we talk volatility and we hit it up to 22, we were at 14 on thursday last week. we get the huge spike, now we've been pulling back, pulling back. it's still above the 200-day moving average. keep an eye on that. >> we'll count down to the decision by the fed. t-minus 59 minutes and change until you get the feds' latest decision on interest rates. could they surprise everybody and raise rates? the market is not betting on it. it could happen. welcome to "power lunch," it is michelle and i for you today. melissa is off. tyler is on assignment. here is your market set-up ahead of the fed. right now as you haed from scott, the dow is not doing much, up 21 points, everybody is in a holding pattern right now. the bond market, the benchmark 10-year hold steady with a yield of 1.60%.

for the macro commodity viewpoint. not seeing a huge shift anywhere. most people don't think we're going to see a move by the fed, but you never know. we're seeing gold up .02%. fractionally and crude oil is down 36 cents, not a big move. so there is the market set-up and we've got a great guest line-up with smart and actionable advice for you over the next 90 minutes. let's begin with another smart guy, steve liesman with a another fed preview in washington, d.c. >> today we're looking for a fed that's cautious on raising rates, amid near-term economic uncertainty here and abroad. probably optimistic on the economic outlook. one that could yet again lower its forecast for the fed funds rate. can you see from the chart, the average fed member has cut its forecast. if you take in 2016 and '17 together, seven quarter-point

rate hikes and there's been controversy and criticism of the fed today, jeff gunlock saying they've turned into the zombie fed. say the meeting this week is live, but investors all know it isn't at all. so larry summers basically arguing for a reversal of course saying the fed should signal its commitment to accelerated growth and avoiding a return to recession. watching the fed over the last year, there's a groundhog day aspect. brian, janet yellen goes into this meeting with her policy compared to zombies and to bill murray. i'm not sure that's the place you want to be going into a meeting. brian. >> we'll see if it is a real caddyshack around here as well. there's more to get to. let's bring in cnbc contributor larry kudlow. is it a sitcom by fed? >> what's a zombie fed? >> alive but not really, not going to do anything. >> they shouldn't do anything. what we have here is a fiscal blockage problem.

not a monetary problem. the whole world is enmeshed in stagnation and deflation, there's no reason for raising interest rates. at some point after we get a slashing of corporate taxes and regulations on business, the business side of our economy is dead in the water. dead. >> larry, should they bake out these forecasts that say they're going up? they keep having to go down and down. they've taken out a percentage point in 17, almost .7 of a percentage point. and they talk about not raising at all. >> it hurts their credibility when they have to backtrack. >> i don't disagree. the fed forecast is wrong. the models have been wrong. the ph.d.s have been wrong. they're all wrong. so whatever. i'm just saying they shouldn't, don't promise what you're not going to deliver. economic conditions, steve, you've reported this accurately. economic conditions are lousy here and abroad. and particularly i want to make this point. it's the business side that is

really getting hurt. you saw it today with industrial production. it's down, profits are down. why should we be talking about raising rates? >> what do you say to conservative economists who argue that when rates are this low, the misallocation of credit is destructive? people put money in places they would never think, because they are so desperate for yield and it has a very bad, we can see bad repercussions everywhere. >> i think there has been a misallocation of credit. qe 1 was the last one i supported. they should have raised interest rates in 2010 and 2011. frankly. >> but here we are now. >> michelle can i have a swing at that? >> the question is don't maximize the damage, minimize the damage. the argument about misallocation is been harnd. right now the fiscal obstacles of taxes and regulations, not only in the u.s., but around the globe, places like japan and europe, they need to make major

changes in tax reduction and regulatory relief. that's why the economies aren't growing, easy money and infrastructure spending did not work, let's face it. >> i want to get larry in first, it's a criticism from conservative economists, that i raise and he's a conservative economist. >> get that. i get that, michelle, i think there's a point to that. but how much capital is quote-unquote misallocated if german 10-year bunds are zero orr negative, and how much is misail misallocated. you have a ton of property that should in equityings or other profitable investments that's sitting on the sidelines. so there's two sides to the misallocation story. i think people ought to talk about that. >> steve, there's a point there. but let me, there's a difference between excess cash and capital. okay? excess cash is one thing. think there's a lot of

speculation out there. and as brian kelly has said, we may in a gigantic bond bubble right now. i'd be careful about that over a period of time. in terms of making long-term investments in businesses and structures and equipment and technology and hardware and all that stuff, it has been dead in the water and i'm telling you, it's not zero interest rates. fed policies, monetary policies have no permanent effect on economic growth. only taxes and regulations and government limits, that's where you get the economic growth. we need incentives to grow, not easy money and not rising rates right now. >> how about this, my friend. did you, larry, maybe inadvertently make the case for a rate hike today because what you said is, if it's not working, the definition of insanity loosely is doing the same thing over and over again and hoping for a different outcome. why not change something up and see if that provides the spark? >> fiscal changes, fiscal

changes. >> not monetary? >> we got to fix the monetary side. let's not do that now. it's fiscal changes and i want to slip this in, i a am for brexit. i don't think brexit is having any impact. british interest rates are falling like everybody else. the pound hasn't moved all year. magna carta. magna carta. britain is a nation of freedom and liberty and its parliament should not be sub assumed by the european union, bureaucrats in brussels, magna carta. i'm for brexit. freedom, liberty. >> it's a trade agreement they're going to have to rewrite. >> let them rewrite it. they got two years. i'm fine with that. >> let me say one thing, larry. all the central bankers around the world are jumping up and down and screaming yeah kudlow. not exactly, but they've been arguing and pounding their fist on the table we need help here. we cannot have monetary policy

carry the whole ball. we can disagree -- >> a lot of the fiscal demand is spend, spend, spend. >> michelle, michelle -- we used to compromise. we used to compromise. we used to say -- [ speaking at the same time ] >> they keep telling me, what's the problem? you got to rush somewhere? >> i love steve liesman. >> see you. >> they cut to a shot and there was nobody there. >> it is interesting, though. i'm a little obsessed with brexit. >> the bookies are saying it's not. >> remember y 2 k? >> sadly, yes. >> computer date change was going to destroy the economy and the fed was pouring money into

save us from y2k. and alan greenspan obsessed about it. and he gets up in the morning, in chevy chase in his pjs and he goes to his back and atm and it comes out okay and he goes oh no, i got to take all of that excess money. this is like that there's nothing here. >> you know how the fed thinks, riddle me this, which is the fed is supposed to be apolitical here and particularly apolitical around the grobe. we're supposed to raise or lower rates based on inflation and wage data and pretty much that's it. if everybody goes around the table, and george wins out and convinces them they need to raise rates today, does janet yellen stand up and say even if the economic conditions merit a rate hike, we can't do it because england may vote to leave the eu? they can't put that on the record, can they? >> there's so many reasons why she shouldn't raise rates.

but i don't think brexit will have a big impact on fed thinking. >> you don't? >> i think the fed is properly assessing a lousy u.s. economy. as i said, the reason interest rates are low, we've talked about this, they're low globally. is two reasons, stagnation and deflation. the central banks are virtually powerless. and all this negative interest rate nonsense stop it, get rid of it. >> janet yellen brings it up and says it's one of the reasons not to raise rates, it's silly? >> i think janet yellen should study magna carta. that's why i keep saying this. 1215, king john. >> do they teach it at berkeley? >> i bet they do. american common law is based on the magna carta. europe doesn't have a magna carta, they don't believe in personal property rights, blah blah. i'm just saying let the voters vote. they're here, there's a lot of economic populism around the world. i don't think trade and finance are really the issues in this

vote. i don't. >> sovereignty. >> i agree, totally right. >> which by the way people are wondering, that vote, circle your calendar with a red sharpie. june 23rd. >> a week from tomorrow. >> we're going to see you in a bit, talk about the fed and the reaction, whatever they do or do not do. before the fed, which is about 49 minutes in you're counting, as we are, let's take a look back and see what's happened to your money since the rate hike that we got back in december and since the last fed meeting in late april. since the rate hike on december 15th, the first in more than nine years, the dow has soared a whopping 1%. but the ten-year yield has moved. it has tumbled 29%. crude oil, up 30% since the rate hike. gold soaring up 21%. the move since the last meeting, april 27th. not that dramatic. we're seeing the dow down 1.5%,

the 10-year yield continues to slide. oil up nearly 10%. bottom line, oil has been the best investment since the rate hike and the last meeting, while stocks overall have gone nowhere. but just because the macro market has not moved, doesn't mean there's not big moves inside of said market. so for your viewing pleasure, the best s&p 500 stock since the december rate hike? all heavily shorted beaten-up oil names, southwestern energy, oneok and the worst, endocompany, seagate down 33% and how about this, nordstrom, considered one of the better-run retailers, down 31%, michelle. >> that whole mod sl getting shaken up. we've learned that retail has changed permanently at this point. >> i thought low gas prices were supposed to boom all the retails, right? >> it's you will on amazon. >> the same city, too. >> larry is coming back.

the financials are coming up. they're down more than 13%, they've been getting hit. are u.s. looking better than europe. if the fed holds steady today, what does it mean for the banks? we're 47 minutes away from the fed decision, "power lunch" is back in two minutes. they found out who's been hacking into our network.

who? guess. i don't know, some kids in a basement? you watch too many movies. who? a small business in china. a business? they work nine to five. they take lunch hours. like a job? like a job. we tracked them.

how did we do that? we have some new guys defending our network. new guys? well, they're not that new. they've been defending things for a long time. [ digital typewriting ] it's not just security. it's defense. bae systems. great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. welcome back to "power lunch," i'm michelle caruso-cabrera. shares of viacom are up big, sumner redstone making apeeshss at viacom, paramount and cbs

properties. this comes as viacom's lead independent director sent a letter to redstone asking to let the company look into potential deals to sell a stake in paramount. we have a big interview coming up on this issue. later on cnbc, former viacom crowe tom freston will be on "fast money." if you're wondering where tyler is, don't worry, he's rocking it, in denver at the iconic conference, where cnbc and "inc." magazine have teamed up to find some of the most interesting start-ups across america. shoet the show is packed with great guests. earlier today fans shared how she used her youtube fame to create her own make-up start-up. >> i did so by really just building my influence, creating content, generating authentic content that speaks directly to my audience and finding a key solution to what they want. which was really they wanted to

have a better beauty discovery experience. so this really helped inspire the conception of itsy. a lot of people are starting to invest more in content. know that people are going to want to subscribe. i think subscription is still a very powerful concept. residual income really helps. helps you project you know you're growing, earnings, but most importantly, the value really starts with the product that you create. >> also chip wilson pulling no punches, he had some harsh things to say about the company's value earlier today, doing an interview with our own jim cramer. >> lululemon invented this business, they should have five or six years ahead. they should have been morphing into other businesses that would have their margins be way, way larger than they are now. it should be worth double the amount of under armour. we're talking billions of dollars of lost value. >> chip wilson. he was on "power lunch" a few

weeks ago, answered a lot of similar questions, why is he so upset with the company when the stocks are up so much? we're minutes away from the fed decision on interest rates. financials are down sharply in the past week. over the past year. appeared unlikely the fed will raise interest rates near-term whaxt do you do to make money in the banks? joining us, eric oja, banking analyst for s&p analysts. and steve bush. neither one of you guys likes the big banks, eric, why not? >> they're too much under the regulatory microscope. we don't think either trump or clinton looks especially promising for the largest banks, we prefer the mid-sized regional banks. >> such as? >> we like huntington, fifth third. comerica. regions financial. any of those banks that are in that $10 billion. >> eric, why should i like any bank when the yield curve is so flat and it doesn't look like interest rates are going

anywhere soon. >> we see banks as being less and less tied to the overall interest rate picture. because banks have a lot of control over their balance sheets and they have have gotten tired over the last seven years. of playing the interest rate game. they can hedge and they can move their balance sheets more towards an asset-neutral position. a lot of banks have done that over the last few years. >> steve, you don't like the big banks either, why not? >> for the reasons outlined here. the yield curve is flat, and the big hope is going to be the fed was going to raise rates, the two-year led up to .9% yield and may unemployment came out. it looks like you could take the fed funds rate increase off the table for sometime right now. secondly, the regulatory regime is very negative. all the acronyms that are out there. that's not going to change. in my opinion, we're about to have a good election for democrats and a bad one for republicans. i don't see an impetus to change the rules. finally, you know regional banks

and banks have quite frankly over the last ten years, outperformed the market. you go back to the market bottom, 2008-2009, regional banks up about 330%, 320%. >> you also like the regional banks? that's the way you'd play this? >> no, i find them to be fully valued here. >> well, i guess that shot went dead. i can tell you he did like mortgage reits and also some bcds. eric last word to you, any concern about brexit? >> yeah, brexit is a concern. what could happen from that would be a lot of uncertainty. we're not expecting a credit risk. a capital risk to the banks, but the uncertainty could drive the u.s. dollar higher, which might vin direct effects on oil and commodity prices, as we saw in january/february. it could be a quick thing. overall we remain positive on the credit quality and capital levels of united states. >> okay, thanks for joining us.

>> to eric and steve wherever he is at this point. with bush securities. the latest on the horrible story of a toddler being dragged into the water by an alligator near a disney resort. grappling with the tragic accident, straight ahead. we're counting down to the fed decision at 2:00 p.m. will there be a surprise rate hike? power lunch will be right back.

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this next story is so tragic, it is nearly impossible to say and to listen to. especially with anybody with young kids. so be warned. julie boston is here with a very sad story from disney world in florida. julia? >> 15 hours after a 2-year-old was attacked by an alligator at disney world's grand floridian hotel, officials say there's no chance of survival. officials calling this a search and recovery mission for the body. the sheriff saying a five alligators have been removed and euthanized from the lagoon, but they haven't found any evidence of the child. a family from nebraska was on vacation, wading in the water in the lagoon last night around 9:20 p.m. when an alligator attacked, dragging the child into the water. the father tried unsuccessfully to rescue his son and suffered cuts and lacerations. >> it has been now about 15 hours since the child was taken into the water by the alligator

so we know that we are working on recovering the body of the child at this point. and so on behalf of everyone that is engaged in this effort, our ultimate goal is to try to bring some closure to the family. >> disney issuing a statement saying everyone here at the walt disney world resort is devastated by the tragic accident. our thoughts are with the family. we're helping the family and doing everything we can to assist law enforcement. more than 50 officers from the orange county sheriffs office and the florida fish and wildlife commission were involved in the search. they tell us attacks from alligators are rare. there have been only 23 fatal alligator attacks in the state since the 1940s and none at the seven seas lagoon. all beaches, ferry boats and marinas at walt disney world are closed until further notice for the safety of guests, brian? >> julia boorstin, thank you.

a few stocks on our radar. biopharmaceutical company celgene announcing a share buyback program. shares barely moving on the story. lower by 13 cents. re/code reporting that twitter is investing $70 million in sound cloud. it values the music service company at $700 million. shares of perrigo spiked on takeover rumors, they're now down 5.5%. you can see the big spike in the middle of the week. all right. should they stay or thud she go. the clash over the so-called brexit continues. if they go, could it have a huge impact on housing in the uk? >> it turns out bad news for the british currency could be the buying opportunity of the decade for real estate buyers, we're

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hello, i'm sue herera with your cnbc news update for this hour. secretary of state john kerry says the truce in syria is at a critical juncture. and that u.s. patience with syria and its russian and iranian allies is wearing thin. he made the speech at the oslo forum today. >> the cessation of hostilities is frayed and at risk. and that it is critical for a genuine cessation to be put in place. we know that. we have no illusions. and russia needs to understand that our patience is not infinite.

>> iraqi forces continuing the fight to regain control of the suburbs of fallujah. they have been fighting to retake that city since late may. fallujah has been under isis control for two years. house democrats holding a news conference on capitol hill to try and pressure gop lead nears passing legislation which prohibits people on the terror watch list from purchasing guns. they say congress needs to take action now. and spacex successfully launching a pair of communication satellites this morning. they'll provide tv broadcasting across parts of africa, asia and latin america. nine minutes after lift-off spacexengineers landed the first stage of the rocket on a barge in the atlantic ocean. i'll send it back to you, michelle. more tv in the world, excellent. >> what could be better? the final gold trades are crossing for the day. gold been a great performer, doing almost nothing today. very typical of almost nothing that's trading today on a fed

day, nobody thinks the fed is going to raise rights, you never know, there's often a flat trade, you see it similarly across the entires metal complex. copper is moving 2.5%. while silver is slightly higher. let's check the bond market ahead of the big fed decision, rick santelli is live on the floor of cme. >> ever since the minutes on the 18th of may, everything has changed. the fed chose to underscore an aggressive tendency to normalize, everything has changed. let's look at the settlement, date before the big release of the minute two-year down 14-year basis points. the 13:30-year is down 27 basis points from 268 to 241. the dollar index down about .33% of a cent. bund, intraday, they're fini finishing up. finally, the dla/yen, the bank

of japan, the bank of england meet tomorrow and the yen is screaming, the best levels on a closing basis since around halloween 2014. sully, back to you. >> rick, we got to jump in, the orlando police department and fbi holding a joint news conference around the massacre at the gay club in orlando. let's listen in. >> orange county sheriffs office, the atf, and the dea, also with us today, are florida governor rick scott and orlando mayor buddy dyer. i would like to thank all of my partners, standing here with me today. and many other who is have come from all over the nation to assist us in investigating this terrible attack on our community. the level of cooperation and partnership we have seen has been phenomenal. in the last several days, has been completely overwhelming.

we continue to stand shoulder to shoulder and work together to investigate this horrific attack. we wanted to take the time and give you an update on what we're doing and ask for your help in certain areas of the investigation. because this is an ongoing investigation, there's still much that i cannot share with you. so i would ask for your patience, and when i tell you that there are certain things that i just cannot discuss at this time, we continue to cover many leads, we don't, we want to make sure that we share information that when we share it with you, it's not only timely, but that it is accurate. we owe it to the victims, their families, their loved ones and the community to bear witness with finite accuracy. the fbi's office of victim assistance in our highly experienced victim's assistance deployment team is working with the city of orlando and many of

our state and local counterparts and community agencies to provide resources and support victims the next of kin. and loved ones at the family assistance center. and now we have recently moved the family assistance center. i would like to share with you where it's located which is at the camping world stadium and it's open from 10:00 a.m. to 8:00 p.m. wednesday through friday. and 8:00 a.m. to 2:00 p.m. on saturday. and noon to 8:00 p.m. on sunday. and for more information regarding that, i would ask you to please visit fbi.gov/orlandovictims all one word. there have been media reports about alleged threats or attacks on members of religious or ethnic communities that could be perceived to be in response to the shooting at the pulse. let me be beyond clear on that point. civil rights violations are a

priority for the fbi. and we will investigate reported incidents against individuals based upon any class, any protected class to include race, religion and sexual orientation. any known threats or known incidents should be reported to your home fbi office or local law enforcement agencies. let me tell you a little bit about where we are today with the investigation. the fbi's evidence response team remains at the pulse. and we continue to process the crime scene. as you might imagine, this is a methodical, time-sensitive, time-intensive work that includes trajectory analysis, and crime scene mapping. it's imperative that we get this right. we're committed to staying here for as long as it takes. to carefully process the vast crime scene. i will tell thaw efforts are under way to reduce our

footprint, in an attempt to have the city return to some sense of normalcy. we're doing our best to work as efficiently and effectively as possible. our goal is to maintain the integrity of the crime scene and the evidence we collect. we continue to seek and follow all leads about the activities and associates of the shooter, omar saddiq mateen. we need your help through in developing the most complete picture of what the shooter did and why he did it. the fbi has placed a seeking information poster on our website at fbi.gov that includes photos and additional information about the shooter. we want to hear from -- >> news conference in orlando related to the shooting at pulse earlier this week. the fbi are out there asking for

help from people in orlando who can tell them anything about the shooter and update the investigation on what's been happening inside the club. if you want to go to cnbc.com you can watch the rest of this news conference live there. 20 minutes until the rate, fed rate decision. by the way, i am still in the rate hike today camp. i'm scared and afraid by myself around the campfire. i'm very alone. but -- i'm not fleeing the tent just yet. more market eyes may be on the uk, however. they're awaiting the june 23rd vote on whether or not britain should remain in the eu. behind the scenes the other member states in the eu are asking themselves one question -- if london is out, who is going to be the new financial capitol of europe? joining us from brussels is tara p pa palmieri. what is being said and what is the mood in belgium and other continental european nations, is

it england, please stay we love you? or beat it, britain? >> right now it's please stay, we love you, because they're scared of the, the shocks that it will cause the market the day after the vote. but to be honest, a lot of the countries are trying to figure out how can we get something out of this divorce. you have the city, if the financial hub of europe. but you need, if the uk is pulled out of the single market, there will need to be a new access point into europe. and that could be paris, that could be frankfurt. or some of the smaller countries are positioning themselves like the notorious tax havens like luxembourg and malta and ireland, an english-speaking hub, dublin could possibly also take that role. so they're all sort of jockeying to figure out who might be able to open their arms to the financial services industry. >> why would they be so cut off, tara?

the uk doesn't use the euro as it is, right now, right? if i'm in london i've been listening to you guys in brussels talk about a financial transactions tax. how much they hate the banks. i think paris is dreaming if they think they're ever going to be a financial hub. they make clear all the time how much they hate finance. >> right. but if they're not if they're not in the european single market, it's difficult to do trade. there could be that tariffs on any sort of services and goods. a lot of countries they put their offices in london to passport their financial services into other countries as the he. if the uk leaves, they won't have that access point any more. they're going to have to find another hub to passport their services around. right now the european central bank acknowledges the advisory role of the bank of england. but if the uk leaves, they no longer have to consider that to be an eu regulation, regulatory

authority. >> tara, what about the country to your north, you're in belgium, i know you guys are still hung over from the kraushikraush i crushing defeat from italy in euro 2016. the netherlands was arguably the financial capital of the world. neutral lender to the world. they helped fund the u.s. revolution. could the netherlands step up and take that mantle? >> it hasn't been discussed, you hear them more arguing for the uk to stay in the eu because they have this same ideal of free market, liberal economic values. so they really want the eu at the table when they're arguing against more protectionist, more protectionist countries like france or germany. right now they're not really marketing themselves that way just yet. but they do have a lot in common with the uk in the sense that

they are a seafaring country. they share a lot of the same liberal economic values. so a lot of the nordic countries feel a certain attachment to the uk and they're talking about creating a special relationship with the uk. maybe a sort of associate membership. where as some of the core countries that are more federalist and believe in this tight european super state, like germany and france, they don't want to set the precedent that you can leave the eu and still have market access. so they're talking about how to punish the uk in a sense to make sure that it's not better outside of the eu than in the eu, there's a lot of plan b talk right now. let's face it the polls are showing there is a chance that people will vote to leave. >> i know it's going to be a big day. a week from tomorrow. >> saturday is bigger because belgium plays ireland. there will be no beer consumed at that game. belgium versus ireland. so-called brexit could have

a huge impact on the uk's luxury housing market. robert frank is working that side of the story. >> there's over $120 billion of real estate in london held by overseas investors. the question what happens to that investment with a brexit vote. some say the uncertainty is adding to a slowdown of sales in central london. sales down 25-30% from the peak in 2014. a lot of it is because of new investigations aimed at money laundering. all of that is chilling the market. a leave vote could spark a one-time burst of buying. if the pound weakens, london real estate goes on sale. it gets cheaper for dollar-based buyers. we talk to agents and say buyers from the middle east and asia are ready to pounce if there is a currency discount. the last two times the pound fell tearily, that was in 1992 and 2008, you had a big momentary jump in property sales so we could see that again. now prices in central london

have more than doubled over the past six years, a lot of people looking for, waiting for a discount. what you do you get right now in london? knight-frank is listing this property in notting hill. that's -- this is another property, this is property in st. james, 863 square feet, $1.5 million pounds, a brexit no vote could leave you over $100, $200,000 discount. if you get even bigger this is a 6200 square-foot townhouse in kensington. five in floors, listed for $18 million pounds. if the currency falls 15-20%, you're talking up to $3 million that you're getting off. >> saves, savings all being relative. you're still paying 18 million pounds, on a dollar basis, this is the discount that people are

waiting for. because property has gotten far more expensive in new york than london. >> one of the things to watch that day. thanks, robert. >> a few utility stocks hitting all-time highs ahead of the fed decision. they've all pulled back right now. little bit in the red, earlier today they did gain and did notch a record high. trust us. keep it here. we are 15 minutes away from the big fed rate decision, come join me in the rate hike camp, everybody. we're back right after this. ♪ before the band separated over unknown creative differences. [ crash ] and reunited three decades later for a tour that sold out in three minutes. and your cisco hybrid cloud handled millions of ticket orders without breaking a sweat. before all of this, [ crash ] the experts at cdw orchestrated a cisco hybrid cloud solution.

scalability by cisco. orchestration by cdw. hello prashant bhuyan. co-founder of the fintech services start-up. hello watson. your analysis of social media and conversations on various trading floors, helps us uncover insights. insights that help investors predict market closes, well before markets close. you know, your analysis has helped us improve our predictive accuracy by over 500%. 550.2, to be precise, but we can always do better.

i like your attitude watson. 550.2, to be precise, but we can always do better. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ is we're only 12 minutes away until fed chair janet yellen makes a decision on interest rates, let's preview the fed with daniel demartino booth. money strong and kevin logan chief u.s. economist at hsbc. i want to talk to you about

something we were talking about in the break. the shootings in orlando, potentially having a ripple effect toward the fed. explain that line, it's not as crazy as you might think. >> as tragic as the events were, i think the tragedy fed the fear factor among so many people in england, who are really upset about this immigrant debate. and the effect that it's having on just your average working joe. and you can equate them to people who are all over voting for trump. they're really afraid and we saw the odds of a brexit spike after orlando. i don't think they're unrelated. >> and bringing, so let's bring it back to the fed. we've heard them say that they want to see what happens with the brexit vote. so it's quite possible that maybe they're not internalizing orlando. but certainly if they think about brexit. that -- >> if you can connect the dots. i think it's there and i think that orlando is literally staid the feds' hands. after listening to people's

feedback. i think there were some conspiracy theorists out there thinking that something along the lines of the shanghai accord that's rumored to have occurred that yellen might have had a behind-the-door agreement with osbourne to push a rate hike to scare the british people into saying look what happened, the market fell out of bed, the fed like if we vote to leave it's going to happen to us here and it's going to hurt the guy on main street. >> that's a little bit further out there. >> it's intuitive. yellen has made no sense. yellen has made no sense about her insistence to want to raise rates. given everything that the data is telling her. >> kevin, you agreeing with that, there's a lot of people who think that the fed needs to normalize, to them that means raising rates at some point. >> well janet yellen has made it clear she thinks gradual increases in the fed funds rate are appropriate for achieving their goals of full employment

and inflation stable near 2%. she's also said that uncertainties are currently surrounding the outlook for the economy and these uncertainties preclude any near-term rate hikes. these uncertainties these uncertainties include the slowdown in business investment spending, soft data from the labor market. of course, all the international developments, uk referendum, growth in china. and closer to home, the slowdown in production tist growth and what is happening to inflation expectations which appear to be falling recently. so combined in all of these things, i think the fomc reached a conclusion that at least for the near term, rate hikes are precluded even though over the medium term they still think gradual rate hikes are appropriate. >> lady and gentleman, thank you so much. we have a lot of breaking news at this hour. we'll continue the fed discussion. don't move after this. we are less than ten minutes away from the fed decision.

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we had very tight trade so far today. the s&p 500 is higher by seven points and the nasdaq is higher by 17 points. the russell 2,000 is higher by nine points. show what you is going on with the treasury market here. ten year yields stand at 1.6%. we haven't seen a lot of movement there. we have seen the most action and the most shifting .7% is where it stands right now. the price of oil at this hour, $48.19. kocher is higher by 2 1/2%. >> the founder and ceo of ds economics, david kelly from jp morgan funds and bob doll, chief

asset management. do we get a rate hike today? >> no. >> why are you laughing? >> sorry. it's not happening today. >> somebody's got to play -- i'm fine with that. here's my beef with the fed. let's assume you're right and everybody else is right and we don't get a rate hike. it is really -- >> i'm taking a big assumption on that one. >> is it really because of one piece of pay role data? that doesn't seem right. look how low the bond yields are right now. and that is complicating things for the fed. >> larry kudlow was on an hour ago and he would tell you you're crazy. there is no reason to do. so wrong, wrong, wrong, wrong. >> i'm surprised that larry

would say. that the interest rate is the most important price in the economy. rate of interest is set an inappropriate level. it is misdirecting resources throughout this economy. moreover, the fed wasted the opportunity to reload monetary policy so that if we do have a problem they could cut rates to stop growth. it's a happy tortuous. this is as fast as kit go but that's what it's doing. there is no excuse to have a federal funds rate which is negative in real terms and just between 25, 50 basis points. >> i agree, obviously. bob doll this is a fed that is full of excuses, right? we can't do anything against china. it's the brexiit or this or that. if they're afraid of everything that's outside of the u.s. and our economy and their control, we may never get a rate hike. >> in some ways it feels that way. a 25-basis point feds fund rate is totally inconsistent with

where our economy s we're not talking 2 going to 2.25. we're 25 going to 50. not this time. the visibility of the jobs number earlier this month and the noise around brexit causes them to wait yet again. >> all the data points to the suggestion that they shouldn't be raising rates. larry kudlow would agree with you, they should have raised rates when they had the opportunity. but now you have to deal with the economy that you're dealing with right now. they blew it. they should have done it then. they shouldn't do it now. there is so much division about where the economy stands right now. it's amazing. >> i think that's right. i it this problem is potential growth is really slowed down. so when we see 2% growth that, is really what this economy can do. look at real consumer spending. real consumer spending, retail sales number is going to rise by 3 to 3.5% in the second quarter. you have housing picking up. i think much of the inventory drag will be over by the second quarter.

so overall this economy does have enough momentum. and i don't think we should be scared by one payroll report. you look at the labor market indicators. it looks like the labor market is continuing to tighten here. >> how it is possible if we can't agree where the economy stands, how do you even agree with what the sfed going to do? >> well this is one of the issues. david is right on. this i agree the fed should be raising two. and we agree on that. what we know is some sort of kinks in the dat yoon first quarter, second quarter gdp growth and how it adjusted. we falsely slow down in the first quarter and then pick up again. this know. that yet, they painted themselves in this corner with data dependcy. >> exactly. >> it's an issue of communication. that's a real problem. >> dianne, we also know that the

data has the huge swings, right? they'll say well the nonfarm pay role could be off by 100,000 jobs. there's a difference between being data dependent and data addicted. >> well, and that's a really good point. i it this problem is the fed really has to deal with the communications here which puts, you know, we've got chairman yellen. she has to walk a very tight line to sort of say, yes, we're concerned about these uncertainties but she has to lead the option alt of july in. there we're going to get a lot of data between now and the july meeting including another retail sales report, the june unemployment report and cpi and the pce. we're getting inflation and -- >> and the brexit vote will be over. we'll know one way or the other. and my guess is that european union, even if they vote to opt out, they'll make it very difficult for anyone to even think about it. and so that reaction function could temper the contagion effects related to brexit. it's not the direct effect with

the uk that we're worried about. >> we want to know what you're thinking about with the markets with a lot of uncertainty. we only have ten more seconds before we hope we'll get the announcement. >> we're going to say good-bye to our esteemed panel. let's get the fed call. >> no change in interest rates. no change in interest rates. really, guys, no explicit hints that fed is going to hike rates. they did not include a balance of risk which is something you would see before the fed were to hike interest rates or signal they would hike the rates. they lowered the rate for 2017 and 2018. the median forecast for 2016 but also lowered it for the long run. i'll come back to that in more detail in main. i'll tell that you six fed officials now see just one nik 2016. so even though the forecast is for two, there is a lot more

company in that notion of one hike this year. the fed is providing a very mixed picture of the economy on the one hand. it sees a slow labor market but also says economic activity has picked up. it sees the unemployment rate down. but job gains lower. it sees consumer spending stronger and housing continuing to improve. the net export drag which hurt manufacturing so much, they say has now less ened but business investment is still soft. inflation is below 2%. yet they see it rising now some of the things that they said previously, it says, again, the fed still sees gradual rate hikes over time and lower than normal rates while it raises over the long term. let's get to the fed forecasts

which are so interesting. the 2016 median is unchanged. i want to reiterate, six officials now have pegged at one rate hike this year. that up is from just one. for 2017, they reduced it by a quarter point to 1.6%. and a big whack to 2018. it came down by 5/8 or 0.625 to 2.4%. the long run came down. the ultimate effect of that is to bring it much closer to where the market was. once again, we talked about this repeatedly. the fed officials have come down towards where the market already was. they're still not quite there yet. and finally, one forecast is actually for the fed rate goes across 2016, 2017, and 2018. and a quarter point. on gdp, they're flattish at 2%. so a very slight decline. there back to you. >> steve, the -- they're not huge moves. the stock market is moving higher. yields are moving lower. the bank index is moving lower.

that would make sense to me. when you see even esther george threw up her hands and said i don't disagree, you get the sense that there is the belief that there are far fewer rate hikes coming than we just expected, you know, a few weeks ago. >> they moved down that curve and they've come to where the market was. you know the market trades with the belief that has but it also trades with a risk that what the fed has forecast is going to come to fruition. this back that's off at least somewhat. and that big whack to 2014, that, by the way, if you look at the fed funds, the fed funds, the own target rate plus compared to the cnbc fed survey, 2018 is the place with the biggest difference much that's come down and now it is much smaller. so the market and fed having meeting of minds of lower rates down the road. >> thanks, steve zblment sure. >> dovish fed getting even more dovish. the one hawk flew off. let's get to bob pisani with the dow popping a little bit, i

guess. >> just a small move. 2083 we were going into the meeting at 2:00. take a look. we're essentially there. we have very modest pop. 2% in the s&p 500. 2085. as we see back down. we like to look at the banks, the kbe which is the bank index. it is a very modest pop. not bag moig move here. then the last 20 seconds or, so coming off of those highs moving to the down side a little bit. of course, this signals lower rates for longer, not particularly great for the bank stocks. we've seen volatility spike rather dramatically in the last few days. this is largely on -- seems to be on concerns about brexit going from 15 to 22 the high yesterday. it's been coming down today. slight move here. i would say this is not significant in the last few minutes with the vix now below 20. so overall, looks like, i'm still looking at the report here, very little changes. definitely take back job growth

fwht first parra graph on the economic discussion. still dovish on rates. still seems to be constructive on the economy. but walking back to job gains a little, didn't seem dramatically emphasize the may jobs report as a sign of trouble. overall, not much change except for some comments on the economic state. back to you. >> all right. bob, thank you very much. now let's get the bond market reaction with rick santelli. rick? >> hi. we'll go in order as to where i saw the most volatility. the dollar index is scooting around. it was down about 20, 21, 22 and now we're down 50. and it's been moving around a lot. obviously, it's euro scentric index. on the curve, two years, they're down about 72. they're down 67. but really i think it was the five year that was moving the most. it went in around 112, 113. right now it's hover at 1.08.

if we look at tens, they sit at 1.57. they were 1.60. 30s, nobody woke up to 30s. they're like wrong maturity. they were around 2.41. that is pretty much where they remain. as for the yield curve, we went in with tens and twos around 88. it's hovering around 90. so we're just splitting hairs there. i guess the long and short of it is stocks are up and treasuries are a bit bored. >> treasuries are a about it bored but we're not. thank you so much. let's bring in scott minor from guggenheim partners and larry kudlow and steve liesman is here with us. scott, you're new to the show today. what do you makest nonmove? >> it was exactly what was expected. when i was on the last time with brie arngs i talked the fed was not going to move in front of brexit. now with the weaker jobs growth, you know, there's no reason for the fed to be raising rates.

>> larry, we just had two economist onz who say you're wrong, wrong, wrong. dianne swonk said they should be raising rates plchlt k. mr. kelly said you should raise rates. >> i didn't hear any mention about the business situation. and i will repeat. we are in a business recession. profits are falling. investment is falling much jobs are falling. capex is falling. industrial production is falling. now, look, business leads consumers. i'm sorry. that's the way it goes. business is not making money, they contract. and that means jobs don't get created and that means incomes slow. so it's the business side that worries me. and it is fiscal policy, taxes and regulations, that will save it, noted fed. my problem with the fed statement, i agree with scott with the outcome. they should say that. they should say to get this economy moving again is not a function of fed policy. get off our backs.

it's a function of fiscal policy. >> that would mean you would have to admit that they're not effective anymore, larry. that's a pretty tough place for a central bnk to be. >> you know, sometimes honesty is the best policy. or humility is the best policy. honestly. >> if they admit they don't have control anymore, even though a lot of people don't believe -- >> they admitted it in the statement. i'll tell you. i can read something from the statement which to me -- >> brian is right. he says they do say, larry, that it continues soft. but you understand the politics of this. you don't necessarily go to your boss in this case congress and say the reason why the company is doing terribly is because you're not doing your job. which they have jengently hinte at. they're keeping it zero, larry. they're saying, you know what? this is what we're doing for right now. >> one point. go back a ways. voelker and greenspan were not bashful about telling congress and the white house what to do

fiscally. they were not bashful. and i think miss yellen should really read some of their old testimony. >> you're right. i'm going to concede. that i would also tell that you i know bernanke and yellen both came in with an idea that they thought both of those guys, certainly greenspan, was too political and got the need trouble. so i think they're trying to balance something here. i agree what you're saying. voelker and greenspan to some effect and sometimes not. >> mario drogy is always yelling at everybody to do their jobs. i mean, he's so frustrated. >> as a policy matter though, is the fed supposed to sit on its hands until the day it's out of power and then what do they do? right? japan is dead. europe is dead. interest rates are below zero. it's just a matter of time until this comes on shore with the u.s. are they supposed to sit there until they arrive at the day where we can't do that? >> i don't think the fed has the tools to deal with the modern society.

i hear what larry is saying about voelker and greenspan. the audience is very different. i'll read you a statement from the fed which to me in one sentence exemplifies why they don't understand the modern economy. the pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up. so they said the economy is getting better. by the way, without job growth. that's called technology. fix that, fed. >> well, look, i think the answer there is pretty easy. which is the natural rate of unemployment is nowhere near what the fed is talking about. it's not 4.7%. and i'll go out on a limb here which i'm known to do and say maybe it's three. they're so focused on this natural rate of unemployment and that they need to raise rates, it's completely misguided at this point. >> sure. >> can i shine a little -- >> scott, i want to -- >> the real rate is not the unemployment rate. these unemployment numbers are subject to great dispute. the data says it is 4.7%.

okay. fine. but millions and millions and millions of people have left the labor force for one reason or another. so to me, at a minimum, you're better off watching the u-6 which includes dropouts and discourage workers. that's 9.7%. and some estimates, 14, 15 million people left the labor force altogether. what they're doing, i don't know. maybe they have become couch potatoes or on government welfare. i don't know why but those are the numbers. that's why they're machled bag. today is different. bha but what is not different is businesses and investors and risk tears respond continue to sentives. so we have to give them a boost. en that is a fiscal issue. that is not a fed issue. if this inflation rate were 5%, 6%, 7% now, i would say the fed should act. i believe monetary policy affects prices. but it's not happening. we're in deflation and stagnation. >> steve, i want to get you a chance to respond. the fed funds futures are

pricing in now at 22% chance for rate hike in september and a 44% chance for december. only 8% for july. that's very low. >> i think july is done. i just want to allow a few rays of sunshine to shine in on this mournful durge of a show you're running on a u.s. economy. >> don't be so flaerting. >> look, we're turning around in the second quarter. it looks like we're doing better than 2.a% on the cnbc wrap it up. the consumer doing better than 3%. i acknowledge a lot of what larry says about the softness in business spending. we will a couple soft quarters there. certainly the first quarter looks like it was just over 1%. which by the sway more than double the half point that the ea originally put out there. so it's not all that bad, scott. especially for you. i think there are some signs of hope there. the fed is on hold right now. it's not hiking rates. stocks have maintained reasonable levels here.

i'm not quite ready for the, you know, to throw in the towel here. >> steve, with all due respect and, you know -- >> that is always a bad opening. >> here he goes. >> you have better credentials than i do. wasn't it a few hours ago that we heard that capacity utilization has fallen? >> that's why you have a little slowdown in the autos. car sales came back. a lot of that was electric utilities. and manufacturing went up higher. >> i don't believe we're lagubrious. i'm here to tell everybody that change is coming. and those policy changes are going to reignite this economy and -- >> no matter who wins? >> not necessarily, no. i'm not making that statement. i'm saying something quite different. but fiscal changes are coming. to my mind, they're going to reignite the economy. en that is going to be a very good thing.

so i'm not pessimistic. >> by the way that, means solemn or sad. i never heard that word. >> gloomy. >> and i'm not be lagubrious or solemn or sad. i it this old mod rlz nels are going to be as relevant. i wonder if this is a fed that is not understanding the new economy and thinking that fiscal stimulus or monetary stimulus is going to do something when it's not because the world is changing. when a company has a $15 billion valuation like this and has 20 million employees, how does the fed fix this secular change? that's my view. i wonder -- i'm going to coin this right now if they're becoming irrelevant. >> the fed is becoming clearly more irrelevant. what you're talking about, brian, are bubbles.

and we're creating bubbles and we know where that story -- >> is there a bubble brewing? >> i don't know. with negative two basis point yields? >> yeah. >> it's come up a lot on the show. guys, we're going to discuss more about. this larry, great to have you. >> thank you. >> steve, good job. >> as always. >> scott sticking around for a couple more blocks. coming up, bracing for a brexit. what happens if britain leaves the european union? and we're waiting for janet yellen. the news conference begins at 2:30 eastern time. you do not move.

let's go to dominick chu. >> safe to say we could see some more volatility with janet yellen's comments if she does say something a little bit more ground breaking than what we've heard in the past. for right now, let's take a look at the s&p 500. it is now largely unchanged from where we were just before that fed rate announcement came out about no change in rates and a downgrade of the economic forecast for next year and beyond as well. you can see the s&p 500 up by about .6%. writ was just before what happened with the meeting.

now if you take a look at the sectors overall, materials have taken a lead here. up about 1%. that happened just because of the reaction that we'll show new a few moments with gold. discretionary still up. there health care and utilities the lagging sectors. we should point out on the heels of that fed rate decision interest rate sensitive sectors and industries did move higher and then they settle down a little bit. let's move on here past the specific sector heat map. a more macro view of things. yielding 1.85%. it was about 1.61 right before the announcement came out. dollar index off by .5%. gold moving higher, near the high to the session for now. you can see up there .6%. and that is having an infect on gold mining stocks. we were mentioning those material stocks before. check out what is happening with gold miners. the etf attracts them. gold miners and etf is up 4%. you can see the spike higher. in a that is pro telling

materials. and one more to watch with moves in the dollar. the emerging markets. you check out the emerging markets etf up by 1.5% just off the session highs. back to you. >> thank you very much, dom chu. >> scott is staying with us through the yellen press conference. okay, scott, you just showed me a chart. i just tweeted this out. we don't have it. the labor force participation rates going down. unemployment is going down. this is not the economy. this is not your grandmother's economy, is it? >> no. >> things are structurally shifting. >> things are dramatically shifting in our world. i don't think the fed is the right policy arm to addressing the problem. >> who? >> it's congress. and we need to wake up to the fact that the way we counted employment in the past, the way we counted a number of things in the past just are not relevant anymore. and how do we, you know sh how

do we change our policy decisions based on the models which you say are not relevant? >> that's right. the chart i showed you showed that, you know, massively lower levels of participation in the employment back in the 1950s, we lived with 3% unemployment rate. so the mix of what is considered employable versus unemployable is changing. >> you can take it a step further. the fed has made it easy for the congress to not to do its job. the easier monetary policy is, easier it is for them to not do anything. by the way, that's what happened in europe, right? he did not want to help the italians. the minute he did, they wouldn't change. he helped them, the italians didn't change. >> of course, we see what that policy led to in europe. >> stagnation. >> a deck afd stagnation. the real issues here are not really to be addressed by the fed. they're to be addressed by congress. >> by changes in your labor

markets. by changes in your tochl struax structure. >> exactly. >> our corporate tax vat so uncompetitive that that's why there aren't inversions. the tax policy is relevant. >> all right. we have to take a break here swrechlt to get to janet yellen. we're minutes away from janet yellen's news conference. she's taking questions. we'll carry it live as soon as she begins. i was working in the yard, my chest started hurting and i thought, well, you need to go to the doctor. i was told that is was cancer, and i called cancer treatment centers of america. dr. nader explained that they can

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all right. welcome back. 2:24. we have the fed's latest decision on rates. that decision was no decision. unchanged again. >> there is steve liesman in the front row. >> imagine. an empty chair which will be filled by janet yellen and a bunch of reporters. steve liesman typing away, glasses on. we'll get to janet yell non a few minutes. we talked about a lot of things. we have five minutes left before yellen. >> right. >> leave us a reason to be optimistic and give us actionable ideas. how do you make money in this environment. >> that's what i remind people i'm paid to do, not to tell policymakers what to do. >> not to say it's raining. we still have the gulf. >> that's right. >> so, look, we just saw it with dominick when he was standing up

the heat map. gdx, gold miners, go for it. i know. brian hates when i talk about gold. i just hate gold. >> i've seen a number of people who say, gosh, i would never recommend gold. >> look, all the central banks are on the board. people in japan, europe are moving their money out of banks and putting it in gold. >> they're buying safes. >> they're buying safes, that's right. >> why are you recommending -- by the way, the gdx is 99% of audience knows this. the 1% that is new maybe, gdx is the gold miner etf. why are you recommending shardz of the gold miners? are you also recommending the physical metals? >> the physical metal is great. i think everybody should have gold as part of their portfolio. physically. >> well, look, yes. i'll just say yes. but look at gdx today. it moved up almost 4%. right now it's on the screen at 4%. >> right. >> gold up is about, you

know, .6%. >> every piece of gold that's ever been mined is still, you know, out there. it doesn't actually return. you have to pay to store it. all the negatives. >> well, i mean, i'm not getting much money on my bank account right now. so the cost -- >> the opportunity costs as well. and the other thing is the -- silver is, you know, the hyper version of gold. gold advances silver typically advances even more. so, you know, look, if anybody hasn't figured it out yet, the fed is in no hurry to reduce -- to increase interest rates. and central banks are printing money like crazy. the ecb is going to meet next week. they'll probably announce an increase to the size of their qe. but there are other things besides gold. right? high yield bonds, bank loans. the fed is going to continue to be accommodative. the economy is not going to fall off a cliff. you're getting paid healthy

rates of return. you even have some guggenheim mutual funds out there can you look at. but there are lolts of opportunities. >> emerging markets moved higher. that always happens. if you think rates are going to be higher. emerging markets tend to move inverse. do you like that idea? >> i like brazil in particular. i like chile. so i think those are two great places in the emerging markets. >> they've had a hell of the run. >> i know. it's up like 24%. >> everything was terrible. that's when you're supposed to buy. >> there's more? >> yeah, i think. so look, i remind clindz that come to me all the time, right. are you an investor or a speculator? if you're an investor, you're thinking about a time horizon of three to five years. over the next three to five years, gold, the emerging markets are going to do very well. if, you know, you're a speculator and want to know if it's higher or lower in six months, i can't tell that you. but all i do know is to say in

five years i expect brazil will be worth three to five times what it is worth today. >> would you buy any treasuries here at all? >> you know -- >> i ask because i worked here now 17 years, 18 years. the one thing i've been told the entire time i've been here, no matter what you do, don't buy the long end of the curve. who wants 5%? who wants 4%? who wants 2%? and it turned out to be the best trade in the last 20 years. >> the first time i went on the air with brian in 2006, he nearly didn't want to have me on anymore. he said what do you think the best investment is? i told him long term treasuries. >> that is boring. >> yeah. >> thanks a lot. >> it didn't look boring in retrospect, right? the money you could have made in 30 years. >> mining up is 4% right now. quickly weeshgs expecting an eye on the stock market. s&p 500 fairly valued, overvalued? undervalued?

>> i think, look, i think there is more money to be made in the stock market. i'm reminded of the baron rothchild line when asked what's what the secret of the great we will snj he said i sold early. i think there is upside in the stock market. but i think there is better money to be made in other things than stocks. >> bonds? alt earn tough investment? >> gold, bank loans. high yield bonds. >> they keep doing it until yellen walks out. you know what? thank you. >> let's go to janet yellen. >> good afternoon, to date central market committee maintains a target range for the federal funds rate at one quarter to .5%. the accommodative policy should support further progress toward our statutory objectives of

maximum employment and price stability. based on the economic outlook, the committee continues to anticipate the gradual increases in the federal funds rate over time are likely to be consistent with achieving and maintaining our objectives. however, recent economic indicators have been mixed suggesting that our cautious approach to adjusting monetary policy remains appropriate. as always, our policy is not on a preset course and if the economic outlook shifts, the appropriate path of policy will shift correspondingly. i will come back to our policy decision. but first, i will review recent economic developments in the outlook. economic growth was relatively weak late last year and early this year. some of the factors weighing on growth were expected.

for example, exports have been soft, reflecting subdued foreign demand and the earlier appreciation of the dollar. also, activity in the energy sector has obviously been hard hit by the steep drop in oil prices since mid 2014. but the slowdown in other parts of the economy was not expected. in particular, business investment outside of energy was particularly weak during the winter and appears to have remained so into the spring. in addition, growth and household spending slowed noticeably early in the year despite solid increases in household income as well as relatively high levels of consumer sentment and wealth. fortunately, the first quarter slowdown in household spending appears to have been temporary. indicators for the second quarter have so far pointed to a

sizable rebound. this recovery is a key factor supporting the committee's expectations that overall economic activity will expand at a moderate pace over the next few years. despite lackluster economic growth, the job market continued to improve early in the year. during the first quarter, job gains averaged nearly 200,000 per month, just a bit slower than last year's pace. and the unpolice department rate held near 5% even though notably more people were actively looking for work. however, more recently, the pace of improvement in the labor market appears to have slowed marketedly. job gains in april and may are estimated to have averaged only about will 80,000 per month. and while the unplament raemplo

fell to 7.7% in may that, decline occurred because fewer people reported that they were actively seeking work. a broader measure of unemployment that includes individuals who want and are available to work but have not searched recently as well as people who are working part time but would rather work full time has flattened out. on a month positive note, average hourly earnings increased 2.5% over the past 12 months. a bit faster than in earlier years and a welcome indication that wage growth may finally be picking up. although recent labor market data have unbalanced been disappointing, it's important not to overreact to one or two monthly readings. the committee continues to expect that labor market will strengthen further over the next few years. that said, we will be watching the job market carefully.

on going economic growth and improving labor market underpin our inflation outlook. price index for personal consumption xpenld tours was about 1% over the 12 months ending in april. still short of our 2% objective. much of the short fall continues to reflect the effects of earlier declines in energy prices and lower prices for imports. core inflation, which includes energy and food prices, has been running close to 1.5%. as the influences holding down inflation fade and as the labor market strengthens further, the committee expects enflags infla rise to 2% over the next two to three years. our inflation outlook also risks importantly on our judgement that longer run inflation

expectations remain reasonably well afrpgornchored. we can't take the expectations for granted. while most survey measures of longer run expectations show little change on balance in recent months, financial market measures have declined. movements in these indicators reflect many factors and, therefore, may not provide an accurate reading on changes in the inflation expectations that are most relevant for wages and prices. nonetheless, in considering future policy decisions, we will continue to carefully monitor actual and expected progress toward our inflation goal. let me now turn to the individual economic projections submitted for this meeting by fomc participants. as always, each participate's

projections are conditioned on his or her own view of appropriate monetary policy which in turn depends on each person's assessment of the multitude of factors that shape the outlook. participates projections for growth of inflation adjusted gross domestic product are slightly lower in the near term than the projections made for the march fomc meeting. the medium growth projection is 2% through 2018 in line with the estimated longer run rate. the median projection for the unemployment rate edges down from 4.7% at the end of this year to 4.6% in the next two years. somewhat below the median assessment of the longer run normal unemployment rate. the median path of the unemployment rate is little

changed for march. finally, the median inflation projection stands at 1.4% this year. a bit firmer than in march. and then rising to 1.9% next year and 2% in 2018. returning to monetary poll sishgs as i said, the committee maintains the target range for the flederal funds rate. this decision reflects the committee's careful approach in setting monetary policy, particularly in light of the mixed readings on the labor market and economic growth that i have discussed as well as continuing below target inflation. proceeding cautiously in raising our interest rate target allow us to verify that economic growth will return to a moderate pace. the labor market will strengthen further and inflation will continue to make progress toward our 2% objective. caution is all the more

appropriate given the short term interest rates are still near zero which means that monetary policy can more infecti ieffect respond to strong inflation pressures in the future than to a weakening labor market and falling inflation. al thoet financial market stresses that emanated from abroad at the start of this year have eased, vulnerabilities in the global economy remain. in the current environment of sluggish global growth, low inflation and all rating very accommodative monetary policy in many advanced economies, investor perceptions of and at the type four ris kk change abruptly. as our statement notes, we'll continue to closely monitor global economic and financial developments. we continue to expect that evolution of the economy will warrant only gradual increases

in the federal funds rate. we expect the rate to remain for some time below levels that are anticipated to prevail in the longer run. because headwinds weighing on the economy mean that interest rate needed to keep the economy operating near its potential is low by historical standards. the headwinds which include developments abroad, subdued household formation and meager productivity growth could persist for some time. but if they gradually fade over the next few years as we expect, then the interest rate required to keep the economy operating at an even keel should move higher as well. this view is consistent with participants' projections of appropriate monetary policy. the median projection for the federal funds rate rises only

gradually to 1.5% at the end of next year and 2.5% by the end of 2018. somewhat below the normal level. al thoet median federal funds rate at the end of this year is unchanged from march, the number of participants revised down their projections. for 2017 and 2018, the median projection is one quarter to one half percent lower than in march, roughly in line with the .25% downward revision made to the estimated longer run level of the federal funds rate. participates projections for the federal funds rate including the median path are not a fixed plan for future policy. policy is not on a preset

course. these forecasts represent participants individual assessments of appropriate policy given thifr projections of economic growth, employment, inflation, and other factors. however, the economic outlook is inherently uncertain. so each participant's assessment of appropriate policy is also necessarily uncertain especially at longer time horizons. and will change in response to changes to the economic outlook and associated risks. finally, the committee will continue its policy of reinvesting proceeds for maturing treasury securities and principle payments from agency debt and mortgage backed xushts. we anticipate continuing this

policy until the federal funds rate is under way. maintaining our sizable holdings of longer term securities should help maintain accommodative financial conditions and should reduce the risk that we might have to lower the federal funds rate to zero ro in the event of a future large adverse shock. thank you. i will be happy to take your questions. >> ma'am? >> thank you very much. one of the things of the uncertainty hanging over the markets is the vote in the united kingdom next week. how much of a factor was that? in today's decision relative to the questions about the domestic jobs numbers and inflation data? and could you talk a little bit about the channel that's you think about when you talk about the potential impact of a brexit on the u.s. economy? thank you.

>> well, brexit, the upcoming uk decision on whether or not to leave the european union is something we discussed and i think it's fair to say that it was one of the factors that factored into today's decisions. clearly, this is very important decision for the united kingdom and for europe. it is a decision that could have consequences for economic and financial conditions in global financial markets. if it does so, it could have consequences in turn for the u.s. economic outlook that would be a factor in deciding on the appropriate path of policy. so it is certainly one of the uncertainties that we discussed and that factors into today's decision.

>> thank you. the fed's outlook for rates has come down sharply for 2018 especially. but it's been coming down gradually over time, almost 1% in some cases compared to a year ago. and, yet, the gdp outlook remains the same. what has happened? in say just the past quarter torte committee's outlook for rates to bring it down so much for say 2018 where it is now just 2.4% and further from the long run than it was, say nshgts prior estimate that was out there, is there a dramatic change in the committee's view on the relationship of gdp to rates? and maybe can you also explain why the fed has to keep lowering the rates and getting that forecast wrong. >> so as i mentioned in my opening remarks, there is really a great deal of uncertainty around each individual's assessment of the appropriate

level of rates, particularly as we go further out in the forecast horizon and when we come to the long term. and i think what we can see and what many studies show is the neutral rate, namely, the look at the federal funds rate that is consistent with the economy growing roughly in trends and operating near full employment. that rate is quite depressed by historic aal standards. many estimates put it in real or inflation adjusted terms near zero. now the path that you see in the plot for rates over time is importantly influenced. there is accommodation and as we achieve our objectives, i think most participants feel that the accommodation in the current stance of policy needs to be

gradually removed. but a very important influence in the outyears is what will happen to that neutral rate that will just keep the economy operating on an even keel? i've often taekd about headwinds. to the extent there are headwinds, i think manufacture us expect that headwinds will gradually diminish over time. en that is a reason why you see the upward path for rates. there are other factors at work that are holding down the longer run level of neutral rates. for example, slow productivity growth which is not just a u.s.

phenomenon but a global phenomenon. productivity growth could stay long for a prolonged time. and we have in aging societies in many parts of the world that could depress this neutral rate. i think all of us are involved in a process of constantly re-evaluating where is that neutral rate going? and i think what you see is a downward shift in that assessment over time, the sense that maybe more of what is causing this neutral rate to be low are factors that are not rapidly disappearing but will be part of the new normal. now you still see in an assessment that neutral rate will move up somewhat. but it has been coming down. i think it continues to -- it

continues to be much lower. and it is highly uncertain. >> hi, jason lange with reuters. the median participant for example for the fed funds rate for 2017 and 2018 came down quite dramatically. but this stems in contrast with the 2016 meeting forecast. as you mentioned, there were a number -- actually six participants who saw only one rate hike this year. can you comment on what it would take for two rate increases to be a -- the likely or appropriate policy path? and about this disconnect between the median view and the view of the voting members of the committee. >> well -- >> if there is one. i should add. thank you.

>> well, i'm not going to comment on participants versus voters. monetary policies, the committee feels that monetary policy when looking at several years, we should show the public what the views are of all the participants in the committee, especially given that voting rotates every year and so that is a decision we made. but you asked me what it would take to have two increases. so the committee as a whole never discusses how many increases should we have this year or next year. that is not a decision we're making as a committee. we are making decisions on a meeting by meeting basis and trying to give a sense to the public of what we're looking for and what the basis of a decision

will be. and as i indicated first of all international uncertainties loom large here. we mentioned brexit, the uk decision. obviously how that turns out is something that will factor into future decisions. and we are also looking at the prospects for economic growth and continued progress in the labor market. the forecast that you see in the statement dhthat the committee continues to expect moderate growth. 2% growth suggests healthy growth for rest of the year and a pick up in growth in the second quarter. and we expect to see continuing progress in the labor market. we had questions about the growth outlook because we did see slower growth in the fourth quarter and in the first

quarter. i have to say there with respect to the slowdown in consumer spending, that seemed to be out of line with fundamentals. we expected it to pick up and we've seen very good evidence that it has picked up. but now the labor market appears to have shroud down. and we need to assure ourselves that the underlying momentum in the economy has not diminished. so as i said, we will be carefully assessing data on the labor market to make sure that job gains are going to continue at a pace sufficient to resulting further improvement in the labor market and we'll be watching the spending data to make sure growth is picking up in line with our expectations. of course with respect to

inflati inflation, we're constantly evaluating whether or not incoming information is roughly in line with our expectations. so we will be evaluating that at every meeting. every meeting is live. and we could make a decision at any meeting to adjust the funds rate. but there is a the kind of -- that is the kind of thing that we will want to see to make such decisions. >> the fed created a labor markets conditions index a couple of years ago that was designed to bring together a lot of these factors in the market you talked about. it's been falling since january, that suggests to some people that it was your decision to raise rates in december that has caused this weakening in the labor market. could you discuss what role if any the fed's decision has in what we're now seeing. >> the labor market's index is a experimental kind of research

product that is a summary measure of many different indicators. and essentially that tries to assess the change in labor market conditions. as i look at that and the state of the the labor market is still healthy but there's been something of a loss of momentum. the 200,000 jobs a month we saw, for example, in the first quarter of the year. that slowed in recent months. exactly what the reasons for that slowing, it's hard to say. we never pay too much on one report. we should not overblow the significance of one data point, especially when other indicators

of the labor market relationship still flashing green. initial claims for unemployment insurance remain low. perception of the labor market remain find. data on job openings continue to reach new highs. so there is a good deal of incoming data that does signal continued progress and strength in the labor market. but as i say it does bear watching. so the committee doesn't feel and doesn't expect. and i don't expect that labor market progress in the labor market has come to an end. we've tried to make clear to the public and through our actions and through the revisions you have seen over time and the dot plot, that we do not have a

fixed plan for raising rates over time. we look at incoming data and are prepared to adjust our views to keep the economy on track. and in light of that delta dependence of our policy, i really don't think that a single rate increase of 25 basis points in december has had much significance for the outlook. and we will continue to adjust our thinking in light of incoming data and whatever direction is appropriate. >> chair yellen, i want to come back to these rate projections you have been asked about. yields on 10 year treasury notes have fallen below 1.6%. 5 year notes are near 1%. elsewhere in the world, in germany and japan long term bond yields are negative. how do you explain this low

level of long-term bond yields? and does it give you any pause in looking at your own projections and coming to a conclusion about where whether those projections are possibly still way too high when the bond market is at a much lower level? >> so i think the levels of longer term rates reflect essentially two things. one is market expectations about the path of short-term rates over, if we are considering say a 10 year treasury security, what would be the path of short-term rates over the next 10 years? and the second factor is the so called "term premium" or the extra yield that investors demand in order to hold a longer term security instead of to

invest short-term. and clearly market expectations for the path of short-term interest rates over the next 10 years remain low. and that is a factor. that is an important factor that's i think holding down the level of longer term yields. perhaps as important, or maybe even more important, the term premium is also low and has probably come down. now, when we engaged in longer term asset purchases, our very purpose in doing that was to drive down longer term yields by making these assets scarce, scarcer. and hence more valuable to the public that wants to invest in long-term securities. and we were consciously tempting

to drive down that term premium. now we continue to hold large quantities of those securities but we're not adding to them. in many other parts of the world, the ecb, for example, and bank of japan are also engaging in quantitative easing and buying longer term assets and pushing down those term preemia. premia. >> do you have any uncertainty, our any doubt about whether you will be able to get rates to whether projections say they are going? >> i want to say again we are quite uncertainty aborates are heading in the longer term. we write down our estimates of

this time, and those are numbers about which there is great uncertainty. we have good reason to believe that the so called neutral rate, or rate compatible with the economy operating at full employment is low at the present time. and many of us believe, as a base case it is reason to assume those rates will move up over time. but we're not certain of that. it is one of the uncertainties. and there could be revisions in either direction. but thus far, in recent seps, i'd say the revisions have mainly been in the downward direction. the idea that a low neutral rate may be more closer to the new normal but you still do see some