going through until january. i hope we can get that to bloomberg television. for an chart. the if this were a move in stock market, it would make the front page of every move -- of every paper tomorrow. this morning we were up around .8. that was definitely a signal -- a signal that people were position for the fed to make the move. clearly did not. give us more numbers. we have a continued rally in the longer end of the curve. the currency market looks interesting as well. tom: i just went to the timeout chair because i am too round up because i did not do the data check. we have given up all of the list on the left side below trend. and two august of 2016 or further. looking at the yen. stronger japanese yen.

crude gives up 46.99. but where you really see it is in the yield market. little bitan real a stronger than where it was. that is an international story. the about the comments on effect of the international economics upon washington? >> i think this reveal so much about the fed chairs thinking. also, when she said there is more slack in the labor market than what the headline numbers show. i think she is focused on this. bringing in someone who is and that ends on that. here with us in the new york studio. continuing special coverage. formal economist at the federal reserve bank of dallas. here with us in

studio listen to the press conference, watching the market. what is your take away. what is your take away for starters with what janet yellen just said. the fed traditionally has not done that. they normally do not pay attention to the ethic rate, the dollar, what other currencies and the economy is doing. this is a big shift. this is completely different. but she also made some comments about china. donny blanche fire -- danny blanche lower earlier said despite labor market flag was like it largest economy in the world is slowing, it is difficult to know what effect it will have on the rest of the world, including the united dates. >> that is right. but you asked about what the chinese effect will be on the rest of the economy, most of us

are focused on the import, export sector. here she is clearly talking about the potential chinese impact and overflow from slowing china. has exitedl mckee the press conference. i was fascinated. i thought appelbaum was a great question. yours was fascinated. you got janet yellen to talk about rudy dornbusch, the idea of overshooting. explain the facts i abouthy she is worried inflation overshooting cap though i don't get it. >> i don't get it either. it seemed to come down to the idea perhaps it would be wrong. the idea if you wait longer you will have to raise rates at a pastor -- faster pace and

steeper rate. the fed forecast is even with the improvement of the labor market, and they took down the neutral rates of employment to 4.8%, even with that, we will not see inflation rise faster. they have lowered the forecast inflation. it is not clear to me why they think the fed needs to get going under those conditions, unless we could see the economy develop faster and the projections turn out to be wrong. it is possible unless something changes in the economy between now and december that you may see more members slide into 2016. tom: we get to have walking questions because we have been working for 15 hours. what i don't understand is a use e the flavor. what she talking about inflation

softening. is there another inflation series that better captures america's worries about future higher inflation? pce is thelong run right measure to use. the dallas fed measuring of inflation is a very good measure. you know of a chart. it is still showing softened inflation. you use youmeasure still have to stick with the tried and true. putting this question two tim. what about the sense that the global economy, not so much the ecb just has cut its inflation targets and has said there is a width of deflation in the air, and you see china slowing, it seems to me that is what the fed has to be so concerned about.

what really sticks out to me is even though she did not come out and say it, there seems to be concerned about what happened in august that started in china. bring up the two-year yield on bloomberg television. i just put it out on bloomberg radio plus. some of this is the view outward. you are far better at these that i am. what is the distinction going out intonths, or even 2018? >> they brought it out. that means they lower the path of tightening. that means only one move by at least december. imply three orld four moves. i read jersey earlier said --

said that does not match up with the market. overall slower growth rate and less potential for inflation. . my question is why then do you have to start now? perhaps you can wait until 2016 without an inflation problem? -- janet smyth lack brought the chair to silence. she said that is a hard question. i so much harder questions and i had ever seen before, which shows that tension in the air on this thursday. >> arguably certain the most federal -- most important federal reserve meeting since the beginning of the financial crisis. some would put it back further. i think janet yellen handled everything well.

you were in the room with her. how did you bring the body language and tone of voice.com quick she seemed quite happy with the decision they made. very comfortable with where the fed is at the moment. do not have enough information to make a move, so they did not. reflects the idea of a brought this down in the inflation forecast. thank you so much. i don't know if you are taking the gulfstream, but get back safe as you can. for thep, thank you response worldwide to the comments with rand paul earlier. in about we talk to someone texas with government authority yet. hensarlingng --

will join us. come on, please bring in our next guest. >> isil -- certainly well. the richmond fed does have a strong monetary fund. it is certainly considered one of the more hawkish fed. you want all of the listeners and viewers to know, he did not think the fed would raise the key rate. great to have you on our show. joined by carl riccadonna as well. starting with you. i've decided not to. janet yellen and fomc decided global economic uncertainty. >> nice to be with you. understandablyas

a lot of interest in the fact ont there was so much focus the international situation. certainly i will recognize that. also, maybe there were not as many comments i did not last as long but she showed a lot about the outlook for in patient. if you are going to understand that policy policy and clearly, you first have to look at the mandate and where they are in relation. while heard was that labor markets may not be fully where they need to be, there is a little bit of slack. basically, they are not worried about inflation mandate so much. it looks because of these transitory things that the inflation outlook is going to be weak even longer. i think that was probably the main thing that drove the decision. it was supplemented i the decision on the international side but not driven by it. i have lost my sound. tom: you put your your back in

there. in there.k tom: we thank you for listening. two year yield .6815. that is way in. that is the titanic 13 basis point move. that is extraordinary. you are out of indiana university. so was james bullard of st. louis. he is practicing now in taking a neutral stance. how do you think the middle ground switch with tensions of eric of boston. what is neutral for the fed? think neutral at this particular meeting is closer to leaving things where they are today then moving the rate of.

that is probably the reason it came out the way it did. it is the inflation outlook that is the key factor here. does not mean the other things played a role. and ornts about the national environment that has been covered played a role. keeping, they -- the key thing is they are word about the low end nation going forward. the question is, if you are going to get lower inflation, it is going to be even lower and further away from a mandate and you had a vested earlier. the key is to understand the fed is a risk manager. that is really what is going on here. they think they would like to buy a little bit of insurance

that in fact the inflation performance going forward and 2016 and 2017 could be a little getting the economic forecast. they would like to buy the insurance and get the rate up a little bit this year and early next year. they just cannot quite ready to do that this year but may be able to do it later on this year. i think that is the way it went. kathleen hays and tom keith. what a day that's been with markets moving right now. we have to go out and all of the island of manhattan and find one person who could take a victory lap. he is live in our studio. carl riccadonna of bloomberg intelligence. you out slowly killed this in

terms of the call and nuances within a janet yellen and the fed said. starting with the basics. what did you hear in the press conference did give you -- that would give you a further view forward? >> going back to the mckee question. much glory for mckee. i am getting no love. >> this invokes a response from yellen. i think she knew it was a dovish press conference. holding onto hawkish credentials where she says we cannot let things get out of control. >> they tell you what was really happening. fed is of au the dovish bias and are in no hurry to go. janet yellen is a unique fed her -- mature person because she

cares about a strong dollar. the response from the press conference. this means the fed is going to go very slowly. i suspect they will go even lower than the signal they are sending. fed would arguing the not move and should not move was looking at this low down in china. the volatile markets. you -- it seems we also heard a lot of what janet yellen inside the labor market. a certain amount of what she thinks of inflation. has it comes to inflation, the message shifted? it is so far away from the target it is tough to move? >> we knew from the july meeting minutes, that they are almost

where they need to be for the labor market. that is not where once to be on the end nation front. janet yellen hinted at that today. the fed is not back at 2% inflation until 2018. , we watched core inflation more than the headline. isis fact it will backslide given the dollar strength we have seen. at the market move. .67 print on the two yields. extraordinary. >> people are watching everything. do you agree there has been a shift? the affluence he led by janet yellen is finally acknowledging there is a hurdle? when you set an inflation

target, you have to pay attention to it. >> absolutely. i'm getting to feeds here. let me go back. the key thing here has been the persistence of it, inflation.target the longer that persists, the longer it seems that is not doing what any to do to get the basic mandate. i think that played a role in the playing a role today. tom: when we look at the moment to 1950, and going back and harry truman in the we haveent of the fed, come to a new point. are the models that she spoke of in the press conference going to be forever changed from what you used at carnegie mellon at

richmond and for that matter what jeff yellen -- what you learned in school? are we in a new era nine of fed theory? >> it is a better condition than what we go with a 1970's and 1980's and most of the 1990's. the way the fed works is any different, i don't know. go back to the 1930's and you have great differences between what happened then and what happened now. today's world reminds us of that kind of world. in some sense the broader economy still response to the same forces as before. it is just that in the 1970's and 1980's government policies put in place and expectation all environment that produced very sick -- very consistent and hard to defeat inflation. we got past that.

now we're looking at a situation that is more two-sided. we also have to worry about too much on the downside. riccadonna, what next, in terms of what we're watching in the economy you could do the nation numbers get all the more emphasis? >> absolutely. they ain't broke but they're probably bent. this means policymakers have to rerun the models. the old relationship to train on inflation and employment have changed. there are heightened sensitivities. things rhyme but are not exact match. all the time we spent together, what i find most interesting is the central bank in a truly new global economy. went i heard today is janet

yellen and central-bank with the world. >> janet yellen is not act in an a vacuum. she is much more sensitive to the implication of federal policy on the world. >> is she the most powerful in the history of the fed? back probably. we do not do one word answers here. >> i am not sure the paradigm has strange. i am not sure the model is broken. i think if we wait a few months we will see the year-over-year comparisons. >> i agree with the insight. if dan fischer the most powerful vice-chairman we have ever seen with what we heard? comments iner's jackson hole were interpreted as

suggesting maybe the fed would go ahead and move. it was the bill dudley comments. this reflects not an easy fed, but a fed that is afraid of the future. it is a move we must consider. tom: right now joining me as a public official who has to deal with the fed each and every day. gets all the press. for years to mature event of the house financial services committee coming in to change the town. from texas joins us. a busy day and washington. these are market moving announcements by the fed today. we see a sense of dovishness and

a little bit of the fed from jeff lacher. what would you like to see from too muchhat is doing washington policy? what do you need them chairman yellen? >> i think we would like to see the fed getting my -- but getting back to more sustainable interest rate. as we all know, these are unsustainable interest rates and now we probably have the longest team in interest rate history. there is not much guidance in foreign guidance. there is an entire industry that has risen trying to read the tea leaves. ultimately the challenges our economy faces while we continue, notwithstanding one quarter, last quarter gdp growth and why we continue to be mired at 2.5% is main you -- mainly fiscal challenges, not monetary. they are trying to fill a vacuum

they cannot bill, and ultimately doing more harm than good. >> the fed is looking at global uncertainty. chinese slowdown. inflation that is not rising. why is there harm in the fed in keeping the key rate as he for a while longer. we know that will not happen for some time. global could unsettled -- could unsettled global markets if it moves too soon. ? is ok? saying it >> no i am not saying it is ok. thely it is not solving problem otherwise we would not have the slowest recovery and are in homage history. it causes market direction because the fed does not have a predictable that -- methodology.

that is one reason we are putting forth legislation to require to let us know. you have to consider the variables and come to the public and communicate to the rest. that is the bare minimum they can do to be transparent. i think it would lead to leicester rations in the markets, not more. the 1949 father was graduate of the texas aggies. my father was one year behind him. what they want is in america that runs like it used to run. you have a new fed president in dallas. what leadership can the fed president bring to the governor's and the chair and

washington to get this country back on track? number one, thank you for mentioning my beloved texas aggies. i have not got a chance to meet the new texas vice president. i think they can use their label put. i think that is an important thing to do to bring the voice of community financial institutions that help finance the new startups and small businesses and tried to permeate the bubbles, which is washington. we have had way too much of a washington new york red access. ofneed to bring in the voice relationship banking and community banking into the equation. , until we of the day do something about the regulatory on lot, the high tax place to make america a where people want to do business again, there is only so much the fed can do.

jareeb hendersling. carlso want to thank riccadonna. hensarling. thank you all for joining us today on our special decides program. day.has been quite a i think the market moves tell it all. the fact that we have had such an adjustment. the fact raised by one of our e-mailers, what does this signal? are the markets concerned the fed is so concerned it did not raise interest rates today? tom: the fed has said it is trapped within a model and moment. we have much more coming up for you. john lipsky will join us on

bloomberg surveillance. bill gross will join us as well as he looks at bond prices higher. coming up bloomberg television worldwide. the may have a little bit to fromree with what we hear chair yellen. we think all of you. thank. ♪ i ♪

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fed decision. alix: u.s. stocks closing mixed after the federal reserve leaves interest rates unchanged. treasuries rallying while the dollar tumbles to a three-week low. joe: but the question is, what'd you miss? doves prevail with interest rates unchanged. all eyes on october. will the fed even make a move this year? alix: we size of the fed's 2% target. joe: and how is turmoil on the global market influencing the fed's decision? if the factor driving volatility. alix: of course, we begin with the markets because a whole lot of nothing happening in the markets. the s&p spiked higher as the decision came out. and slowly as the