francine: the hike is on hold. janet yellen points to global risk, and softer inflation forces as the reason why the fed it didn't move. markets react -- the dollar drops -- emerging markets breathe a sigh of relief. on a veryides again close vote in the likelihood of yet another coalition as greeks prepare to cast their ballots on sunday. welcome to "the pulse," live from london. time francine lacqua. coming up, we will be speaking

exclusively to the chairman of the official monetary and financial institutions are board -- forum board. stay tuned -- we will be talking fed. word around the world after the federal reserve sidestepped the opportunity to raise interest rates soon -- rates for the first time since 2016. -- since 2013. here's a recap. >> that officials were reluctant to end the era of record monetary stimulus in a time of market turmoil and rising risk. policymakers say none of those have significantly affected the u.s. economy so far, they can't be sure they won't. >> the outlook abroad appears to have become more uncertain as of late, and heightened concerns to back a growth in china and other emerging market economies have led to notable volatility and

financial markets. eal: she says they would be reassured of unemployment continued to fall. forecast --their they now see the jobless rate at 4.8% by next year. at the same time, they also see inflation rising at a slower pace. because of that, the doctor plot where policymakers see it in fourg years, a maximum of by the end of next year and a neutral rate of 3.5%. what she couldn't explain was given the inflation outlook, why move this year at all? >> i would like to underscore that the forecast of the federal funds rate, as usual, are conditional on participants on individual projections of the most likely outcomes for economic growth, employment inflation, and other factors. but are actual policy actions overtime will depend on how

economic conditions evolve, which is quite uncertain. a move she did suggest: in october was possible, so while jeffrey lacher did dissent, looking for a 25 basis point move higher, he may be a lonely voice. michael mckee, bloomberg. francine: let's get a look at how the markets have been reacting. ryan chilcote is at the breaking news desk. ryan: if you look at equity markets, which i have been watching for the last half hour, european equity investors don't appear to be delighted with the news out of the fed, the decision not to hike rates. take a look at the stoxx 600 -- down by 1%. the daxvidual indices, is standing out. is down about one third of 1%, part of the reason why it

is the least hurt of the indices had morning is brand, which gold up. the coo made some bullish comments about production this year. finally, the euro did top on the back of the fed decision yesterday. it rose buy almost two thirds of 1% and today it is up just a tad, effectively holding on to the gamin he got yesterday. francine: thank you so much. ryan chilcote there. the china slow down was slighted by janet yellen as one of the fed's big concerns. let's turn to nick. what has been the impact of her remarks on the chinese economy? nick: i think there are two interesting things going on -- that she acknowledge is

that leadership is trying to manage a slowdown to what it calls healthier growth, and she deftness,the word that there was uncertainty about the chinese government's deftness and handling the economy. that confirms questions about whether china's leaders are capable of managing the incredibly complex economy as they faced so many headwinds. janet interesting to see yellen sharing a lot of the concerns that have been raised by analysts that people have been asking. francine: the yuan rose the most in the week, so it is sliding that. -- slighting that. nick: i think you probably saw a reprieve across the board. u.s. dollar,he maybe not quite so appealing as it would have been. it will be a relief to the chinese leadership, which has

been spending billions in its foreign exchange reserves to prop up the yuan. it popped pretty high after that decision, so it will ease concerns about capital outflows as the yuan looks a little more attractive today than it did yesterday. francine: thanks so much. more, let's speak to the chief investment officer at aberdeen asset management. great to have you on the program, inc. you for joining us. -- thank you for joining us. are you disappointed that the fed didn't start to normalize? it just delay something that will be inevitable, so the markets are still in a false sense of security. >> i think that is an adjusting point -- does it really delay the inevitable? if you look at the raw data, there is nothing which says at this stage that the fed should be pushing harder rates. i think there was a debate

around -- if we don't raise rates now, then we don't have to cut them later on. but there should be a compelling reason, and they're clearly wasn't. it is a finely balanced decision but it is the right decision. francine: are you talking about domestically? that you think there is no reason, for because of the specter of disinflation, the worries surrounding about a global recession? anne: i think there is a risk, that if the fed moves prematurely and tightened rates to quickly into what is at the moment a slowing of a global economy, that he could push something over the at and make 2016 the back end of the year a much uglier picture. data, look at inflation it was nothing compelling. if you look at exports, a little bit weak in the u.s.

between thealance upside risk versus the downside risk. it seems to us that it was very skewed toward the downside. are we going to get a rise between now and the end of the year? again, i think you would have to see a compelling case coming through for the inflation side, a big hike in inflation. we don't see that coming. very newt remains a wants to discussion but at the moment there is no compelling reason. e, what does that mean for your investment strategy? i you think we will continue correction in certain markets? have you adjust your portfolio accordingly? anne: if you look at different markets, they have been reacting in different ways. view that bonde markets, fx markets, and equity markets are assuming a slightly different path. we are seeing a slightly weaker dollar which we would expect,

and that will be helpful for some parts of the world, which is why you see a little more encouragement, from the e.m. in that space. i think more broadly, if you look at the fact that europe is isling off this morning, it that realization that for the first time, the fed has looks beyond its domestic borders and said, perhaps we are a bit concerned about the global growth. -- if weequity markets had had a rate rise, it would become a little bit spooked. they are saying that 2016 isn't quite as rosie as they thought. net-net, we are back where we were. a week ago, if you had gone away from the weekend come back you would see the euro go back up but inn come back down, the balance, we are still in this wait-and-see mode. all eyes on the chinese economy, in the effectiveness of policies there to maintain growth. let's face it -- what is a good

level may be slower than china is used to but it is still an absolute level of growth, higher than we see in many developed market. that is a pretty important balancing point for the global economy. francine: i know you mentioned domestic growth -- you mentioned inflation concerns -- but how much did the chinese growth equation play into janet yellen's thinking? do you think she is a central bank to the world, and how worried are you that china is in a huge bubble? anne: fascinating if you go and look at what the fed's mandate is, because there isn't anything about the world. it is about inflation, employment, financial stability. but that belies the fact that the fed now effectively is the bank of the world, and it can't operate in isolation. i think that is a bit of a change that we are seeing in the feds approach things. if you were in janet yellen's shoes, you do not want to go

down in history as the chairman that pushed the global economy over the edge and into recession, nor the u.s. economy. on a balance of risk, you are going to move a little bit slower, i think, then for example the unemployment data might push you to. because in the event that inflation does pick up, in the event that it picks up, you have the option of tightening a little faster a little later. you have plenty of scope within that. balance on the downside -- do it too quickly, push the world into recession -- that will take years to get out of. skew is still lower for longer because you can always tighten screws the other way if you need to. francine: on that premise, do you think it was a mistake? they will have to abandon it. anne: i think forward guidance is one of those things that is great in theory, but in practice, any central banker

wants to be able to look at the data on the day they have to make the decision. the problem with forward guidance is that the data doesn't come in the way you expected to. you have got to be able to change your mind. it was winston churchill said that when the facts change i will change my mind. that is an important thing -- central banks need that looks ability. forward guidance was a great idea in theory, but in practice, it doesn't work unless the economy follows exactly the past that is anticipated, and economies never do that. is the impact -- are you expecting janet yellen to raise rates this year or is it now being pushed back to 2017? and how much does that impact that mark carney is thinking? anne: interesting. i find it quite unlikely to think that mark carney would move the head of the fed. a tough call for the governor of the bank of england to do.

we are having a live and active debates here at the moment on whether or not we will see a fed rise before the end of 2015. the balance is probably unlikely but some people think it might happen. going into 2016, there is a whole bunch of different stuff going on, at the least of which tends to have some effect on the feds thinking. we have presidential elections, authorities in china. i think the central cases probably will see a rate rise at some point in 2016, but i don't think it is a given. we will wait and see what the data is. the experience from japan shows us that economies can run for a very long time with hairy low inflation and very low unemployment without things getting out of control. i think that is a lesson that the fed is going to have to look out for carefully to understand what is different in the u.s. from the japanese experience. francine: thank you so much for all of that insight.

here's a look at what else is on our radar this friday morning. greece's election is too close to call. political parties are wrapping up three weeks of campaigning ahead of sunday's vote. also the syriza party and the new democracy party running neck and neck. the recovery in china is being hailed by interest rate cuts. prices dropped in 25 cities, fewer than the 29 in july. london luxury homes. it is proving to be the toughest sell in the global financial crisis. higher prices continue to decrease demand. this morning, we have heard that a london billionaires rowhouse has apparently sold for $132 million. that is just for one house.

coming up, is mario draghi disappointed? emerging markets may have a friend in janet yellen, but will it cost currencies like the euro? that brings us to today's twitter question. has the fed done the right thing? #thepulse. ♪

>> i think there was a plausible case that the fed would look past the volatility that was created by china and weakness in the economies around the world, but i think that ultimately led them to delay. >> i thought the most surprising thing about the announcement was that it almost came with a soundtrack of beep, beep ,be, beep, because they were backing up from what they have been saying -- they want to get off the zero, but the conditions don't warrant that. >> as we get closer, we will start to see some pickup in nominal wage growth that will be very positive and i think she mentioned that in the press conference. that will in turn help create inflation toward the 2% target. i agree with austin that there is still need to start the hiking cycle. francine: that was just some of

the names giving their reaction to the fed rate decision. the fomc's decision not to raise rates may make mario draghi's job to strengthen the euro zone more challenging. let's get out to our international correspondent in berlin. hans, are janet yellen and mario draghi on the same page? what is looking to tighten and the other wants to do more tv. -- more qe. hans: their outlook -- they are on the same page, they are just a deriving different responses. if you look at where they are in china, they are both concerned with volatility, that when you look at mario draghi's next decision on whether to expand quantitive easing, in some ways it makes it more difficult because we now have a stronger euro. if you look at how export driven the european economy is, the prospects for growth, -- the fed

move didn't make it easier for the emerging markets and their currencies will appreciate. but if you look at the u.s. and the euro-dollar trade, your over year, -- year-over-year, the increase is 20%. over that same time period you saw a 20% decline in the euro. weaker, andmuch that is helping them with their export story. if you think this is an effects issue -- yes, pressure is on draghi. if you think this is a lending cost, when you take a look at yields all across the board, they were dropping on this. it doesn't seem like low yields, at least as is reflected in government assets. mechanism the lending and a lot of work being done in brussels on the capital markets union. in some ways, this is a pure fx story. if it is a little more nuanced,

it is a world that had a lot more influence and we have seen it may be janet yellen that is susceptible to the argument that she is responsible for the entire world, not just the u.s. economy. francine: that is a huge change. every american says -- she is not there to set policy for the world. hans, stay there, because we are bringing mark gilbert. aboutve a piece believing in magic. they are itching to, but they just don't have the guts. mark: inflation doesn't warrant it, no matter what you think about the unemployment situation. it is much better in the u.s. the matter what you think about the growth outlook, which is better than two years ago. u.s. economic policy doesn't stop at the u.s. borders, and it shouldn't and it can't. francine: it has in the past. mark: it has.

you focus on the domestic and let the rest of the world get on. but the world changes, and the interconnectedness of the global economy -- look at china. growth may slow below 7% and everyone is running around with their hair on fire. that tells you something about how the global economy is developing, and i think it is a good thing the fed has a knowledge -- has acknowledged that. it puts them in a difficult situation going forward, because they are itching to go, and they don't like being at the zero. strange things are happening economically. they would like to move away. but if the inflation outlook doesn't warrant it, there is a risk that every other central bank will raise and reverse. i don't think you want to do that. --ncine: i am surprised listening to mark, it seems this was the right thing to do. the other argument says that

yellen should start looking at something more worrying -- citigroup had that call of 55% of a possible global recession. may this be a fad that is looking at the world and saying, we are more scared than the markets? hans: potentially. what is interesting -- when you listen to the press conference yesterday and look at where the dots are, everyone is giving themselves room to do this. most people don't think it will happen in october, but it seems like in so many ways they are giving themselves the option to do this in december. the question then becomes -- if we have continued volatility out of china, continuing negative economic news out of china, do we have a replay? is totally dependent on chinese data. i don't suspect that will be the case. i suspect that they are waiting to see some sort of technical sorting out of how bad the data is in china, then they will make a decision.

their fundamental view of the american economy hasn't changed all that much. mark: if you are mario draghi and thinking about euro policy, i wonder if it changes your propensity -- there has been talk that there may be even more qe. hisnder if this increases ammunition against those people. basically.ag, i wonder if it increases his own appetite for doing more qe. he came late to the party, and seeing how hard the fed is working to try and keep things on track. hans: well, i guess it depends on your view. do you think draghi needs an excuse to expand quantitive easing? if that is your view, he certainly has more room to maneuver. in some ways, he has been -- and i mixing metaphors -- he is allowed the numbers to paint

himself into his position. appetite for doing more qe. he came late to the party, and seeing how hard the fed is working to try and keep things on track. if the numbers continue to be bad on the european side, then he has clearly signaled that this is what he wants to do, extend asset purchases beyond .hat there were 2016 we were having this conversation after draghi made his move. --was really that 25%-30 3% the amount of assets that could come from one country. that was the most interesting thing to me because it clearly gives them the policy tools to do what he wants to do. we don't have that much internal dissent. he has ruled against it before. it comes down to your view of draghi -- does he need total consensus or does he need excuses? if you need excuses, you may have just gotten one. francine: thank you so much. mark gilbert and hans nichols. still to come, we will be joined exclusively by the chairman of the financial institution board. we will be talking fed.

and as the formal chairman of the labour party, we will be discussing jeremy corbyn. ballot boxck to the -- greek voters head to the polls for the third time in less than a year. has election fatigue set in? we will have the latest from athens. i find it is crazy -- alexis tsipras was being called a criminal. -- now he's the favorite. mark: that is the only way you can look at alexis. given the mess greece event, it may turn out to be a good thing. francine: mark gilbert. just a reminder -- you can follow me on twitter. coming back, we will go through what the fed decided. it seems that the only market that moved was the treasuries. we had this debate yesterday. euros,around 500 billion and he is saying that the

markets seem to be leading the feds thinking. do you think that is right? do you think the fed has done the right thing? you can tweet us. ♪

francine: welcome back to "the pulse" live from bloomberg's european headquarters in london. i'm francine lacqua. the federal reserve kept right near zero, the chair janet yellen told a news conference that most policymakers still expect to raise rates this year. yellen highlighted the strength of the u.s. economy. greece election remains too close to call. political parties are revving up three weeks of campaigning

today. opinion polls show that serena party and the conservative new democracy party are running neck and neck. china's house prices rose in august. the recovery is being helped by interest rate cuts and easing of restrictions. ,rices dropped in 25 cities fewer than the 29 they dropped in in july. now let's get back to the fed decision to keep rates on hold. here's a recap of fed chair janet yellen's news conference in 90 seconds. ms. yellen: the federal open market committee reaffirms the current target range for the federal funds rate. since the committee met in july, the pace of gains has been solid. the unemployment rate has declined. overall, labor market conditions

have continued to improve. inflation, however, has continued to run below our objective. partly reflecting declines in energy and import prices. where we still expect the downward pressure on these factors will fade over time, recent developments are likely to put further downward pressure on inflation in the near-term. the outlook abroad of years to have become more uncertain of late, and heightened concerns about growth in china and other emerging market economies have led to notable volatility in financial markets. developments since our july meeting including the drop in equity prices, the further appreciation of the dollar, and a widening in risk spreads, have tightened overall financial conditions to some extent. the committee anticipates that

inflation will remain quite low in the coming months. fade,se temporary effects and importantly as the labor market improves further, we expect inflation to move gradually back towards our 2% objective. francine: dallas janet yellen in 90 seconds. let's check in on how the markets are reacting with ryan chilcote. ryan: european equity markets not exactly on fire. they are down. the stoxx 600, it is down. opened down and remains down. indices,he individual and you see that reflected across the board. the rostock x50 down close to 1.2%. the ftse hurt the least of the indices in part because of ram gold which is of just over 3%. down by more than 1%.

the euro, on the other hand, is up, just as it was almost immediately following the fed decision. 0.6%uro popped by about yesterday and has held onto those gains solidly. finally, i really like talking about, when is the fed going to act, and what traders and speculators think is the probability of a move at the next meeting is, get ready for this, all of 18%. in other words, speculators don't think rates are going to go up next month. we've got to go all the way to january 27, four months from now, until speculators are pricing in an actual rate hike. back to you. francine: thank you so much. ryan chilcote with the latest on the markets. greek voters head to the polls for the third time in less than a year. bloomberg has what it means for

the country's bailout program. as greece countdown down to their third vote in just eight months on september 20. left wing syriza and the conservative new democracy party are both in the running to win. if you believe the polls, neither party is close to getting a majority. that's why many are betting on a coalition. was he says it's ready to team up with syriza. that could include the socialists or centrists. but syriza has so far ruled out working with them. it wants another coalition with the right-wing independent greeks. they might not even get back into parliament. this is important because greece needs a stable government to enact its latest bailout deal. syriza backs video but says it will negotiate on its implementation. new democracy also backs video

but once debt restructuring. reject on the fringe all the bailout and want a return to the drachma. the most likely outcome is yet another coalition and more austerity. but if the big parties fail to reach an agreement, the election on september 20 might justly to another. francine: let's get more now from bloomberg's tom mackenzie live in athens. voters seem tired to be heading to the ballot box, and with good reason. tom: absolutely. it's a very different atmosphere here in greece, compared to the referendum that was held earlier this year and the vote in january, when there was a real sense of optimism, a sense that there could be change in the air. most people say there are very few differences between the major parties. the major parties having agreed that they will go ahead with

this bailout deal. voter turnout looks like it's going to be crucial. undecided voters, around 10% according to the polls. the newspaper pointing out that 650,000 greece still don't know who they are casting their vote for. the parties in their rallies last night, new democracy, and a rally for tsipras and syriza. there is that sense of indecision here in greece. whoever does win, and we are expecting a coalition of some sort after the vote on sunday, whoever wins will inherit a very difficult task. the economy here is in bad shape. there are still capital controls. the banks need to be recapitalized. unemployment is still near record high. growth for 2015 looks like it could contract by 1.4%. on top of that, you got the new

conditions that are part of this bailout deal. we are talking reforms of pension, labor markets, and possibly tax increases as well. all those things will need to be pushed through quickly by any new coalition. there is an october review by the country's creditors. many of those reforms will need to be pushed through before that. next year, more reforms and laws need to be pushed through. the coalition is under pressure. the people in greece are under pressure. the merry-go-round of elections could continue if the coalition isn't stable enough. tom -- francine: tom, great work in athens. we will be following that vote on sunday. up next, we are joined exclusively by the chairman of the monetary and financial institutions foreign board. and, the chairman of the uk's labour party. we will be discussing jeremy

corbyn. keep it right here on "the pulse ." ♪

francine: welcome back to "the pulse." let's get back to the fed decision. unchanged. the words echoed across trading floors around the world after the federal reserve sidestepped the opportunity to raise interest rates. we are joined exclusively by the

chairman of the monetary and financial institutions foreign board, meghnad desai. thank you so much for joining us. it's a pleasure to speak to you today. but then decided not to move. is this because they are just being cautious because it would be burdensome to hike when we are not sure, or are they seeing something that's extremely worrying on china? fed -- ii think the think the mistake we are making now is the same mistake we made before 2008. it became all about price ability and income employment trade-off. persistent low interest rate leads to bubbles. you look at merger and acquisition prices being paid.

the stock market according to the schiller index is way above where it should be. i think if we persist in low interest rates, it will only get worse. we have probably improved the have -- but we really we could have a crash. francine: so your concern is that if we don't normalize soon, bubbles will continue to inflate. so now it's monetary policy following the markets instead of the other way around. meghnad: monetary policy is still stuck in the phillips curve, what i call the flow economics of income employment. portfolios are up again. stock market is where about it should be. i really worry about mergers and acquisitions.

ing absurday prices for what is old capital. what will it take to break this level you're talking about? i get you're talking about valuations him m&a. meghnad: the valuations are way above where they were in 2007. francine: what will it take, not one little interest rate hike, right? meghnad: i think they should have gone up 35 basis points and given a notice that they are going to move again very soon. the market needs to be told low interest rates are not going to persist. francine: they did say that before, and now they haven't done anything. looking atare something. are you concerned about recession? if you look at inflation, it's way below target. if you look at china, we're not sure what we are looking at.

if that brings us to global recession, we are in a very messy but. china should have actually warned us. mind you, the way the markets reacted to chinese crash was way over the top. people in a bubble know they are in a bubble. they are hoping to get out sometime. about gdprguments are growth, unemployment, both on which american economy is looking very good. i think they overreacted to the chinese danger and have forgotten that there's much bigger financial market problems brewing. late comes, it will be too to retract. you won't even raise interest rates. you will have to again keep interest rates low.

francine: and that's a disaster that no one wants. talk to me about the u.k. we talked about bubbles. we talked about m&a valuation being a bubble. house prices. i'm talking about london. is it a definite bubble, especially when we're looking at a referendum where it could actually spook investors? meghnad: i've been saying for a long time, when i spoke about the budget and before the budget, that the chancellor has really let the housing market get into a bubble. we haven't really done anything on the supply side of housing, and we are just piling on .ressure, especially london we're also being affected by greek money leaving greece and things like that. so yes, we are in a bubble. how we get out of the bubble, i

don't know. the bank of england will be reluctant to move interest rates now that the fed hasn't moved. yes. sadly, we are in a housing bubble. .rancine: jeremy corbyn we talked about him a lot. is he a credible opposition to david cameron, and was the appointment of the shadow chancellor -- meghnad: let me say two things. first of all, the way jeremy corbyn performed on wednesday was really a big surprise and a credit to him. francine: talking about prime minister's questions. reacted veryron creatively, very constructively. has only one way to go, to the right. he can't go any further left than where he started from. think he will learn that he

has to be more toward the center. not all the way toward the more in that territory. francine: will the party give him enough time for him to learn? from what i've heard, i've never met him, but he's worried ideological. -- he's very ideological. meghnad: he's ideological. he's on the fringe of the party. , this into the mainstream is not [indiscernible] -- [indiscernible] he is very much in the labour earlytradition of the 1970's. the other question really is

whether his parliamentary colleagues will give him the time. will they jump the gun? election nextr summer, when the london mayor -- he's all right. if labor loses the mayor election, there will be a lot of nervousness. francine: thank you for joining us. the chairman of the official monetary and financial institutions for him. --ll to come on "the pulse," cup: the rugby world prepares to take off. join us after the break. i'll be speaking to the chief executive of the english rugby union. ♪

francine: welcome back to "the pulse" live on bloomberg tv and radio. kicks offworld cup later today with england in london. mark barton sat down with the english rugby football union ceo. he thinks this will be the most profitable rugby world cup ever. bei think it is going to very lucky with the number of tickets we've sold. i think we are going to have a great atmosphere.

mark: [indiscernible] >> there's very few tickets left. we've sold over 2.2 million. the tv audience is going to be huge. i think it's a fantastic showcase for rugby in england, but around the world as well. this 80d you put down million guaranteed. you obviously get that back. will there be some left over to put back into the game? >> you breathe a sigh of relief with a guarantee. the team that hold it together from my view, you breathe a sigh of relief that economically you're not losing money. that's important as well. when you're looking at investment into making the event great, you want to have that flexibility. you're right. i think we're confident about that. you put it back into the game.

mark: i looked at my stats. france was the most profitable world cup in 2007. will this be that or not? >> most of the profit goes back to world rugby rather than from us. i think it's on track to beat that. i will stress, profit is very important because it goes back into the game. to me, the key thing is it's going to be a great event on and off the pitch. mark: how do you build a lasting legacy through the world cup? >> the beauty of this event, because we've used existing stadiums around the country, whether they be football or rugby, is that there's nothing about the building costs that have come into it. it's all about engagement with the game. when we look back in 2016, 2017, how many people were engaged in the game as a result of this world cup, that's playing,

participating, volunteering, coaching, and we've been planning for that for three years. in 2016, 2017, we make sure reengage with that and get more people involved in the game. francine: for those listening on bloomberg radio, the first word is up next. for our viewers, a second hour of "the pulse" is coming up. more of the fat of course. it is the day after the fed decision. the decision not to raise rates. we talked to tim ash. later on, we also talk about facebook. dollars and sneakers. those are essential items for a group of syrian refugees navigating the last leg of their journey. we have their full story. we also have the greek elections. tom mackenzie is on the ground in athens. that happens on sunday.

the main parties are neck and ne ck. it's when you look at alexis tsipras and what he's done over the last four months. he's favorite. this is the guy that berlin and the u.k. would like to see in power. and yet, just a couple months ago, he was describing the international monetary fund as criminal and amending that germany a war reparations to greece. he's an incredible political animal. we will have more on that. this is the picture for equities the day after the fed, on the back of janet yellen leaving interest rates unchanged. it was really only treasuries that had a huge impact. european stocks are a little under pressure. the ftse is down 0.5%. the dax is almost down to percent. this raises concerns about global growth. is it inflation or is it china that she's worried about?

you can also tweak me. the twitter question of the day, have the fed done the right thing to do nothing at all? does this mean the end of forward guidance? ♪

francine: the hikes on hold. janet yellen gives the reasons why the fed did not move. emerging markets breathe a sigh of relief. greece point to a close vote and another coalition. ♪ francine: good morning to our viewers in europe and africa. good evening to those in asia. welcome to those just waking up in the united states. i'm francine lacqua.

unchanged. the words that echoed across trading floors around the world after the federal reserve side set -- sidesteps the opportunity to raise rates for the first time since 2006. janet yellen pointed toward market turmoil. >> the federal open market committee reaffirms the current 0.25% market -- to rate. the pace of job gains has been solid. the unemployment rate has declined. labor market conditions have continued to improve. runation is continuing to below longer run objectives. partly reflecting declines in energy and import prices.

we still looks wrecked -- expect the downward pressure to fade over time. recent developments are likely to put further downward rusher -- pressure on inflation in the near term. the outlook appears to have become more uncertain of late. heightened concerns in emerging market economies have led to notable volatility in financial markets. since our july meeting, including the drop in equity prices, the further appreciation of the dollar, and , havening in risk spreads tightened overall financial conditions to some extent. the committee anticipates that inflation will remain quite low in the coming months. as the labor market improves inflation toxpect

move gradually back to the 2% objective. francine: let's get a look at how the markets are reacting. ryan chilcote is at the breaking news desk. ryan: the markets are not happy. european markets continue to head lower after opening low. they are down almost 1.4%. you look across the individual indices. the ftse down 0.5%. almost 2%.down the euro is strengthening. it popped right after the fed decision and it has held onto those gains and is strengthening over the last half hour. you can see that the euro is headed higher. it is right smack in the middle. because we love to talk about what the fed is going to do and we have another 30 days to do that, let's do that right now. i'm showing you fed futures contract. iess is what traders, hedg

think the fed will be lending money at. the reason why i'm showing this to you is if the fed was to hike rates by 25 basis points, that means the range would go from to 25 to5 basis points 50. the median is priced in. you have to go all the way to may of next year -- and that is a reasonably active contract -- before that is priced in in the contracts. very few people think there is going to be a hike this year. the probability of a hike next month is 20%, that is less than going into the last meeting. many people, pimco for one, say they don't see it happening anytime soon. francine: thank you so much.

let's cross to new york. brendan greeley. this is a massive change in policy for janet yellen, i think. brendan: we have learned something about culture at the fed. they are not supposed to pay attention to the rest of the world. but we have heard rumblings from the fed that they do pay attention to the rest of the world and they are aware of their eaffect on the rest of the world. she said she was worried about spillover effects back to the u.s. it is entirely possible that she has been paying attention to the desperate pleas from the imf and christine lagarde in particular. she is central banker to the world and is paying attention to it. francine: i'm surprised we did not have a more violent move on emerging markets. you either read it as janet

yellen looking at inflation or this is janet yellen saying, i'm not sure what i'm looking at, i'm not sure if this is a recession. brendan: the other thing to pay attention to is that the fed looks at a different kind of dollar than you and i look at. we look at the dollar is a value against the major currencies. the fed is looking at a trade weighted dollar. that dollar is much stronger than the standard cross dollar with the euro and yen. the is another issue with what tom keene calls the "rubin dollar." francine: there is always one guy, one central banker favoring a negative interest rate. brendan: we know who it is. the most dovish member, a dovish convert voting member of the fed

of the minneapolis fed. lastis his swan song, his year he is on the board, his last chance to affect policy. not only is that lonely little. gone negative, he does not see a raise until 2017. that is the first time we had a dot waiting until 2017. janet yellen said negative rates are not something we have ever realistically can uttered -- considered. subtext, i don't know what he was doing, but he is out there having fun in negative land area -- land. francine: brendan greeley, thank you so much. let's cross over to beijing. impact ofeen the janet yellen's remarks on the chinese economy? nick: the big thing was the use --he word deafn

deftness when she talked about china. the fed may be concerned that the chinese government may be when it comes to policy. if the fed is worried about china's economy and its effect on the future of the u.s. economy, that shows you the force that the chinese economy has come to play in the rest of the world and is another tip of to show just how serious the downturn has been in china. nick: what is driving --francine: what is driving the yuan rise? i think you are seeing a respite in emerging market currencies. this is going to be good news for china.

they have been spending so much money from their exchange reserves in recent weeks to prop up the yuan. the fed keeping interest rates unchanged suggests that there won't be the l flows, the flight to the u.s. and that may take the pressure off of them to keep the spending -- yuan in the coming weeks. francine: thank you so much. let's bring our guests in. is this a different janet yellen? , dide now the guarantor she said monetary policy for the world? or is this a janet yellen afraid of recession hitting the u.s.? >> that is what investors are worried about. the fed mandate has not changed. problem is that people are

prepared for a hold. they were prepared for a hawkish hold. the economy is getting better, but we are not there yet. but this almost looked like a dovish hold. investors are worried that we are going to stay at lower rates for a very long time. i think this is the wrong decision. especially if you consider international markets. the amount of dollar debt from non-us companies is growing. the longer you keep rates low, the more this debt is going to increase. francine: a rate hike in december? >> our view is for march. we are looking at march 2016. becauserrying international sentiments have looked at the medium-term.

the dollar dependency, increasing private debt, increasing overhangs, that problem is going to get worse. you can take some volatility in some pain now, but if you wait, you are growing the problem in the medium-term. there are a lot of yen borrowers doing trades in dollars. francine: have they missed the window now? what does it mean for the investor? it is good on the short term for markets, but it may create a further bubble. >> i think the perspective from here is it is going to be negative for markets, particularly equity market. people were position for a hold. the market position was for a december move. the concerns about the wider world economy was the issue. bad news is now bad news. i'm not sure they missed the window. the introduction of the language is that news for the markets. forward guidance, i'm

going to ask you both. is it out the window? this is the fed reversing. this is the garbage truck going backwards. forward guidance is just not working. it is clouded now. >> janet yellen said it is a broad picture. it is not just about an unemployment rate, inflation, and earnings. we are now looking at china and china's policymakers. there were remarks about how confident they have been. it makes it harder to gauge with the fat activity is going to be. the market is going to take its own guidance. people are reappraising the view of the next hike and what it means and the context in which it will be made. >> i think there is a credibility problem. we asked institutional investors about the fed, what they would .ave done

central bankers are losing credibility. 60% wanted the fed to hike in september, even expecting some market volatility. obviously, they did not think they would do it. francine: she may be right to hold even if it does make her job more difficult. >> we call it the people's bank of america. [laughter] >> there is a strong imbalance between the u.s. and china. too much trade from china and too much consumption from the u.s. china is slowing down. bounce.t without if the chinese slowdown can affect u.s. policy every time, u.s. policy will be even more

foreign-dependent and market dependent. it works once, but if you , if you areng it more and more market dependent, if your policies depend on the wealthy fact that you become a central bank -- wealth effect and you become a central bank that tries to control prices --investors don't trust that policy anymore. francine: what does it mean for your investment? we are positioned substantially in cash. francine: what currency? >> that is in u.s. dollar. but it depends on what our client is asking us to do. , ayour base currency substantial amount of cash. we are underweight in the u.s. market. we are taking a 3-5-year view in emerging markets.

basis, what we saw in august was a selloff in markets driven by events in china. there are good reasons to discriminate between countries. those with poor governance, those with better. on a selective basis, we are moving into emerging markets and we are expecting a drawdown. when valuations combined, we will be interested in getting back in the u.s. market. francine: albert, you have been warning about this for a while. you think the problem could get worse and worse. what is the impact on a lot of these markets, including equities? >> i don't think there is a .ecession in the u.s. or europe i think the ecb is going to do more. the problem stays. as you said, equities have sold off. we still see very tight valuations and capital inflows.

you abouteople tell issues, but the real issue is private debt. they never had a deleveraging or a credit crunch. they are continuing to do credit. when the time comes for a rate hike in the u.s. and in the u.k. and other developed markets, the flow of money from developed markets to emerging markets will flow and the private jet will be a problem. it does not matter where you are. you can choose the country like choosing a street in a town where you know there is going to be an earthquake. we are very cautious, especially about china. thank you very much. i'm a little bit worried. more worried than when i started this. thank you very much. tooce's election maintains

close to call. opinion polls show the syriza party and the conservative party running neck and neck. china's prices rose. the recovery is being helped by interest-rate cuts and convergent restrictions. prices dropped in 25 cities. sales -- itury home is proving to be the toughest sell period since the global financial crisis. in the primed central districts. we have heard that the london billionaires row house, one fore has sold on that block $132 million. coming up his mario draghi's disappointment.

we will look at the fed's impact on the ecb coming up next. guests thought that mario draghi had to do more qe. the twitter question of the day. has the fed done the right thing? ♪

cause -- the fomc

fomc's decision to not raise interest rates make moderate -- may make mario draghi's job more difficult. mario draghi may end up having to do more qe. hans: it comes down to the question for both janet yellen and mario draghi of how data dependent they are. mario draghi wants inflation to be higher. he seemed to be more concerned about the overall pace of gdp, how actual things are taking place. if they are data dependent, it looks more likely you will have an extended and expanded quantitative easing by mario draghi. there has been a lot of talk about currencies so far this morning. yes, the euro is strengthening against the dollar. the euro was almost up to $1.40.

now it is down to the $1.14 range. if you look at what has happened in terms of exports, eu exports, you see a 20% increase from 2014 to 2015. the euro was trading at a much higher level. yes, the euro has moved a little bit. francine: when is the next opportunity? when is the next opportunity for mario draghi to do something? hans: i thought you were going to ask me on janet yellen's next opportunity. she has a speech in amherst, massachusetts. we are going to do a pre-college tour. draghi's next --

i don't believe he has anything in october. nextieve november is the one. francine: it is in the next couple of weeks. hans nichols in berlin. a piecek, he wrote titled "a fed rate hike -- only if you believe in magic cure co it seems he was right. >> i had a lot of feedback from readers suggesting that the argument is along the lines of quantum physics that spooky things start happening. if the fed is telling you it is extremely nervous and it is keeping rates of zero, there may be a negative cycle of feedback which becomes a self-fulfilling prophecy. businesses don't invest,

consumers don't spend. that hurts growth and keeps inflation at deflationary levels. ' point, itwo hans what is explained and adjust with the markets did yesterday. >> the horror is we might go through this again next month and we might go through it again the next month. we might have the same show going all the way up until the end of the first quarter. if the international backdrop does not improve and that continues to keep the fed on hold, they still want to have a two-way market. that is one of the key policy points at the moment. they want people to be thinking and anticipating for when they do raise interest rates. francine: trigger point you made yesterday -- to your point yesterday, forward guidance has not worked. we were expecting a hike and

then china happens and then they don't do anything. what i would like to see is clarification from janet yellen. absent what had happened in raisedthey would have rates. that would be a great way of steering people's expectations. francine: she is also looking at inflation, right? >> i think they should have. i think that is not dependent on what is happening in china and in the emerging markets. i do think that the global inflation backdrop is not one where prices are rising. if that is their key policy statement at the moment area that is what they should be focused on. probably dropan the 2% inflation target for a while. they can say, the world is different. we thought we knew what is going on. instead of continually saying, inflation is just around the warner, just let it go for a

while. just concede that the textbooks are not working. francine: you tell that to the markets and they freak out. >> i don't think they would. francine: why not? >> you keep repeating this idea that we are data dependent and they keep talking about inflation that no one else is seeing. whereight get you in line you can tighten policy more credibly. you just come out and say, we need normalization because we need to get confidence back to businesses, back to consumers. francine: with that change mandates or would that be temporary? you talk about that. >> don't think you would need to pass a law, i don't think, but you would be suspending your mandate. francine: i like it. it makes sense. maybe too much common sense. mark gilbert with the latest on

the fed. you can find mark on twitter. i love your twitter handle. facebook dollars and sneakers. ♪ sure, tv has evolved over the years.

it's gotten squarer. brighter. bigger. it's gotten thinner. even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. this is a great place to work. not because they have yoga meetings and a juice bar. because they're getting comcast business internet. comcast business offers convenient installation appointments that work around your schedule. and it takes- done. - about an hour. get reliable internet that's up to five times faster than dsl from the phone company. call 800-501-6000 to switch today.

perks are nice. but the best thing you can give your business is comcast business. comcast business. built for business. francine: welcome back to "the pole spear go -- welcome back to "the pulse." the federal reserve kept rates him to near zero yesterday. policymakers still expect a rate raise this year. she tied the decision to fresh uncertainty and market volatility. china's property markets showed signs of improving. homes rose and 35

of the 70 cities surveyed. -- recovery is being helped by five interest rate cuts and a loosening of restrictions. fa's second-highest official has been released of his duties following corruption allegations. he has been implicated in a scheme to tell world cup tickets above face value. football's world governing body has requested an investigation by its in-house ethics committee. let's check in on the markets. jonathan ferro has the latest. jonathan: unchanged. that was the word that echoed across trading floors across the world. it is a case of good by september, hello 2016. that might be the case. what does it mean for the equity markets in europe? the ftse 100 is down.

that is nothing compared to the move in mainland europe. fullby almost two percentage points. you could say it is the fed citing global risks poor you could go straight to the fx markets and look at the effects of janet yellen's words on the euro. we could dollar, stronger euro. going through 1.1453. pushstronger euro helping equities in europe lower. fed, does that mean mario draghi needs to do more? what we got him a global bond market is the depressing effect on yields globally. italian yields down. mario draghi wakes up this morning, he looks at the euro,

he looks at yields lower on a net basis. is mario draghi happy and what does it mean for the ecb? questions for everyone in europe. francine: in about 25 minutes, it is "surveillance" with tom keene. the day after the fed. know, will janet yellen, had it not been for china, raised rate? tom: i thought it was amazing what we observed yesterday. without question, francine, it was an international perspective. john lipsky will join us. he is a very special guest in the 7:00 hour. lipsky with his public service for america to the international monetary fund. being the managing director before madame lagarde, john lipsky on the international ramifications. from pimco will join us.

he is an expert in the short term paper market. i like what jonathan ferro said about the italian yields and the knock on effect. abby joseph cohen and will be with us on the equity ramifications. it was really something yesterday to see basically janet yellen do what mark carney did a few weeks before. francine: yeah, so should we abandon forward guidance? tom: i think that is a really important and a complex question , mathematically and economically. what i'm hearing from guest after guest is forward guidance is here to stay. a scarlet crystal ball gazing. question, the key thing yesterday was how the view out to 2017 came in. they brought the rate structure down in their forward guidance.

from 12 months to 24 months. francine: thank you very much. we are looking forward to your show in 25 minutes. tom keene with "surveillance." emerging markets have a friend in janet yellen thanks to the fed cost decision. policy from asia and latin america can enjoy a reprieve to the slump in their currencies. for more on the gift to emergency markets, let's bring in tim ash. tim, great to have you on the program. i would probably quantify that. it was not really a gift. janet yellen said we want to be on the path toward normalization , but we know what we are facing. this could build up a bubble in emerging markets. it may get more messy when normalization comes. tim: sure, there has been a focus on the fed conflict off.

-- the feds left off. it has lulled a lot of emerging-market policymakers into a false sense of security. the fundamentals were never really that good and they should have been focusing on structural reform, boosting their competitiveness, making their business environments more friendly to attract foreign investment. the fed, whether they are going to hike or not, is a bit of a sideshow. emerging-market policymakers face very strong headwinds and they need to focus on those kind of things. francine: if you had always had cheap money, it is much more difficult for the markets to push the people in charge to do the reforms. tim: precisely. absolutely. francine: that is the problem. tim: absolutely. it provides a short-term relief, a little bit of short-term relief. let's have policy makers come up with some big ideas.

there is a rating decision today. russia faces its own challenges. countries need pretty clear reform policies and programs to help turn around markets. francine: for investors, it is crucial to pick the right countries. we can believe the cheap money is here forever and it will go up in emerging markets. tim: it should have been that way anyway. there was a people when anybody -- there was a time when people bought anything. --, bottom-up countries obviously, there is a temptation, you need to do your work, you need to do your homework. there were some reasonable stories out there. there were commodity impulses. francine: any specific ones? tim: i think the whole space. turkey at this stage. hungary, poland, croatia, serbia, romania.

they have been through many crises in the last 4-5 years. european periphery, european bank crisis. they have not rolled over. generally, they have adjusted their external positions. they have reduced external debt liabilities. fiscal is kind of ok. banking sectors have been cleaned out effectively. they are commodity importers. the biggest challenge is getting russia and turkey right. they are the big calls for the next six months. francine: and brazil? we are looking at impeachment. unemployment rose by double. we are looking at the unemployment figure from june. tim: many of these big emerging markets face very challenging positions that need normalizing. you mentioned brazil, say turkey. the geopolitical angle.

we need to see some political stabilization. then a focus on structural reform and fiscal reform. you could mention south africa, as well. we don't see much of that, unfortunately. to lay out amuch comprehensive reform program in many of these places. francine: what about asia? would you rule out a global recession? citigroup put out a very bold call. there is a 50 five percent chance of that happening in the next 18 months. tim: the key for everyone these days is china. china is a huge parallel universe. it is very difficult for people to figure out. maybe it is a lazy consensus, but the chinese authorities have huge amounts of ammunition and they are technically very competent and if anyone can manage a soft landing, it is a chinese authorities area francine: was that tested? when we had the 2% devaluation?

it caused havoc. authorities,ese the messaging, or it is an indication that they have tried everything possible to turn this economy around and undertake structural reform. me really about china despite this idea that they have got lots of ammunition to address chinese problems is the opaqueness and lack of transparency in the chinese economy. do they really know what is going on in this huge economy? i think it is a challenge for any policymaker in any economy to really know. i think in china it is much more difficult to do. i think the risks of something significant happening in the , the external debt

liability is a big iceberg out chineser the policymakers in terms of the global economy, as well. china worries everyone. the hope is that these guys know what they are doing and can manage a slowdown. francine: i guess that is the crux. thank you so much for all of that analysis. tim ash. let's change subjects. official figures show the 85%pean union had 20 -- more asylum-seekers this year. the route taken by many from outlying greek islands to the macedonian border is now well traveled and many local businesses are feeling the benefit. tom mackenzie followed one group of syrian refugees as they navigated the latest leg of their journey.

i have $900. i have a passport. i have $900 for all of us. we are all together. ♪ >> we will go to germany. we don't know. i want to complete my study. i'm a student.

tom: may be running, walking? >> we don't know. now we will go to buy a bus ticket. tom: the next step in the journey. >> yes. they give their papers. we give them the receipts. they go straight on. tom: how much do they pay you per ticket? >> 50 euros. a lot of travel agencies are doing the job. it is not only us. tom: drivers and restaurants? >> everything. they are stopping, they are eating. it is business.

>> it is so expensive. up, youleep and wake see your dad or your mom or your sister, every day, every day. everybody needs help. everybody helps. >> to begin a

. -- to begin a new life. come -- still to >> west london, the home of english rugby, as the rugby world cup prepares to kick off this evening. i will be speaking to the chief executive of the english rugby for all union -- football union. ♪

francine: the rugby world cup kicks off later today. ahead of the big opening, mark the rugby down with football ceo ian ritchie. he thinks this will be the most profitable rugby world cup ever. is going to be the biggest. we are lucky with the number of tickets we have sold. i think we are going to have a great atmosphere at the grounds. there are very few numbers of tickets left. million.old over 2.2 the tv audience is going to be huge. i think it is a fantastic showcase for rugby in england, but around the world, as well. i think it will be a great show. mark: you put down the 80 million guarantee. you get that back. >> yes. mark: will the resolve left over

to put back into the game? >> yes, you breathe a sigh of relief. you breathe a sigh of relief that, economically, you are not losing money. that is also important in the world. you want to be able to have that flexibility. if there is a profit at the end of it, we are confident about that, you put it back into the game. the most profitable world cup in 2007. will this be that were not? >> most of the profit goes back to world rugby. i think it is on track to beat that. i would stress that profit is very important because it goes back into the game. the key thing is that it is going to be a great event on and off the pitch.

it would be good if england does well, too. mark: how do you build a lasting legacy through the world cup? isthe beauty of this event because we hate -- we use existing stadiums, there is nothing about the building cost that come into it. it is really all about engagement with the game. when we look back in 2016-2017, how many people are engaged in the game as a result of this world cup? playing, participating, volunteering, coaching, all of the above. we have been planning for that and investing in that for three years. in 2016-2017, we want to engage with that and get more people involved with the game. arecine: all right, we looking forward to the rugby world cup. i'm going to see italy-france. back to the ballot box. to theoters head

ballot box for the third time in a year. we discussed that next. ♪

francine: welcome back to "the pulse." for look at what we are watching for the rest of the day and the rest of the weekend, we are joined by tom mackenzie live in athens.

greek voters back to the polls this sunday. tom: absolutely. it is the fifth general election in three years. i was speaking to a student activist last night. they have been rallying the vote back in january for syriza. they said they will be sitting at home on sunday. they don't know who to vote for. that is the sentiment held by not insignificant number of the electorate. voter turnout is going to be crucial. around 10% of the electorate remain undecided. the main parties, new democracy and syriza, will try to rally their supporters to win back some of that support. for syriza, it could prove crucial. they managed to win with a huge youth movement, but that looks like it is dissipating. can they win that back? that is a big question for them. francine: you are mentioning the

turnout of overall voters. do we have any predictions about how many people will actually show up to vote? not yet. we have predictions of how people are still undecided -- 650,000 according to some reports. 63% turned out in january. some analysts say it could drop below 60%, which would be quite a shock to the greek electoral system. the party that will lose out the most is the reset. alexis tsipras is speaking tonight. his message is yes, we have backtracked, but we are the party that can offer a better version of the bailout, we can soften the average -- averages of the -- edges of the implementation. new democracy's leader has been on somewhat of a role as the interim leader. his popularity is above that of

alexis tsipras. popularity is's around 30% now. francine: what challenges will the next prime minister face? lots? tom: yeah, lots. it is looking pretty bleak for whoever wins. if there is a coalition, they will confront some huge issues. the economy is in a moribund state. 1.4% contraction by the end of this year is the latest figure. unemployment is still around the 25% level. capital controls are still in place, the banks need to be recapitalized, all of these reforms linked to the third bailout need to be pushed through. thank you so much. tom mackenzie live in athens. that is it for "the pulse."

stay tuned the "surveillance" team live from new york. it is all about the fed and what the european markets are doing. they are down. futures practically unchanged. we will have more on the fed next. ♪

announcer: this is "bloomberg surveillance." it is the morning after as janet yellen clearly states she is the banker to the world. christine lagarde takes a mediocre victory lap.

we speak with john linsky and anthony crescenzi this morning. there is no inflation. what does the zero bond mean? in 2016? abby joseph cohen and kit juckes. and in search of humility and newly minted priests. good morning, everyone. this is "bloomberg surveillance ," live from a world headquarters in new york. i'm tom keene joining me, brendan greeley and vonnie quinn. what a week. brendan: a long week. you know where i was when you were on tv? i was in a bar doing a countdown -- 10, nine, 8, 7 -- it was like new year's. that is how excited we were. in the last 16 hours, we found out if you look at not rising the rate as a control, the one country that failed the expeme