>> from bloomberg world headquarters in new york, good monday afternoon. >> here's what we're watching at this hour. investors want lincoln, as factory business. its lowest since 2012. speculation swirling that twitter has a takeover target. marc andreessen has considered a deal to buy the company. >> federal reserve vice chairman stanley fischer will it is his take on the economy and the likelihood of a fed raising rates four times this year. first, we go to the bloomberg markets desk where we have been tracking the men's in -- the movements i.

taking a look at the markets right now, they are getting ways down by those, the s&p down by a 30 minute percent. we are definitely off of our session lows. by as much aswn 100 60 points. we down now by about 50 points. we are at session highs even though we are a negative territory. take a look at the dow for the entire day. we can see where the right has been. at 10:00 a.m., that is when u.s. personal income and spending came out. we have been slowly clawing our way back, and you can see her at the noon hour we are just off our session highs. another thing that is affecting the markets is of uti crude, as it always has been. and that is now at session lows, down by five and a quarter percent. -- 5.25%. that is breaking a four day

winning streak. the 10:00 a.m. mark we did see a leg down after the u.s. personal income came in a little bit worse than expected. inx: we are seeing movement the market caps today. it is an apple and google story, but i could be wrong. ramy: you are absolutely right. apple, facebook and exxon are the ones i want to focus in on. expecting earnings to come out after the valve. with apple, we are talking about a possible netflix takeover. facebook is of about 2.3%. priceline might be using targeting mobile platform, and that is doubling the properties available there. with exxon mobil down two point 3%, it is getting hammered off of energy, which is falling.

going to the bloomberg terminal for specifics with what has been happening with market caps. here we are talking about alphabet. it is really catching up with apple, he represented with the white line. we are so close. we are $100 million or so off in market cap. if we go to another terminal, this is how facebook compares with exxon. right now facebook is in white, and is in blue. wheren see right now facebook has surpassed exxon for the first time. alix: good stuff. thank you so much. i love that. scarlet: old economy oil. new economy, facebook. news fromton has our news desk. make theirs will voices heard when they turn out

nearly 1700 caucus sites. last minute survey show democrats leaning toward hillary clinton, and republicans toward donald trump. he reminded i was that it has been a long time since they act the eventual winner, and he sounded confident going into nights caucus. >> you have not had a winner in iowa in 16 years. we are going to have a winner, you better believe it. you're going to have a winner this time. we are going to change that. have 44mocrats delegates at stake. the republicans have 30. more than 100 $50 million in ad money was poured into the iowa campaign. preview alix: the caucuses live from des moines as a special edition of with all mark halperinth and john heilemann that begins at 5:00 p.m. new york time. talks began today in geneva, switzerland with the opponents in the syrian civil war.

that happened today after a triple bombing outside damascus killed at least 45 people. islamic state claimed responsibility. the world health organization is holding a crisis meeting to see if the zika virus should be declared a global emergency. the last time this was declared was with the ebola outbreak. 4 million zika cases are predicted for the next year. more than 2000 pages of information about the deadly will berash released today, but it may not explain why it was going nearly twice the speed limit when it crashed. the engineer does not recall what happened. news 24 hours a day powered by our 2400 journalists and more than 150 news bureaus around the world. back to you. scarlet: thank you. the bank of japan surprise move

last week to adopt negative interest rates open to drive down global bond yields are at their lowest in a year. alix: and now this is practically a tossup. head of strategy at td securities joins us now. when you take a look at the global bond yield universe, what kind of global slowdown is that predicting right now? are predicting a global slowdown. what is interesting is that the u.s. market, the interest rate markets, it is pricing in a u.s. slowdown. if you look at the correlations between oil and s&p, as well as the financial rates market, it is very time. -- hiugh. it has been the last couple of months when we take the decline in oil, to imply that the fed is not going to come as far out within height. -- with their height.

ike. i think we have actually moved on this being a china story of global growth, and it is now the u.s. rates investors and u.s. growth. scarlet: you noted that in your research. s and china have now shifted to the united states. what are the greatest sources of distress? >> people are concerned about the whole debate we have had in top crime. -- prime. chairman bernanke he said it was fairly contained, and that he had the spill to mortgages, to housing, to the entire country, to the entire world. is oil that asset class? to actuallyough affect the u.s. manufacturing sector? i believe it is. is it because to affect the

sector, which is 75% of the economy. that all the data we see is someone shellacked, and -- isil is much worse ed, and oil is much worse. alix: they say that oil is the problem, but couldn't we make the argument that a company producing oil out of it well is nuch more influential to a economy than me buying an iphone? >> certain sectors get hit much more. if you look in the u.s. the services are 70% of the economy. might be saving $25 a week, you don't spend that on an iphone right away. you build that up, and then you go and spend it.

you could cut right away. in a short-term basis, oil is a negative. i think that is the reason that all of the manufacturing data is extremely negative. it is the oil effect. not reallymately that much of an energy producer. so i would argue that the data will show that maybe we are not growing at 3%, but i think the fed can continue to normalize. scarlet: while has been a trigger here. we have seen stocks plunge. treasuries have not been as sensitive to the risk of sentiment. why is that? >> a great point. many are struggling with that, because you are supposed to buy the 10 year treasury if you want stocks. they hedge each other. but those correlations are much weaker. have noseen, and we data, but what we've seen over the last year is that china, as

well as other central banks are essentially trying to control the extent of depreciation. we have seen significantly decline, and usually the asset is u.s. treasuries. from the risky assets-you are seeing a significant amount of selling from china. it makes it very hard, if you're a risky asset investor, what is a good hedge? ten-year treasury should be closer to 116, and we are here at 190. it has a very significant event -- effect. scarlet: has gold taken its place? >> to an extent you could argue that, but it does not give you any interest rate. we are all about yields. interest rate is a very powerful motivator across the world. i think ultimately, if we can get p.m. why today's appreciate

-- tn why to depreciate slowly, i think you will see correlations go back up. alix: the number one thing for equities to stabilize? >> u.s. growth rate to suggest extremelyacturing is but other sectors are strong. our threshold of what is a good number is not that high. anything 200 plus, or anything about 100 is actually good. anything 150 to 200 is a good sign. that shows that the consumer is , with theding on cars lower prices helping. scarlet: great to have you. thank you for being here. estimatedck note, the changes nonfarm payrolls. alix: more on all of this in the

next hour. you do not want to miss the conversation with the fed vice-chairman stanley fischer from the council on foreign relations. tom keene will be sitting down with mr. fisher to discuss the economy, the fed and monetary policy. scarlet: coming up in the next 20 minutes, is jack dorsey ruby twitter for potential buyers? alix: and if you think chief while prices should be a shot in the arm to the economy, think again. the bad outweighs the good, according to one analyst. scarlet: and a final appeal to voters in iowa. the first test of the campaign is tonight. ♪

alix: welcome back to bloomberg

markets. scarlet: let's head to our markets desk. we have been checking in on individual movers. ramy: three deals to talk about. in total, $16 billion. let's talk about the first one. are inmacy, abbott labs talks with a leer to buy a leader for $5.8 billion. diagnostic testing devices for the flu, hiv and malaria. they could boost abbott's on testing devices section. in other mergers and acquisitions, let's take a look at what is happening with striker. they are down by 1%. they are in talks to buy sage products for $2.1 billion.

that comes with a tax benefit. isikers big business orthopedics, including artificial hips and knees. the biggest competitor is dropping on the news that it did not get in on the act. also, dominion resources down 1%, but questar going gangbusters. the 23% is paying premium on questar's closing price. alix: thank you. shares of twitter are rallying today. -- silver lakes has considered buying the troubled social media company. scarlet: twitter stock has dropped 26% since their peak last year. they are an enticing takeover target. for more on this, we go to cory johnson. you would think that with jack

dorsey coming back that that would make the company less likely of a takeover target. on thee has always been board, occasionally as ceo. but the problem has been that they always have problems with user engagement. you can see that with the numbers. when you look at the actual user growth, whether it is in the u.s., where they have had no months, ornine international, they seem to have reached the limit of what they can do in the way that they do it in terms of expanding the user base. the stock is reacted to that by really collapsing as that growth is collapsing. alix: what is interesting is that over lake and mark andreessen considered some part of a deal with twitter. what could that mean? when the a -- when is the and breakup of the company? cory: we do not know the story

-- we dof the story not know the information behind the story. when we talk about deals, price tells you very little. it is always the terms of the deal. there is so little that can possibly be known about this. it could be these groups talking together in their swanky addresses. it is interesting because marc andreessen is a great tweeter himself. but the valuation of this company, losing money, and a lot of that loss is a result of stock-option compensation, it would not be a cost that a private company would have to bear. it perhaps that looks a little profitable. when you were talking about $2 billion in top lead with $12 billion in market cap, a very expensive company even at these levels right here. for the business that is not dramatically growing, the only

growth right now is from increased value for customer, and that is an encouraging sign that advertisers are willing to pay a little bit more. it is not a profitable business, even when you add the evaluations that they have in this stock. automation --al optimism for a buyer to emerge. scarlet: alix: thank you. alix:breaking news for you. cdc saying that the e. coli outbreak for chipotle seems to be over. 2 e. coliooking at outbreak that happened since december of 2013. they say that it is over, and no deaths have been reported. scarlet: we will be keeping an eye on these headlines. -- tohares gaining cash

chipotle shares gaining right now. ♪

scarlet: welcome back to bloomberg markets. alix: oil's longest rally of the year is coming to an end. prices are down over 12% since the beginning of 2016. scarlet: the former commissioner of the cftc said that he is worried. he joined betty liu this morning from washington. these $9.2 million of production. we are expected to drop this year by 600 million barrels a day. but with the iranian nuclear deal, they could make that up in a heartbeat. with the matter of months, they could actually be trading about -- 3 million barrels a day. they are looking for the rest of , to stop in opec production.

i'm am worried about the impact of the economy in general. theconsumers it is good, average gas price right now is $1.79 a gallon. but it is having a ripple impact the restl economy, and of the economy, which has me concerned. betty: what about in the commodities futures market, where we have incredible volatility? do you think that it is destroyed market structure? certainly, when he sees volatile markets like this, you rely on the actual exchanges, in this case, nymex with the west texas intermediate contract, and that oversees europe with their brent contract brady rely only to keep it in check. you have price callers to avoid these crazy highs and lows. but as we have seen today can we thought it was may be stabilizing at the $32 range,

but it is already down five percent on the day. reminds me of that old aerosmith song, living on the edge. you cannot help yourself from falling. some of us are hoping it stabilizes pretty soon. betty: what about the spillover effect with other commodity markets on coffee, on cattle, on other futures? are all things interrelated. too often people do not understand that. we have cheaper gas prices from the cheaper oil, it will impact transportation cost. it is getting haunts, corn, cattle to market, it will reduce the price of those commodities. we have seen a rough ride for commodities for a couple of years now. some people has said is that a precursor to another recession? it is usually the opposite way. is usually that commodities are trailing behind, and it is other bubbles in the economy, housing like in 2008.

i'm concerned about the roller coaster we have seen the last few years, and particularly on oil the last few months. about theonfident overall commodities, and i remain optimistic about the economy, even though we are living on the edge a little bit. scarlet: that was the senior policy advisor and former commissioner of the cftc speaking with betty liu. alix: it is time to look at the biggest business stories in the news right now. scarlet: orissa somewhere will unveil another to run at first for yahoo!. -- marissa mayer will unveil another turnaround effort for yahoo!. they have fallen the last seven of the last 10 quarters. alix: u.s. construction spending rebounded slightly. the highest level in eight years. percent.eased 1/10 o

credit the force awakens for making disney the world's most powerful brand. a british firm says the star wars movie pushed disney ahead lego. alix: that is your bloomberg business flash. believe you have not seen this movie. scarlet: it is not my thing. still ahead, the outlook for copper. hit hard because of chinese a consumption. up, aand coming conversation with stanley fischer. do not miss it. ♪

welcome back to bloomberg markets. thelet: let's head over to

first word desk where mark crumpton is standing by. mark: after being saturated with candidate speeches and media coverage for over a year, today iowans will have their stay -- have their say for next u.s. president. bloomberg politics managing editor and co-anchor of "with all due respect," let's begin with the latest poll numbers. what are they telling us. >> two new yorkers, hillary clinton and donald trump. even the best whole -- even the tellpull in the world will you how it is going to turn out. donald trump is a head outside the margin of error, but ted cruz has a strong organization. he has paid staff on the ground, not just to get people to go to

the caucuses, but to make sure the cruise people speak well -- the ted cruz people speak well. the supporters will have an opportunity to say ben carson or mike huckabee. sanders and crews are by no means out of it. >> you mentioned from your thedcast that it seemed on democratic side, bernie sanders was finishing strong. .> a final rally and des moines bernie sanders has drawn crowds like that throughout this contest.

sanders is finishing strong. i think he has a sense this is a possible. if you can get the younger supporters who are with them, high percentages of older people. >> who does that favor tonight on either side. donald trump with a big turn out, he is trying to bring new people in the process. baseline numbers who regularly caucus. both of them brought a new process. hillary clinton is going to certainly do better than senator sanders is.

that is going to suggest a loss of new people and people are going to vote in higher percentages. a lower turnout at these caucuses. >> the managing editor of bloomberg politics. thank you so much. we will see you and john heilemann on with all due respect beginning at 5 p.m. new york time. back to you. -- raise those stakes for policymakers, threatening to prop up the economy. chief asiag's economics correspondent spoke about the challenges facing china's government. >> at the moment the challenges remain on the downside. stimulus is still struggling to gain traction. the temptation is there to let it appreciate somewhat.

stimulus or hope for stabilization as it gains traction. >> if you look at those two evils, the central bank die lamott, what is the lesser of the two evils? more stimulus or less? >> they don't want that to turn it to capital flow. not all of it was hot money, but certainly people are trying to get their savings out. the pressure may, to keep them stable. we may see more spending. >> foreign policy begins at home. what if you write the book about china?

they have some challenges to say the least. the idea that china is going to use foreign policy to be more aggressive to compensate for the loss of economic growth and legitimacy at home. it is almost back to where they need a stable periphery. with me, butagrees that is my own analysis. they know the depth and breadth of troubles at home. thatn beijing control dialogue around them? external countries or even the domestic? i think they are genuinely worried. i think we underestimate how much chinese leaders wake up every morning, and they don't take for granted this thing we call china. they understand how precarious it is given the scale and degree of diversity, the geographic and

demographic reach, they are concerned about their future. >> what we witnessed with the russians a zillion years ago where we may be mrs. -- where he may be miss estimated -- may be underestimated them as well. the problem is we are seeing a race to the bottom. if you look at the doj, they are going to the ecb istes, looking at pboc and the fed, it is just a global race to the bottom and will it end badly? >> china has pushed back in another direction. now the chinese have to depreciate, their move to a domestic lead demand and economy isn't working so well. they simply run up against a

contradictory problem where they don't want to see all the capital leaving. >> are we seeing capital slide out of hong kong? is coming under pressure and real estate. people saying the hong kong u.s. dollars under pressure. when china interviewed in the offshore market, really stops liquidity. i also want to agree with the ambassador, the policy agenda is packed. a full domestic agenda with internet's journal agenda. haasat was richard speaking earlier today. >> china manufacturing falling to a three-year low, reinforcing the worry that the economy is slowing down. copper imports hit an all-time high. the economy be slowing but copper imports be moving up?

commodity is a analyst. chinese copper imports and all three types, we are talking scrapped and refined products. all, the importance is it is the macro of metal. classesf all investor as to what is going on in the chinese economy. the chinese economy is slowing down. yet copper imports are at a record high. what we think is going on is a bit of strategic play. we think they are purchasing in advance of further devaluation of the chinese currency. areomics 101 says if you currencies going to do value imports become that much more expensive. we think they are buying now to use later. >> they are buying all three types of products.

it is a refined metal used in financing. why are they buying scrap and or if they are not using it? >> we think they are going to turn this into real copper. we think it is a bit of a financing trade. the chinese countryside, to be made into pure copper throughout 2016. >> they are turning a supply glut. don't you have to use the actual products at the end of the day? >> they are trying to manage their supply chain. we get all of our supplies ready. it doesn't matter what the chinese currency does. yearghout the rest of the toy have the supplied needed

supply construction, the electrical grid. >> we talk about how china is the world's biggest importer, but it is also a huge copper producer. what type of copper does china produce? greatna's copper is so for this metal. -- china's hunger so great for this metal. the global market is 22 million tons per year. produce 1.5 million mind tons. that is where they have to go elsewhere. all about grid spending and you have to use a for wires.er what do we see in terms of grid spending? in the second half of the

year we saw a huge surge in china's investment the electrical grid. we think it is going to stagnate and plateau. it is not going to be a source of new demand within the chinese economy. >> thank you so much. it is constructive but not yet bullish. -- alf that -- alphabet may soon surpass of market capitalization. we will tell you what to expect. >> and the cdc has announced the e. coli outbreak is over. stanleyeist chairman fischer will be sitting down for a conversation with tom keene for the council on foreign relations.

back to bloomberg market. >> the s&p 500 is rolled over at about 12 noon and seems to just have stabilize. losses of 6/10 of one's percent. if you consider where the industry groups are, we're looking at utilities higher. defensivee more sectors while energy shares are down by 3%, syncing with oil prices, which is off by 6%. rally of oil into thursday and friday. a lot of money managers going long. it feels like a reversal. a lot of in the market.

>> on two specific company news. we have been talking about this one trading higher. >> news that the cdc has ended the e. coli probe, saying they were unable to determine the source of contamination, it was probably some kind of common ingredient, but it has -- it has concluded its investigations. out about $10 billion in market value. maybe the worse is now over, the cdc says all clear. >> 16 customers in 14 states. they built this reputation on fresh locally sourced ingredients.

>> and other stock we are watching is google's new parent company, fourth-quarter results after the bell. it is the first report since an elaborate restructuring. >> results will be split into two segments. that is a pretty wide accounting bucket for the eight other subsidiaries that include driverless cars. will investors like what they hear? san francisco, crawford -- chief researcher at idc research who is with us from skype. the expectations for these other bet revenue, seems to be low. they are going to report some profit loss. san francisco, crawfordwhy is i? atfor the first time it gets google's core business versus the evolution and the status of the bet. much profitability but in the progress they are making in those areas. of have this cold basket things. you have calico in there.

these are long-term investment in areas. what they tend to do is they tend to cloud the core business. what we should see is a margin read on out core business, with sue's -- which is search. we will see whether that business over time has as much scale as we think it does. margins overall have been declining. we know they have been declining because of these big bets. see his scale in the core business. they are very instructive to investors. downy won't google break specific contributions from youtube or android? notwe know why they are profitable? lives that a mistry and wrapped up in google itself?

-- why is that a mistry and wrapped up in google itself? -- why is that a mystery and wrapped up in google itself? >> this is driving the youtube growth and they have mentioned a couple of times the costs are apt pricing or lower than the other google averages. there are five or six google properties worth more than that copies with more than one billion users that they haven't monetized yet. how they localize advertising and stuff like that going forward. ofis all about the size these pockets before they actually come out. >> what does this end up meeting for google stocks? it is hard to do value a company but also weighing on profit margins. now, disclosure is what is going to top the list.

amazon closed the west division. people are trying to understand how popular google core is. if you look at the other bets you also get an idea of what the market they are targeting towards and what the level of investment have been over the last couple of years. >> thank you so much for joining us. google results will be out after the bell. >> we will be back with more bloomberg markets after this.

>> i am have a gail doolittle, at times we have stocks trading doolittlei am abigail . at the time we have stocks trading lower. this is one of the worst-performing stocks.

analyst brian's revenue could be at risk if apple decides to move away from amazon's cloud-based platform. a disappointing fourth-quarter report. all of this has put amazon well below its 50 day moving average. all in selloff of 30%. from the nasdaq, a market report. >> you are watching bloomberg at scarlet fu. >> what does it signal about global markets? >> a deep freeze while putting hiring and salaries on ice. >> we will hear from the ceo on the fiscal third quarter.

first let's start on china. the government's official measure of act reactivity falling for a record six straight months. chinese policymakers face a dilemma. they try to stimulate the economy. they can afford easing, which would exacerbate outflows. shrinking at the firm despite a bump under asset management. they spoke to bloomberg about the market climate. and similar moves at credit suites. making some big adjustments to cut out costs. airline,'s low-cost doubling earnings in the fiscal third quarter. airfare is set to accelerate. more bride that -- more buybacks on the company's balance sheet.

>> to the extent it continues to beep possible, a significant cash in the business. we will look to do more buybacks. >> finally primary goes government is speaking a bond swap. we would also cap debt payments. the government faces or d3 really -- $33 million in revenue. that is your global business report. for more stories visit bloomberg.com. >> we look to be in the lows. also cap debtchina overnight -s percolating as well.

>> there is a lot. personal spending. construction spending. they didn't really do a whole lot when it comes to answering questions. the slump in equity prices is by what is going on in the u.s. economy. >> the question is what does that have to do with the fed? year-to-year it was up 6/10 of 1%. that it isgument hard the fed will have difficulty picking up inflation when you have that kind of number, which calls into question the rate hike call. >> here is the setup as we head to the conversation. this is the futures rate.

right now the traders are anticipating a 20% chance of a rate hike. going to increase this chart. down to 13%.ay no one is looking for any kind of rate increase. >> coming up in a few moments we are going to talk to vice chairman stanley fischer live from the council on foreign relations at 1 p.m. new york time and 6 p.m. london. talking about inflation, went to hike rates.

stanley fischer sitting down with tomnversation keene. they will discuss recent economic developments and monetary policy. first we want to head to the markets desk where ramy innocence you has a set up as we head towards this conversation with stanley fischer. >> down 2% for the s&p 500 as well as the nasdaq. 6/10 of a percent. some of the big weight affecting the markets today is that china manufactured coming in at three years.

at whating take a look is happening with the snp so far to date. a little bit of volatility and .ix i gang -- and zigzag we are definitely coming -- definitely coming off session highs today. now looking at the majors year to date, we are still in the red. this time last week, the s&p was down by 10%. the nasdaq down by 12%. one of the big sectors being affected is the banking sector, pretty much across the board.

jpmorgan, wells fargo, bank of america. u.s. banks could return 20% or more this year. across the board. in particular, they are moving down because of the manufacturing data is week. >> we are moments away from talking with federal reserve .hairman stanley fischer let's bring in our own economics editor michael mckee. you had summer bought -- you had some remarks for mr. fisher. >> he starts off by saying they are cognizant what is happening

in the financial markets to this point. it could be a problem if it continues. lead to aevelopments persistent tightening of conditions, they could signal a slowing in the global economy that could affect growth and inflation in the united states. we have seen similar periods of volatility. they want to await and assess the damage. >> a very clear synopsis. let's go live to the council on foreign relations where bloomberg editor at large and surveillance tom keene is going to be speaking with stanley fischer. here is stanley fischer. >> thank you very much. thank you to the council on foreign relations for inviting me. sure when i was

invited that it was going to be this day relative to what is going on outside. to get things started i sort of provide some background on recent monetary policy decisions. i should mention before continuing that my comments are notmy own views and an official position of the board of governors or the federal open market committee. our decemberow meeting, my colleagues and i on the federal market committee. the fomc decided to raise the target range, the federal funds range by quarter percentage point from one quarter to one half of 1%. this increase came after seven years to which we kept the federal funds rate. effect, which was somewhere

between zero and a quarter percent. rate wasa lower keeping with our congressional mandate. it forces maximum employment and price stability, which we define as 2% inflation. our decision was based on the substantial improvement in the labor market and the committee is confident that a will return over the medium term. employment growth averaged a solid 220,000 months. the unemployment rate declined over the course of 2015. inflation ran well below our target last year. declines in crude oil prices and

also in the prices of non-oil imports. prices for these goods have fallen further and for longer than expected. once these input prices stop falling and of allow. the inflation will dissipate. which is why we expect inflation will rise. the strength and labor market conditions -- i would note that our monetary policy remains accommodative. my colleagues and i anticipate that economic conditions will evolve in a manner that would warrant gradual increases. given the large size of a fed's balance sheet, the fomc is

implying new tools -- is employing new tools for monetary policy. balances thatrve the depositary institutions hold at the federal reserve. we are so employed an overnight repo facility and repurchase facility. the federal funds rate, these have worked well and the federal funds rate and other short-term interest rates have increased as expected to the rate between a quarter percent and half a percent. we can make adjustments to our tools if needed to maintain control of a money market rate. we metmeeting last week

our target for the federal funds rate unchanged. data in the labor market continued even as economic growth continued -- growth slowed lay slack here. theeases in the value of dollar, foreign-exchange value of the dollar suggested inflation likely remained low than previously expected before moving back to 2%. increased concern about global outlook, particularly the ongoing structural adjustments in china and that of -- and the effects of the decline in prices in commodity supporting nations appeared early this year to trigger volatility in global asset markets. at this point it is difficult to judge the likely implications of this volatility.

they could signal a slowing in .he economy we have seen similar periods of .t -- periods of volatility the fomc said in its statement last week we are closely monitoring global, economic, and financial developments and a play -- and implications for the labor market. in a few minutes most of you would not ask what would be done in the last meeting. we emphasis -- we emphasized in the past that we don't know. all policymakers can be sure willwe will -- can be sure

happen is often different from what we currently expect. that is why the committee has repeatedly indicated its policy decisions will be data dependent. we will adjust policy appropriately in light of the economic and financial events to best foster conditions consistent with our employment and inflation objectives. my fomc colleagues spent considerable time assessing the incoming economic and financial information and its implications for the economic outlook. we also must consider some other issues, two of which i mentioned briefly today. we be concerned about the possibility of the unemployment rate falling somewhat below its longer run on the level?

it would be appropriate in current circumstances for two reasons. ofst the other measures labor market condition, such as the fraction of workers with part-time employment is preferring to work full-time. and the number of people on the labor force indicate that more slack may remain in the labor market. wellinflation currently below 2%, the modest overshoot could actually be helpful in moving inflation back to 2%. nonetheless a persistent large overshoot of the employment mandate would risk and undesirable rise in inflation that may require relatively abrupt type of policy tightening. should aim toy avoid such risks and keep the expansion on a sustainable track.

out in context i point the january meeting would reaffirm our statement on monastery -- on monetary strategy. the committee would be concerned if inflation was running persistently above or below our objective. inflation was expected to return to 2% over time, persistent tva shins in either direction could cause economic harm and could have longer-term inflation expectations. whether the committee would take action to per -- action to a aret persistent deviation dependent on the circumstances. and an assessment of the likely effects of monetary policy.

my second topic is to best integrate policy with interest-rate policy. in theeral reserve will, long run, hold no more securities than necessary to implement monetary policy. that statement leaves open the question of when we should begin to reduce the size of our balance sheet. because the tools i mentioned earlier, the payments isn't in the overnight repurchased facility, can be used to raise the federal funds rate of the size of the balance sheet. with the federal funds rate still quite low and expected to rise only gradually, there is some benefit to maintaining a larger balance sheet for some time. doing so should support

accommodative financial positions and reduce downside risk to the economic outlook. decided toee has reinvest principal payments from untilcurities portfolio normalization is well underway. they began phasing out reinvestment and how economic and financial conditions and the economic outlook involved. thank you, i would be happy to respond to some questions starting with those moderated today by tom mckee -- by tom keene.

>> that was stanley fischer, he is sitting down getting ready for his conversation with bloomberg editor at large tom keene. is wonderful to be here. i could think of eight ways you could have canceled this meeting today with grace and dignity. there is so much going on. all withry to get it respect for your public service. altra accommodative. we are migrating in some direction. this idea of a terminal value. the vector of where we want to go is in a lower level. potential gdp comes down. we are trying to get out somewhere. is there a new out somewhere for america? are we moving to a more

dampening american economy? we have to wait to see precisely where this process will take us. the numbers given in the survey of economic projections of members of the fomc is somewhere around 300 and a quarter, 300 and a half -- 300.5%. be data dependent. to fix a rate that will be apt. we can indicate when members of the fomc believe, which is what the number i have just given you is. >> the debate that you have the federal open market committee, such a separation between the service sector and goods producing sector. do you learn about the manufacturing economy and recent

quarters. >> manufacturing growth has declined. we will have to wait and see .hat develops the american economy is in a very long process of manufacturing decline as a share togdp and services continued increase. there has been a tendency for manufacturing to grow. >> we are data dependent. data dependent, or there is actual progress. you is actual progress when attend policymaking. what is actual progress mean.

we are progressing toward meeting our goals and goals defined by law and the statement on the long-run goals that i mentioned earlier. progress is the locals and maximum employment and what we call maximum sustainable employment. and 2% inflation rate. we are very close to their on employment. number that came out this morning is 1.4%. it is not in another universe, it is not in a negative number. pretty stablee and we would like them to go up. >> of course the classic phrase not always everywhere always a

monetary phenomenon. there are lessons learned in the recent years. changed withtion transitory elements? >> we dealt with the oil inflation in the 1970's. it has been around for a long time and we have the same set of issues. there are relative price changes such as the price of oil that have an impact on overall inflation. are dealing with as a significant part of what we are dealing with at the present time. and the price of oil somewhere below 30 at least was recently

could continue the decline, i'm talking as an academic. the price of oil will stop declining at some point. >> my job is in jeopardy on radio. >> i am forever quoting herbert stein who had the privilege of working with earlier in my and one of the many wise one-liners was if something would go on forever it would stop. as long as we are talking about the dollar price of oil it can't go on forever falling. >> it will clear markets. just assume inflation to a longer run trend?

or are there permanent effects to this great recession to the debt that many presume. >> this correlation, which is slightly hard to account for with the price of oil and other variables, it happens with equity it happens with inflation expectations and the connection is remarkably close in a direct and where you would actually have originally -- when the price of oil goes up equity prices have been going up lately not down. somebody said to me recently, that is because the market treats the price of oil as entirely a demand, it is an

index of what is happening. precisely how the markets will digest this and when they will begin to interpret it differently, we will have to watch and see. >> you mentioned uncertainty, the idea of folding and uncertainty or the importance of confidence in your policy are -- in your policymaking. where we are with our uncertainty and latin confidence. the uncertainty we are dealing with now is starting and this year, the enhanced higher level of uncertainty. since we raised the interest ,ates in the middle of december

increasead a very high in employment in the data reported at the beginning of january. when you look at the real side of the american economy and putting manufacturing some want have a laborou market that has been remarkably strong for a long time. have different things going on abroad. in europe and india. there are other things going on. we have to wait and see to what extent the financial instability makes something real.

>> i want to get to the international questions at a moment. i know you are not going to comment on specific banks. 4321.rlor game is are we going to have more rate increases in that. take us inside the debate how do you determine through 2016 the wind of those rate increases? >> we have been reasonably clear on that. let me first describe the set. 17 members of the urban market committee.

we all fillmonths out a survey, which asks a lot of questions about growth, about inflation, about interest rates. the question on interest rates is different than the others. the interest rate projection is the answer to the question to what you think the appropriate cause of interest rates will be. that is different than what we say about output. whatever the numbers are that you specified, there was a range .f views . he meant it is among the numbers not being talked about.

we don't actually need to helmet he we will do in the coming years. we believe it will be gradual. it is not, we are going to do it for times. we don't have to do that to make that decision. we say the results will depend on the development of the economy and be data to -- and be data dependent. we can get rid of this paraphernalia of eight meetings per year and get the whole thing out of the way. decisions on that basis, not on the set of predetermined decisions. that is the process that takes place. thosesent the summary of

predictions. >> am i and a lot of trouble right now? >> there were people who would be following the slow process. everybody is allowed to say what he or she says or thinks. not allowed to say what other people say or think. some who would be quite a few. >> productivity is a mystery. if you go back to the seminal work. productivity is a strange thing.

do we really have a cage on technological process. are you flying to a blind extent, because you can't gauge or measure america's technological process? >> economists have a measure. it is part of that growth they account for by increases in capital input and labor input. you use some production function and come up with another. has declined significantly. modern inventions, which were willimpressed and all that not have anything like the impact on productivity.

this is one where you cannot have a well based judgment. i believe the things we are looking at now will lead to enormous changes in the organization of economic activity in the united states and the productivity of american workers. year, ther 19 last basic question whether the economic center of gravity will continue its shift in recent decades toward asia particular to china or china and india. this will return two centuries ago.

that is long-term. interestingst traditional economics for the oil in economy, we can speak to europe, but we have the news on i know it is inappropriate to ask you about other things, but to those of us in the room who know that may be the rate is not fischer textbook, tell me about this experiment. idea discussed in the 1930's, and there was a lot of thought around it. because currency has a 0%

, if youinterest rate hold it in your pocket, you do that, itinterest on was believed that the rate could not go below zero. economistan argentine who said you should stamp the paper and once a year you have to maintain its value and its value goes down based on the date of the stamp. that was in the 1930's. have seen pictures of some stamped currency. whether they are genuine, i don't know. so, that idea has been around. we problem is, we believed could not get interest rates to go below zero. for europeanthat

countries and one asian country have now done that. how can you do that when currency has a zero rate of return? it because it turns out that holding currency is not so easy. if you are going to keep $1 billion in currency, you have to have a place to store it, in sure it, and guard it. that is done,e the zero is no longer lower bound. all of those costs are lower bound, and that seems to be the case in denmark and one other country. they have a -75 basis point

interest rate, which worked. there are a lot of details i don't want to go into, but across the whole economy, they did not include the smaller in the crowd of people getting negative interest rates. so, the idea is there, and that is what they are pursuing, and everybody is looking at how that , that practical policy, you have to do a heck of a lot of work. spoke to someone briefly and we compare dollar strength 1990's, and he said elements of plaza accord dynamics, when we had a huge dollars. in instability we have

january, 2016, could lead to significant flows out of nations. do you worry about flows of capital becoming more abrupt? clearly ar: that is concern and always a concern when markets are volatile, but it's part of the business, and we watch that, and we will deal with it. tom: you mentioned in your , "a modestis morning overshoot." the overshoots are dangerous. that's what got you trouble -- into trouble, isn't it, the overshoots? mr. fischer: you don't want to go too far, because if you go too far, you have to come back fairly quickly, and then there is the possibility of becoming

unstable. small overshoots are not a big problem. big overshoots, yes. tom: are we in a time of big overshoots? with what werward saw friday, the abrupt weakening of the japanese yen, are we near that kind of instability? has confidence in what we do in monetary policy. mr. fischer: there is of course a confidence in what we do in that is whyicy and we have to consider it and not give rapid answers to new questions. [laughter] tom: on that note, there are summoning people to turn to today. i see you back there hiding. have the firstto question? i don't want to get in trouble

with jamie dimon, but my goal for early -- but michael has led .o much of the debate >> just relative to what we have learned about the cost of interest rates relative to last time, which i think was 2012. mr. fischer: we have actual experience of countries that have used negative interest rates. i have not done a careful evaluation. the countries that use it continue to use it. they have not given it up. the danes are undertaking a contraction monetary policy. they raised the interest rate from -75 basis points to -65 basis points, thereby raising the interest rate. it's working more than i can say expected int it --

2012. i wasn't on the committee at that stage. tom: mr. peterson, please. mr. peterson: thank you for that excellent presentation. said usually the case, you very little about the long-term outgrowth and the interest costs that go with it. some of us, it is not only ,nprecedented but unsustainable and largely unaddressed. concerned you are about the long-term debt interest cost situation and what you think should be done about it, if anything. the most recent cbo --jections are just that

suggest that in six or seven years interest cost will start to rise in the budget. you can try everything, but when the debt keeps increasing, you have to take measures to stop it. it's that simple. but politically it's not that simple. i should mention also, again, that we are on the record for this presentation with vice -- fischer.her in view of the contentious politics in congress over fiscal policy and budgetary management, the entirek that burden of managing the economy

during the recession phase has anden on monetary policy the federal reserve? would you like to comment on that? fiscal policy was nonfunctioning almost, changing. fiscal policy makers don't meet every six weeks to decide what step to undertake next. they sort of watch the situation too far fromgs get control, they make changes. we had changes. we had an expansive fiscal 2009-2010. the united states has had, looking at the data, a very responsible fiscal policy. listening to the noise, you would not know that. you have to actually look at the data.

day today or month to month, it was the fed that was making , or month- day to day to month, it was the fed that was making decisions in the background of the larger conversation going on. tom: there is a question of infrastructure. i don't know if you dealt with that as governor of the bank of israel, but there is this fiscal year earning that we will do something about our infrastructure. is there an official plan like a marshall plan? mr. fischer: the marshall plan along with some money. -- and herenomists i am definitely not speaking for the committee, but for myself, a believe that ats

responsibly financed infrastructure based change in assistpolicy would both the increase in productivity growth that we are all hoping to to and contribute strengthening the economy. tom: sir, right here. >> numbers of politicians have criticized not only certain activities of the federal reserve, but some even its very existence. could you comment on that? they are doing that in iowa today. [laughter] i had the privilege

of watching this global crisis, the one that started in 2008, unfold from a long distance, and i thought the fed did a terrific job. i think the country owes a lot to the fed. i had nothing to do with it, so i can say that. the statementve saved theed united states from a renewed great depression, and that's not a small thing. there were others who believe either there were better monetary policies that should have been followed -- and possibly there were, but not in the direction many critics have said -- or that we should go to some other mechanism. well, we have tried a lot of those mechanisms. we used to have a gold standard. it didn't work. we decided the money supply was

everything. it didn't work. and so it goes. i believe that what the fed is doing is fundamentally correct, -- ite way it is set up is an immensely complicated organization, half government, have private. she regional federal reserve are actually, in form, private. they are not in practice private, but that is how they are set up. we were set up in 1913. we have survived 100 years, much longer than either of the first central banks that the united states set up in the 19th century. so, one listens to the critics. i always believe you have to listen to your critics. frequently, they have a point. in this case, i don't see a

major point about the way the fed is doing things and why it might be doing it in the wrong direction. i don't think that's the case. do you respond to critics who simplistically say this is a fed wedded to the phillips curve with a broad sense of traditional economic modeling, and that they either have to have a new attitude or no attitude? how do you respond to that simplistic criticism? the phillips curve, the wage to inflation route, has never been that tight. it's around. this is based on something very simple. the tighter the labor market becomes, the more likely it is that wages are going to rise.

that does not seem to me to be a very sophisticated theory which is beyond the capacity of human beings to understand because it is too mathematical and it's tied up in some complex model. i think it is correct. but it doesn't mean that the iskages immediate -- linkage immediate or necessarily rapid. tom: do you have any worries about wage inflation at this time? mr. fischer: we are hoping we will see signs of wage inflation. it was 2.5% last year. waseast one of the measures 2.5%. 3% i think is roughly where people would like to be. tom: sir. >> thank you very much. you talked about volatility that -- volatility.

that is current, and that is probably going to be with us for the rest of the year. how do you deal with chinese volatility in a market that is technocrats. that takes me to a whole host of questions i will have to ask you to figure out the answer to. i think the focus has been on the chinese exchange rate other,sm more than any change capacity to exchange rate regimes, if that is what they are trying to do, it doesn't usually go that smoothly. at this point, going on the remarkable history of chinese economic development since 1978-1980, and the capacity of

the chinese government, i am theythat after a while will reach a mechanism that is widely understood both by them and the public. lou alexander, i want to call in you. a few years ago, lou alexander had a wonderful paper about computers and society and the way it cuts two ways. >> i believe what tom is referring to is that it some point i talked about the linkage between technology and how that relates to income inequality. i guess i would like to turn that to potential output. in some ways, i think you would probably agree that there is generally a consensus that potential growth not only in the u.s., but around the world, has slowed. we have seen these trends and

widening income gaps. there is a broad understanding that complementarity between skills and technology has widened the income gap. i wonder if you could comment on how much of the slowdown in growth has been related to that and if this could be a broader skill problem we face going forward? hear a lot about shortages of skilled labor. industry,m construction and so forth, cummins b to the fed and we hear all the time that we cannot find -- come and speak to the fed, and we hear all the time that we cannot find skilled workers. there is the question of whether thatare receiving pay would encourage them to continue investing in their skills. i don't have very

clear insights. we have these amazing new i.t. andies, namely the internet, and all the have.d services that we somebody that we are precisely the people those inventions are aimed at. we think there is tremendous progress. i was asked, have you ever been on the subway? yes. what are people doing on the subway? they are all reading their iphones or whatever they are doing. they are all in the revolution as well. i have not studied subways in

other cities, but i have a feeling that we are coming out of a massive crisis, coming out of it relatively well . we have almost forgotten what a serious crisis it was. i am sometimes amazed when people say the economy has done nothing. what odds would you have given on the economy being at full when thet in 2015 crisis started? i think we have to wait and see how this works out. tom: but the heart of the matter, this question is, if we a part of america not taking advantage of technological progress, you have to manage that america and .nother america one is being left behind.

are you managing policy for that? mr. fischer: we are managing her the unemployment rate. we look at people who are part-time, unemployed, etc. .e have one tool there are a lot of things a monetary policy cannot do. there are things the educational system should do. there is not a lot of chance that monetary policy will solve the inequality problem or will solve the gaps between productivity enhancing technologies that are good for some people and not for others. those have to do with actions the federal government and state and local governments should be undertaking. let me turn to mickey leavy . you have been a constructive critic of much of what we have

done in monetary policy. a question for the vice-chairman, please? >> you have been a champion of and you andrgeting, all the fed members have argued that 2% inflation is your long-run goal. that coretoday inflation, 1.4%, is below that. presumably -- and i have heard many said members, along with you want tosay that avoid any width of deflation because expectations of deflation could lead people to whiff of deflation because expectations of deflation could lead people to save instead of spend. do you see any sign anywhere that inflation is so low that it rathering people to save

than spend, or do you see any signs anywhere that low inflation is harming the economy? , mickey, therell is a concern about to low in the sense of what happens if you get a negative shock. you know going back to zero lower bound is a major concern. the discussion of what is the optimal rate of inflation, as you know, also depends on how the economy works and the reality of labor. when inflation was low, the simplified argument it is harder two raise theman less -- than to raise them less than inflation. both are cuts in wages.

one doesn't produce social conflict. one does. the arguments about the economy are around. we haven't got any precise evidence of that being related to what happening to productivity growth, but that's a possibility. >> another question on china, if i may. is a problemthere with the data exchange rate. do you talk to them? do you plan a trip to china soon? do you have their phone number in your mobile? the governors of , the leading economies, meet every two months in basel at the bank of international settlements and in the what is going on

countries. so yes, we do meet with our colleagues in china. a lot of my colleagues will be in shanghai for the g-20 coming up in february. those contacts are ongoing. governors is af rather remarkable institution, and you can pick up the phone with anybody in that community and have a serious conversation. in world war ii, there was a war room for the generals. do you have a currency war room at the fed? [laughter] mr. fischer: we will see, but it is nice to sit in this very elegant room with plaques on the is where that

operation was planned. speaking to the global audience that is asking about dollar strength, worrying about the strength of the dollar as other currencies depreciate, take us back to economics 101. should we fear a stronger dollar? at some point currencies can become very strong. there is an agreement among countries. ofis an inevitable result easy monetary policy that your currency weakens. the agreement is the international community of frowns upon measures which are undertaken early to influence the exchange rate. it understands that if you undertake an expansionary monetary policy, cut interest rates, then you are going to get

a weakening of your currency. if the conclusion is that you are engaged in an attempt to strengthen your economy and there is a side result of that on the exchange rate, that's ok. if you are engaged purely in using the exchange rate to gain an advantage on other countries, that is not ok. lucy: i am a journalist. 30, 40,mployment rate 50 years ago when people were getting factory job wages of $30 an hour, that same number now when people are serving hamburgers for the minimum wage, if you just come out with unemployment rates, that's not really telling you about the health of the economy and the welfare of the population. should you add another number, another bit of data to the numbers you put out that talk

about the percentages of workers to are getting enough money take care of their families and, for example, don't have to depend on food stamps? this goes to the heart of america and to john edwards talking about two americas. is the fed mechanism, is the process you are working with changed? mr. fischer: the process hasn't changed. we are using the same set of monetary tools, slightly different because we have a gigantic portfolio at the moment, to work on the aggregates. we don't have the capacity to make sure that the minimum wage , in the sense that it is not creating unemployment, and fair. we would be very happy if there were such a mechanism, and that's not something the fed can do.

the numbers are all there, man. the point, pew research has, with a wonderful study of the middle class and the changing middle class. you have seen this across all of your academic career. do our central-bank institutions need a new calculus to address the polarity of our labor force? see a i don't new calculus to address the polarity of the labor force. i can see research which is taking place, and which has led to many discussions, of the relationship between the things we do and the distribution of , namely, hollow interest rates, good for the poor or bad for the poor? the people who look at them say well, they must be bad for the poor because it's the rich who

invest and so forth. but it actually doesn't make sense. what is good for the poor's employment, and that is a goal is employment, and that is a goal of ours and a goal we succeeded in dealing with very strongly, and the american economy succeeded in dealing with strongly. we have close to full employment at the moment. we are in the vicinity. and that is an achievement of thatthe monetary policy has been followed. in speakingeeded about the next meeting. could we go out to meetings? thank you, everyone. [applause] >> that was tom keene's interview with vice chairman fisher.