richer and the poor are struggling? >> a little bit of a red herring because the fed's job is not to go out there and tackle income

distribution through the economy. their job is to maximize employment. i thought they had clever ways of sidestepping the issue, but that is not actually the mandate. smart" coming up at the top of our continuing this -- >> you know i love to talk about the fed. we are also talking about the start of the nba season. i will be looking at the industry and speaking to former knicks shooting guard john starkes. >> "street smart" with trish regan. josh, good to see you. another check of the market movers is on the other side of the brick. ♪

>> 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." i am mark crumpton. "on the markets was quote is next. i will see you tomorrow. 56 past the hour, which means bloomberg television is "on the markets." i am mia saini. in the red,stocks extending declines after the fed came out with their announcement. pretty much saying they will discontinue quantitative easing after we have had three rounds.

the s&p is off by half of 1%. at 2:00 p.m., stocks were pretty much left, but now firmly in the red. in terms of treasuries, they dropped with the benchmark 10 year yield, rising to a three-week high in all this is the fed ended its third round of bond buying. seeing improvement in the labor markets. the fed is announcing the end of this program, putting an end to qe. what is going to happen with the markets? now that it is over, what can investors expect? i am joined by bloomberg news stocks editor mike reagan. what do you think?? >> ultimately the initial knee-jerk reaction was obvious. treasury yields, at least on the 10- and 30-year extended their gains. >>-against the euro as well as the end -- highs against the

euro as well as the yen. >> reaction that this was a hawkish statement. it is important to point out that these instant reactions are often not lasting, and they can be sometimes reversed going into the close. interesting to see what happens. treasury yields have come back down. right here where it was -- >> but if this was expected wide receiver declines to begin with? everyone i've talked to said it was going to be no surprise from this announcement. >> there was a glimmer of hope from a lot of people based on comments on october 16 when he --d the fed might consider thinking about extending qe2 the entity just to see the volatility we have seen in the markets as validity to it. whether it was foreshadowing -- >> it seems as if the fed planted him to make these statements because you expect a more dovish statement.

the comments look pretty hawkish. >> i don't know if they planted him or not but he definitely was the focus of the market that week. the stock market was physically bottoming the day before and day of his remarks. after a pretty sharp drop, 7% on the s&p 500, until right around the point where he made those remarks, it did appear that it possibly was finding a bottom. the question was how much of the rebound was a result of bullard's remarks are just the fact that all of the selling was basically done? >> i'm looking at a note from david rubin, and it said "totally losing the confidence of the market place." is that overblown? >> i think you will see other reactions like that. the fed has focused on their communications skills over the years and still not quite there yet, to the point where expectations for rate increases have gradually been pushed outward in terms of volatility in the last month.

where the first rate increase was coming is a big question mark. >> one hour to go before the trading session is over. thank you for that. "street smart" is up next. ♪ x welcome to the most important hour of the session -- 60 minutes to go until the close. investors are reacting to the fed today -- the central bank confirming it will end its bond buying program. and we are counting down to earnings. i will be joined by former sec commissioner arthur levitt. there is report that some get sec filings faster than others and why he's inviting tube but growing companies. "street smart" starts now.