scarlet: so we are not going to look at the market reaction, joe? joe: we do have to look at the market reaction, and for 10 seconds, i'm very excited to see the market reaction. scarlet: ok, let's go live to the fed. on interest change rates, scarlet, but the federal open market committee drafted a policy statement with a somewhat hawkish tone, and that is a surprise. gone is the reference to risks from global and economic financial developments, which the fed used to explain its decision not to change policy back in march. translation? the fed is not as concerned about external risks to its outlook, and it focuses back on the domestic economy. as you know, the first paragraph of the policy statement is the most key, and in it, we find all

kinds of words, all manner of words, that paid sure of a healthier economy -- that paint of a healthier economy, words like solid, strong, and strengthening. still absent in the statement is a reference to balanced risks. as you know, there was much focused on this heading into the meeting, and again, the balanced seen since theen december statement. there are plenty of to be sures. slowing growth and household spending as well as little change in inflation expectation. what is the overall takeaway? much sums it up. the fed is trying to create enough room to raise rates at its june meeting without surprising the markets, and, of course, the june meeting comes with a revision of economic projections as well as a press conference with janet yellen, the fed chair. the fed also this time

reiterated its desire to tighten policy at a gradual pace. that important? because the fed is going to have to raise rates soon if it was to increase arming cost by 50 basis points before the end of the year. the conventional wisdom is that the federal open market committee will be reluctant if not loath to tighten the policy the closer we get to the election. scarlet, mike, joe, that is my read. i am open to questions. scarlet: all right, any questions as you look at the overseas development, even oblique references to what is going on outside of the u.s.? there was only one, scarlet, and that was that the fed will continue to monitor global economic and financial developments, so the reference to what is going on overseas is not totally absent from the release, but it has been downgraded. it has been moved further down

in the statement, and there is no explicit reference to the globalosed by this economic and financial developments, as there was back in march. mike: there was one dissent, and there is no reference to time. there is no reference to anything new in terms of how they are going to judge whether to raise rates, but they do talk about a better economy. i take away from this that if the economy continues to improve, that would mean june is live. reporter: yes, i think you are right. one thing i will draw your attention to is the second line, the first sentence of the red statement, where the committee talks about economic activity appears to have slowed, and so the read on that, if you will, is that the fed is playing down the weakness in economic data that we have seen since the beginning of the year, things

like retail sales, for example, thewhat we might see in first read in first-quarter gdp. again, this is all about parsing the statement. we do not know for sure because the fed provides us with nothing at these meetings without a press conference. it provides us with nothing beyond the statement, and that they are keeping the options open is very clear. creating more than wiggle room, i left to do what it deems required based on the data should we see, as you say, the data improve between now and the june meeting. : we talked about an analog setast october, where they it up. is this as strong as the october report, or is it somewhere in between, where they are leaving the options open but not telegraphing? reporter: i think that last characterization, joe, hits the nail on the head.

it is not as strong as the possibility of raising interest next meeting, but it goes part of the way there. again, in this case, it is less and morelicit language about tone. had the fed been more concerned about the data it has seen since the beginning of the year, we probably would have heard more dovish or read into this a more dovish tone. the fed has seemed more concerned about what is going on in china, for example, we might have read into this a more dovish tone, but we are not. it appears to be decidedly more hawkish. far as tot go so describe it as very hawkish, but it is surprisingly hawkish in the degree that it is hawkish. how is that? schatzker,, it erik we will talk with you later. remember, you can follow on the bloomberg terminal. ericas been chuckling as

was talking about this hawkish bent by the fed. jim: he has a hard job. i suggest that as journalists, we take a little less preferential view. they remind me in the aggregate of the most novice of novelist retail trend following investors. they have got no model. they have got no history of central banking. what they want to be is right, which means they with thee in sync latest headline, and that is not the approach to making money on wall street, nor is it the approach of making a good job of central banking. on the one hand, it you are one guy. tony, you are one guy. on thise got 17 people committee. it is hard to get 17 people to agree with anything. in this compromise statement, it seems like they are saying, ok,

the economy is a little bit better, the outlook is not that terrible anymore, and that is it. we are not making any promises going forward. tony: well, mike, you can say that the group has difficulty agreeing, and that is with the inflation. you recall that the the last two times, the fed left it out, and janet yellen took leadership by the wards and decided, ok, you participants cannot decide, so i will decide, it in her march 29 speech, she gave a view of the economy and outlook it seemed to show that the risks in her mind, to her way of thinking, word to the downside, so she went in contrast to her colleagues, in the week prior, seeming to suggest it was becoming more balanced. now, think back and just look at the numbers on this and contemplate this. 2016, years leading up to there is only twice that the fed left out a balance of risk statement, and here it is three

times in a row, and so to erik who said that the statement is hawkish, we would say that the absence of a decision on the balance of risks suggests that janet yellen will remain in saw in the what we statement that is only a baby step towards a rate hike. it did open a door and create some option for a hike in june, but clearly, no meaningful signal about a hike in june, so data dependency is the way to be thinking about the fed right now, and also, finally, the reference to growth seeming to slow, we will be thinking about that line tomorrow, all of us in the financial markets, when we receive the first quarter gdp statistics, it are rightly believed to be close to zero, and the closer to zero, the more that line will have an it when we point on view it again. tony, jim grant was kind to

me, so i think i need to defend myself. hawkish is the best i can do, given the tone of the statement, and you are absolutely right, gone is this alan's risk, and that is critically important, but they seem to to have gone out of the way to choose words that underscore the strength of the domestic economy and played down the things that appeared to be holding back inflation. if anything, they make reference to the tightness of the labor market and the expectation that the labor market is going to continue strengthening, which, of course, everyone involved in policy making is going to like the fires of inflation, so maybe it is not so much a self-defense but a further explanation, if you will, of what the statement does say, and also, just as important, what it needs out. read, erik,s a fair

and we will follow today's meeting, but recall that the fed has and outlook. it is in its economic rejections, and staffers have an outlook. it is in the minutes released three weeks after the minutes, and the fed is projecting growth to stay above potential, the u.s. economy's potential to grow for the next two and a half years, which is to say growth potential, how fast can it grow, and the fed thinks it is somewhere in the high one's or at two. put it,th to be, as you fairly good, to look through the bad news that we have seen recently. that is its projection. whatisk to the outlook is we do not know in terms of what the fed believes, because it has not decided and has not iterated it, so janet yellen them will be in charge, and unless data swing and the other direction towards

the possibility of a hike, and there are a couple of jobs reports in the inflation report between now and then. the omission though with a reference to international develop its is important. that is the step, you could say, that puts the fed in play for the, because it does show fed has reduced fear of it, but it did not downplay it enough to say the balance of risks were closer to being balanced. in before the fed hiked the risksit said weren't nearly balanced, both in september and any subsequent meeting. they did not do that at all here, so that part is missing. it is gettingw if closer to that point, and it seems they do not think so. holding you pointed out the fed to less reverence, pointing out the phd's they have, less connected to reality, perhaps. the unemployment rate is down to 5%.

the inflation, the financial system intact. do they not deserve credit or basically performing a lot better than a lot of people all of the other central banks around the world, which are much further from their goal? jim: america is and always should be, i hope, a shining beacon to the world, but don't forget we have had the weakest recovery of modern analysts. to that isamage substantial. now, we did not have a crash crash or atal c crash, but with the diminished expectations, all of this fantasy talk of a new world -- what is the term they use for you cannot grow anymore? is this environment what we want in america, and i would say the

picture of our would-be presidents on the stage remind us of what has gone wrong, and i think no small part of that is the failure of monetary policy. they have relegated themselves functions that formally were limited to the plan in the soviet union. >> we can discuss that forever. >> let's try it. >> let me make one quick point about what eric and tony were talking about. sometimes a cigar is just a cigar. maybe they decided to drop it because they do not like that formulation. it has gone on now for three meetings. into it read too much is there or not in what they are trying to tell us. it may just be gone as an instrument of communications. we criticize them for having their statements be too long. this is a shorter statement. we should be happy. scarlett: jem and tony, thank

you so much. still ahead, the former minneapolis fed president joining us next on bloomberg television and radio. ♪

scarlet: this is a bloomberg special report on bloomberg television and radio. this is "the fed decides," and i am scarlet fu along with joe and michael mckee. we want to go back to erik schatzker. mike was positing that perhaps they drop this to a balance of risk or risks posed by the conditions because they just thought it was not a useful way of communicating what is going on and what they plan to do next.

i think that is a very fair question, and we may not know until we see the minutes we mays meeting, and never know if it is not documented in the minutes, but there does not appear to be in any effort toeen try to reconcile, if you will, the dropping of that phrase. there is nothing like, for example, the risks posed by global economic and financial developments, which we saw in the last statement, which, if substituteerved as a for the balanced risks. there is no reference to risks. it is just not there. the fed says it is going to continue to monitor these external developments but does not characterize them as risks, so mike might very well be right. >> i am amazed at how little movement there is on anything. anre was a little bit of uptick in rates right after the announcement. they came back on the s&p still basically flat.

that janet yellen once again -- i feel like she has this ability to basically do a good job of doing these statements without causing much volatility, coming in right where the market expects without rocking the vote too much. threading the needle? joe: landing the plane, threading the needle. yes, and investors have applauded her for her ability to do that in the past. i do remember larry think, who we were talking about earlier, who we werek, talking about earlier, and there was the pain of the december meeting that was felt all of the way through the middle of february, but, yes, on a number of other occasions, the committee perhaps led by dylan , haves case, and others found ways of choosing just the right language to establish just the right market expectations so

that when the fed chose to act the next time around, people were not as surprised that they might have been had it not then so artful. scarlett: all right, erik schatzker, thank you so much, reporting live from the federal reserve. still ahead, we have got , theana kocherlakota former minneapolis that president and currently a professor, and he will be joining us to give us his interpretation of what the fed meant that it dropped that phrase. we will be back.

♪ this is a bloomberg special report, "the fed decides," on bloomberg tv and bloomberg radio. along with joe weisenburger and michael mckee, i am scarlet fu. economic and developments in chile to pose a

risk. they added global and economic financial developments in a list of items it is monitoring closely, so semantics matter. joining us here is the former minneapolis fed president, now a columnist and a professor at the university of rochester, narayana kocherlakota . professor, give us your interpretation of what this statement means? mr. kocherlakota: welcome and thanks a lot for having me on. it is a real pleasure. well, i think that the committee wanted to indicate it continues to be data dependent, and every meeting is live, and i think they were successful in doing that with this statement, that they did not put any special emphasis on the upcoming meeting, and they did not put any special deemphasis on the upcoming meeting, so i think this statement probably served the purpose that the committee was looking for. >> the one thing it does tell you is that they still believe

in the efficacy of extraordinary monetary policy, because they are not talking about getting rid of it. do you think we are still getting more out of extraordinary policy than we would if they started raising rates and putting more of an equity premium on the market? i certainlykota: think we are in a better position now than we would he if we were -- that if the federer to raise rates. fed were to raise rates. to see a lot of risks around the world. i continue to see very suppressed inflation expectations. i see slack in the labor markets. these are all inputs that call out for accommodative monetary policy, and so i think that the fed is wise to continue to emphasize the need for accommodative monetary policy, that my own perspective would be

that you might even think about going further in that direction as opposed to continuing to talk about normalization. joe: a professor, you argued that the fed -- once the rate hike cycle begins, they seem to wouldthis path where it be hard to backtrack. is there any way for them to do this smarter than they are right now? butin the rate hike cycle show they are not going to move too fast or are really going to wait for certain data to come into place, such as inflation, before they continue to move higher? 's a couple ofta: things. i think that is a great question, first of all. evencycle, going back further than raising rates, and it really goes back to may 2013, when chairman bernanke started talking about tapering publicly. i think that was really the beginning of the journey we have been on and then for i guess something like three years now.

i actually think the emphasis on with interest rate movements is overplayed in the communication. i think that they should be more willing to be more responsive to and perhaps respond aggressively to the data when it is long. what would that data mean? the data i think you are mainly looking for here is stronger inflationary pressures than what you're seeing right now in the u.s. economy, but there is a andinual emphasis indication on, look, we are not going to go too fast. we are not going to go too fast. we are not going to go too fast. bute moving too soon now, it has also concerned the hawks, because there will be a strange if you see it move too rapidly. i think there is a willingness

to move. scarlet: ok, narayana , joining us from rochester, you are staying with us, and another guest coming up. a quick check of the market reaction to the decision of no change. the dow industrials up by a third of 1%, and the two-year points. 85 basis of course, it had its big movement in the last seven days, and the dollar/yen at 111.22. is up fromde oil below 45, and the emerging markets, they have moved into the green call him there. 0.e euro/dollar at 113.23 ♪

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scarlet: this is a bloomberg fedial report," -- "the decides."

let's begin with headlines on bloomberg first word news. mark crumpton has more. mark: republican presidential candidate ted cruz will name former candidate carly fiorina as his running mate. that's according to people familiar with the situation. fiorina dropped out of the race earlier this year and endorsed uz, who cannot get the 1237 delegates needed to clinch the nomination. he and john kasich have joined forces to try to prevent donald trump from getting the necessary delegates. cruz plans to announce this afternoon. bloomberg television will carry the event live. mr. trump made headlines, saying he wants to shake the rust off american foreign-policy and place to focus on what is best for the united states. he made comments during a foreign-policy address in washington. mr. trump: my foreign-policy will always put the interests of the american people, and american security, above all else. has to be first.

has to be. that will be the foundation of every single decision that i will make. mark: the speech came a day after his suite of five northeastern primaries that put him closer to the republican nomination. as a case involving hush money and violation of banking laws, but the sordid side emerged involving a man one second in line to the presidency. today, a federal judge sentenced former house speaker dennis hastert to 15 months in prison. last fall he pleaded guilty to paying money to a man for his silence on acquisitions has to sexually -- hasterts section of used students when he was a wrestling coach. he also has to undergo treatment after his release, and a $250,000 fine to go to a crime victims fund. he told a courtroom he mistreated some athletes he

coached, in the judge called him "a serial child molester." heavy fighting continued in libya as hard-line islamic militias and the libyan national army battled for benghazi, the same city where four americans were killed in an attack on a u.s. to genetic mission. libya slid into chaos following the 2011 uprising that toppled muammar gaddafi. islamic state took advantage of the security vacuum to gain a foothold in the country. global news 24 hours a day, powered by 2400 journalists in 150 bureaus around the world. i'm mark crumpton. scarlet, back to you. scarlet: before we get back to "the fed decides, the -- before we get back to narayana look atkota, a quick new york. thatd a government report showed crude production slipped to an 18 month low. that really drilled oil prices

forward. gold is bouncing around, $1247 an up 0.3% at ounce. erik: we're back with narayana kocherlakota, former president of the minneapolis fed and current professor at the university of rochester. professor, i want to ask you about some of the dynamics in the meeting room. we have heard in recent weeks from a number of fed presidents who suggested that maybe the markets are not pricing in enough rate moves. they range from people on the people -- to people who would normally be considered doves by the marketplace. as a former bank president, -- o people who would normally be considered if people out there are seeing some indifferent in the economy than you see from 20th and c street in washington? prof. kocherlakota: it's a great

question. i think the fed would be better served by having the governors talking more about their perspective, as opposed to the two of us trying to figure out what they are thinking. if the president are out there -- presidents are out there talking all the time, i think it is a great thing. americans can find out how they thinking is evolving over time -- their thinking is evolving over time. for whatever reason, we don't hear often from the governor's. share yellen -- chair yellen is talking for the committee, which is a different role. but the governors, their views matter tremendously, and it would be important for the american people to hear more from them on an ongoing basis. scarlet: we will have a former fed governor joining us in a few minutes. point, a wholer host of fed presidents will be

speaking. kashkari, all speaking in the coming days. there has been ongoing criticism that all around the world there is too much reliance on monetary policy to stimulate the economy. your vote for "bloomberg view," it would help the economy if the u.s. federal government issued more debt. contrary to what everyone says, you are arguing the government is under-borrowing. how would it help the economy if there was more u.s. government debt out there? prof. kocherlakota: actually, this is not that unconventional of a position. we have very low real interest rates out there right now. that shows that there's big demand for a product the u.s. government has to offer, and that product is u.s. government debt. the counter is, the fed is the one keeping interest rates low.

that's why we have low interest rates. or, the banks around the world more broadly. but the fed is merely reacting to conditions created by the undersupply of government debt. you can see that by the fact that inflation is so low. if the fed was overly accommodative, we would see much inflation. to the contrary, we see too little inftion. if there was more government that out there, there would be more safe vehicles for people to save. in my former job, i used to get comments all the time from retirees who wanted to have a yield.save at a higher that would be accomplished if the government provided them with those instruments. so i think this is a shortage that you see around the world. only's the u.s., not the one -- there are other countries that would be better served by having larger supplies of government debt for their citizens. scarlet: there certainly is demand for safe havens, but

there is perhaps a higher demand for yield. and the safe havens are not providing that you're right now. prof. kocherlakota: nobody is providing -- >> nobody is providing that yield, which raises the question. japan has all the debt in the world and they are continually printing more. you wrote about the failure of the fed to stimulate inflation expectations by not going far enough, but japan has not been able to stimulate inflation expectations. i wonder what evidence we have anymore that at the zero or lower bound where these banks are pinned, things work like the model suggest they do and central banks can generate expectation -- inflation and expectations? prof. kocherlakota: you know, we have had examples of being at the zero level before. the u.s. has been at the zero level during the great depression, and a combination of monetary and fiscal policy under franklin roosevelt leadership was able to generate increased inflation expectations, which translated into very positive

stimulus for the real economy as well. not only do we have the evidence that sufficiently rigorous fiscal, monetary policy can work -- in japan's case, i think the japanese government is facing three issues they are trying to solve at the same time. they would like hiring place in, they would like to have more -- higher inflation, they would like to have more demand for goods and services, but at the same time they want structural fixes for their economy, which means that they want to be on a better path in paying off that debt. it is hard to do all those things at once. messages andxed confusing signals, which has been a real problem for them. with all that said, we have to be clear there has been success in japan relative to where they were, say, two or three years ago. scarlet: maybe relative to where they were two to three years ago. but go back to the negative interest rate adoption -- that

has not worked out at all when you look at the yen. >> expand on that further about the success of the boj. a lot of people would say abenomic monetary stimulus has not gone anywhere. but in your view, it has made progress? prof. kocherlakota: i think it has made progress. i don't want to oversell the case, but it has seen -- we have seen improvement relative to where we were three years ago. you would like to see even more. no doubt about that. i wrote about the bank of japan's attempt to go negative with interest rates. i think negative interest rates can be a very positive tool for central banks, but you can't use it as a tool you're scared of. if you implement it with the idea that, this is something we will use for a very short period only doing it because things are out of control, you

are sending a very negative message at that point. you have to introduce people ahead of time to the idea that you might use negative interest more, and it is just one in your panoply of interest rates you will be using to get the economy back to health. scarlet: so a monetary policy tool. narayana kocherlakota, the former minneapolis fed president, thank you so much for joining us today. ta joiningkocherlako us from the university of rochester. coming up next, we have rick michigan joining us to get his take on the fed's statement and looking ahead to the big meeting tonight. ♪

scarlet: this is a bloomberg special report -- "the fed

decides" on number television and radio. scarlet fu along with joe weisenthal and michael mckee. joe: let's bring in rick mishkin , former fed governor and now professor at columbia university. , thanks forshkin joining us. did you see anything in the decision that struck you as interesting, or can we forget about this and move on? prof. mishkin: i'm having a little bit of a hard time speaking -- hearing you. could you speak a little louder or raise the volume, please? joe: did you hear anything in today's fed decision that struck you as interesting, or is this in the words of neil dutta, just a big nothing? prof. mishkin: this is exactly what i expected to see, which is basically they are moving to what i call a much more data-dependent situation. in the past, and in fact i criticized this, they were much more focused on calendar dates.

have said it will be very important how the data evolves in terms of what they do. they emphasized inflation expectations are low, and that is extremely important. the fed has to keep an eye on inflation. inflation expectations are important in the evolution of inflation, and the fed should not be raising rates unless they really are confident inflation will rise to the 2% target, and that is not at all clear right now. so the key to understanding what they are doing is that they will be responding to the way the data is evolving, and the data is not telling them clearly that in fact inflation is going to rise. finally, i would say that one of the key problems that we see for all central banks in the world right now is how difficult it is to get inflation back up to the 2% level, and that will be very important to the fed. scarlet: in fact, the data not only -- looking at the data

inflation has not only risen with the strength of the job market, we are expecting gdp tomorrow which is expected to be revised lower for the first quarter to 0.7% from the previous 1.4%. let's listen to what the baron berg chief u.s. economy has said about the fed's influence on the economy. >> the reason why the economy is not growing faster has nothing to do with the fed. that has been obvious the last several years. it has to do with a wide array of nonmonetary factors. not just the way some households and businesses change their behavior post-crisis, but also some government policies that are clearly impacting businesses and consumers adversely, adding uncertainty and the like. mike: when i asked narayana ko cherlakota about that, he said you need vigorous policy to generate that. you both -- you and i both know

we will not get policy out of washington anytime soon, so is the fed at the limit of what they can do to stimulate the economy? prof. mishkin: the fed has to do what it has to do. but clearly one of the issues that is very important is that fiscal policy is constrained, and i would argue that although if i were king i would like to see more fiscal policy now, i would like to see that actually combined with making commitments to actually get fiscal balances in balance in the future. neither party, and none of the presidential candidates have done this at all. nobody is talking about entitlements and how to keep control, and that's really the big issue. not only extension of monetary policy, but expansionary fiscal policy, and in balances by getting control of our entitlements. i agree very strongly -- with

interest rates so low, this is a great time to build infrastructure, but not if we will to spend now and keep spending in the future. we should balance what we should do now with long-run considerations. unfortunately, it is bipartisan right now that neither party is talking sensibly about what to do in the long run about fiscal policy. -- joe: you mentioned you like the fed moving to data-driven guidance. is there anything further you would like to see that would help acceleration get back to trend more quickly? or is the fed doing enough? prof. mishkin: i think there is a way they should communicate that would be much better. at the u.s. monetary policy forum, i presented a paper with a bunch of colleagues that talked about how the fed needs to move forward to stay independent in terms of forward guidance, but also how they should do it. it is not just good enough for them to say, what we will do in

the future depends what the data do. they need to describe much more what will actually effect that. for example, they should talk about how is inflation expectations are staying low and if we don't see a large enough increase in wages, if there is not enough inflationary pressure, then in fact that means they are not going to raise rates, and should not raise rates. that is something that will be very expansionary for them. i don't think they have been newly clear enough on that. i think they have to indicate that if the numbers are not coming in strong enough, then in fact the fed is going to be much easier than it normally would be, and that will lower long-term interest rates and be expansionary. they could do a lot more in that i mentioned in they are doing currently. mike: you want to talk about inflation expectations. i have a chart comparing consumer expectations with wall street expectations. the five-year forward, and the university of michigan numbers. consumers have a much higher impression of where inflation is

going to be. the fed would be happy with that number, about 2.7%. wall street was much lower. the fed, most officials there say they do not like the wall street numbers. they like the survey-based measures. how are investors to know what they really need? prof. mishkin: you should be very careful here. projections from the michigan survey tend to be over-estimates, biased upwards relative to what is actually happening in inflation. the number going back to 2.7% is much lower than it was previously. so you really have to mark that down. the survey measures, as well as the market measures, are actually indicating inflation expectations are on the low side. so you have to take the 2.7 number with a big grain of salt. in fact, the federal reserve is doing that. what is relevant is that the number has fallen. it is still a big problem, that both the markets and the public are not sufficiently convinced

inflation will be rising to the 2% level, and that is a problem for the fed. scarlet: rick mishkin, former fed governor, stay with us. as we had to break, a quick reminder that bill gross of janus capital will be joining bloomberg, speaking with mike mckee at 3:30 p.m. eastern. you don't want to miss that -- 3:00 p.m. eastern. you don't want to miss that. ♪

scarlet: this is a bloomberg special report, "the fed decides " on bloomberg television and radio. the fed is leaving interest rate unchanged, and also dropping some language in reference to overseas developments. we will rejoin our guest, former fed governor rick mishkin, professor at columbia university, where he joins us now. professor, there is argument over whether this that announcement was more dovish or more hawkish. either way, it sets the stage

for the bank of japan tonight. isyou believe the fed passing the baton to the boj to make a big splash tonight in this era of implicit coordination between central banks? prof. mishkin: i don't know if that's the case. my experience is, if the federal reserve makes the decision based on what is right for the u.s. and basically thinks that central banks in other countries should make decisions on what is right for them -- i don't think the fomc was thinking what the bank of japan would be doing, or is passing the baton to them. i think this is basically a japanese decision to make, and they need to do what is best for them. baton-passing aside, what would be best for the bank of japan? there is a widespread view that for several years they have done further and further forms of easing to little effect. we have seen a strong yen rally in recent months. what now?

prof. mishkin: this is reflecting some of the problems monetary policy cannot do by itself. actions of japan, their have been exactly in the right direction. a sea change from what happened before, before 2013 when kuroda came into office. one of the problems the bank of japan has, they are overcoming the cash policies of the earlier bank of japan, which was never expansionary enough. it tells you an important principle, which is that if you get behind the curve, you lose credibility, and you lose credibility to get in front of the curve when you actually changer policy. so it's a real problem for them. i think the other issue that is extremely important here is that the policies of abenomics have three arrows, and they have not done much on the other two arrows. part of the problem of japan is that the demographics are very problematic for them. the economy basically doesn't

have nearly enough competitive elements to it. the abe government has to really get on the stick here and take measures that give people confidence that japan's economy will get wrong again. happened, had i think that's creating a problem that despite very expansionary policy by the bank of japan has not done the trick. mike: let me ask you this. in your textbook "macroeconomics policy and practice," will there be a new chapter explain why the bank of japan goes to negative interest rates and the yen get stronger, and the fed raises interest rates and the dollar gets weaker? prof. mishkin: this is something i'm doing a revision on right now. part of the issue coming up is, why did the bank of japan's policies not -- why were they not as successful as they hoped they would be? that raises the issue, what else needs to be done to make japanese monetary policy better?

that requires action from the monetaryt to restore policy in japan. he senior events, and you have to talk about them -- you see events and you have to talk about them, and hopefully students like what you do and you sell a lot of textbooks. scarlet: rick mishkin, thanks for joining us. the former fed governor, now professor at club the university. mike, you will continue this conversation tonight when you speak with -- this conversation when you speak with bill gross later. mike: we will see if bill gross is making a meal of this. scarlet: the boj decision is due out at 2:00 a.m. joe and mike are definitely staying up for it. that is it for this hour. more special fed coverage on television and radio. ♪ ♪

>> it is 3:00 p.m. in new york. welcome to bloomberg markets. ♪

david: good afternoon. here is what we're watching. the fed keeping interest rates unchanged despite highlighting labor market improvement and thoughlobal risks, growth of janus capital joins us next with his reaction. -- bank of japan pushes their interest rates deeper into the red. what to expect overnight. the outgoing ceo drugmaker facing the senate today over the pricing practices introduces testimony live. we are one hour from the close of trading. julie hyman is standing by to get reaction from the fed statement about an hour ago. julie: generally being read as hawkish in terms of june now be on the table in terms of a potential