are very close >> we'll get it done >> i want to thank senator orrin hatch and kevin brady. you have been really amazing i shouldn't say that until we sign we've been there too many times. let's get the vote first, right? i want to thank my whole team, gary and steve and everybody, the whole team has been really something special and diane, thank you very much for everything so we are very close to getting it done. we are very close to voting. our economy, as you know, has surged from where it was when i took it over we were having an economy going in the wrong direction they can say all they want about the last administration or even administrations. this country was going in the wrong direction from an economic standpoint you saw where it was one of the early times. we were about 1% and 1.2%.

you were going down. 401(k)s right now, i met last week in new york city with a very, very fine group of policemen. they were all so happy about their 401(k)s. they feel like they are geniuses he said, i'm up 39%. i see all the guys carrying the booms are smiling. are you up too yes, he is he has the one that's the highest and the closest. he is a good boomer but he has a big smile on his face, right thank you. that's very nice they are usually with the press. they won't admit it but he does, because he is beyond the press i just want to say that people are up 30%, 40%, 50% depending on what's in there they are very, very happy. we think we are going to grow that a lot more. we think the economy has a long way to grow. it needs the tax cut and all that money is going to be spent on expanding businesses. we have so many different things

in this bill that are going to create jobs. for me, this is a bill very simple it is a massive tax cut for the middle class and it is about jobs the jobs are defined by the companies. the companies are going to be expanding and creating jobs. in education, we are talking choice in jobs, we are talking choice too. right now, people go for one job. they don't have many options they are going to have plenty of options. they are going to look at five, six, seven jobs. wages are starting to go up, first time in many years wages are now starting to go up. so we have a lot of great things happening. what really is something that i think will really be the capper is going to be the massive tax cuts that we're planning that hopefully within a very short period of time will have signed into law it will be bigger than anything ever done, bigger than the reagan cuts, bigger than any

cuts it will also be reformed there are also some other things in that bill that are very, very big, somewhat unrelated. ultimately, it is all related. i just want to thank everybody at the table, mike, everybody at the table for being here i want to have a very fast lunch. so you can go immediately back and finish it up i actually feel very guilty having you here. i want to you go back immediately and finish it up it is going to be something very, very special thank you all. thank you. >> is it a 21 percent corporate tax rate >> would you sign it >> certainly, i would. it is at 35% right now if it got down to 21, i would be thrilled i would be thrilled. we'll see. we haven't set that final figure yet. certainly, 21% is a very great difference >> is it crucial to get a vote this week? >> i think it is very important

for the country to get a vote next week, not because we lost a seat, which we would have gotten a seat a lot of republicans feel differently, they are very happy with the way it turned out as the leader of the party, i would have liked to have had the seat i want to endorse the people that are running but i will tell you, to me, it is very important to get this vote, not because of that but because i don't know what the vote will be. we have a margin now of two plus our great vice-president so i really think we are going to get the vote but i will say we have to get p momore senatorn congressmen elected asap >> how could that loss affect your agenda? >> i don't think it is going to affect it. i think we are doing a lot this is the biggest thing we have worked on this also has to do with other subjects, as you know.

i won't mention the subjects there are some subjects in here that are very vital. i'm talking beyond pure tax cuts this is one of the biggest pieces of legislation ever signed by this country everybody around this table, we are very, very excited about it. thank you all very much. appreciate it. thank you very much. thank you, gentlemen >> thanks, mr. president >> that is the president of the united states at the white house there speak about the tax plan we are really very close, said the president, close to a historic victory, tax cuts the likes of which we have never seen before. he said he would be thrilled with a corporate rate coming down to 21%. we are spending our final moments with jeffrey gundlach of double line capital. do you want to react about what you heard from the president >> i'm not sure the facts are as

stated the effective corporate tax rate is 21% on average, it will probably be the same if this is, indeed, the massive tax cut that he describes it as, that i would point out to the viewers, that the reagan tax cut led to an explosion of the debt to gdp and the george where bush led to a gentle and accelerating and massive rate in the gdp to rise it seems it is bond unfriendly >> jeffrey gundlach, the bond king that does it for us. let's send it back to "power lunch. >> awesome stuff with jeff gundlach welcome to "power lunch. let's get reaction to what we just heard from president trump.

reaction on capitol hill >> reporter: you saw the republicans going to the president with a deal they had hashed out before they left for that lunch senator orrin hatch, you saw sitting there with the president, told reporters that we have, quote, reached an agreement. the details of that agreement are pretty much in line with what we have been reporting, including a 21% corporate rate and a 37% top rate for individuals. one new piece of information we have been able to confirm is that the corporate alternative minimum tax will be out of the final version of the bill. hatch also said that he was confident that he would have the votes to get this passed as you heard president trump say, he didn't want to congratulate them too much until this gets to his desk. several senators who had been shaky in their support in the past that we talked to here on the hill today say they are still reserving judgment until they see the final version of the bill >> i want to get a quick comment on this as well. i saw you responded to the

tweet. politico tweeted out that they are hearing there may be some kind of a compromise for the blue states of the bill that instead of the elimination of state and local tax deduction from the fed and instead of personal property taxes that there may be a compromise where tax payers are able to choose which ones that they take. i know you responded to that tweet. is that also lining up with what you are hearing. >> that is an option we have heard is on the table and has been on the table. we have not been able to confirm that that's what the final bill says just yet. when we did speak to senator, susan collins, of maine, this is an issue that's been very important to her she sponsored the amendment to include the property tax deduction in the senate version of the bill. she said she felt like the issues she cares deeply about are being addressed. >> let's bring in some analysis on the federal reserve, the bond markets, economy, tax plan rick reader is chief investment officer of global fixed income at black rock. i want you to comment.

did you hear the gundlach interview with scott >> i caught the tail end of it >> that's good all i want to ask you about is the end. when they talked about it, it came out and the president and scott asked jeff to respond. jeff said, the tax cuts, if they increase the deficits, he believes it is, quote, bond unfriendly would you agree with that? >> there is no doubt you are going to put pressure on the debt rates are going to move higher we think rates are moving higher anyway that being said, there is so much demand for assets this is, i would argue, you are going to increase the debt there is a number of assumptions on how dynamic scoring will increase growth. you will pull forward and create some cap x you will see more debt as a result of it >> what about if there is subsequently an infrastructure bill in the area of $1 trillion. that has to get paid for

somehow. usually, that gets paid for with debt >> you are creating the same dynamic. it is part of what the markets have become sensitive to we look at numbers you take this year versus last year, the difference in terms of what the fed is buying and what they are not going to be you are already talking about a trillion difference into next year you are talking about more financing. that is going to pressure and you have seen it already pressure the front end of the yield curve. >> what about growth are we going to get more revenue? >> ronald reagan, the deficit did go up. that's because spending went up a lot on defense and retirement benefits tax revenue went up dramatically and doubled as a result of the tax cut. couldn't we get more revenue as well >> there are a couple of things to talk about. cap ex is growing. it was growing well before this tax bill so we think you will see a persistent growth of cap ex. growth should be relatively good

again next year. one of the things this will do with direct expense and the ultimate setting of direct expensing, you will pull forward growth we are talking about nominal gdp that could hit the 4.5 to 5 number if inflation trends higher you are going to pull forward growth what does that mean for two years hence, three years hence could we see it coming the other way? >> you will pull forward >> if it is going to be viewed that is a temporary blip in terms of growth, how does the fed respond? >> i think they are laid out we are going to hear that today. we think they are going to go three times next year. there is an outside chance they move four times. when the fed is in a tightening cycle, it is different tlhan an easing cycle they tend to be behind the curve. they want to make sure it is durable and the growth is kicking in it will be interesting to see today how much they assume you will get in terms of stimulus, whether they will take the dots

up further than three hikes next year it is one thing that's important. when the fed goes this way, i.e., tightening, it seems to be more deliberate than the other way, where you want to anticipate and be faster >> looks like you think emerging markets are better than the u.s. market fair to say? >> one of the things we think that is going to happen, emerging market, where growth in the world is good. we think you will see a compression of emerging markets. european rates and japanese rates are too high emerging market debt in a number of places is still attractive. we think it will continue to compression into 2018. >> let's hear from money strong president, danielle booth and senior economist, daniel smith >> what do you think is the fed reaction to this tax plan? potential rate cuts and janet

yellen's last press conference >> to say there are cross currents for the fed is an understatement there are so many things going on i cannot imagine the level of discussion that was going on around that table as the ppi came in at a six-year high cpi disappointed and came in at a low. they have this bitcoin mania there are financial stability issues we are talking about quantitative easing being cut in half globally. from $2 trillion to $1 trillion. >> it makes them likely to be more hawkish they have to be. there are signs that there are pipeline pressures that are building if you looked at the workweek that came out on the employment report it kicked up these things will pass into wage inflation. >> danielle, we have to talk to the audience about something i am not trying to blow our federal reserve coverage up. five voting members of the fed change next year

nine voting members. five out, five new ones in how do we have any idea what these new people, mullennicks are going to do? >> which don't we know they are not pure academics in the way they approach the world we heard a speech out of randy quorls, ve quo corals and powell's temperature. we heard about fed coin, about the fed coining its own electronic currency going forward. he was very skeptical about that we know that russia, venezuela, china, japan are deep working on their own. they want to be able to monitor what their people spend. there is a lot more skepticism there is going to be, i think, more dissent going forward with this new crew. >> why do they seem to be so comfortable with the notion that

rates will remain relatively low and likely only three fed rate hikes when danielle had previously outlined all sorts of reason as to why there could be up side risk to rates. >> that's a very good question our forecast is more aggressive than that. we think the feds will raise rates four times next year it is reasonable for the market to feel fairly comfortable with the next couple of quarters in terms of what the fed is going to do. what the fed has done so far is working really well. we have strong growth, low inflation but not so low that you worry about deflation. we have strong financial markets. given na set of circumstances, certainly, c continuity seems tb the sense of the policy. they really have every incentive to continue along the same path, because it has been working. the change at the fed, the changes at the fed will matter a lot more later in the cycle when things are different but, look, after this morning's inflation

print, things still look pretty much the same. you have strong growth, low inflation. if it ain't broke, why fix it? from the fed's perspective, it is not broken. i think investors are reasonable to think that for the time being, we will carry on along the same path. >> i would add one thing john williams is rotating into voting on the coming federal open market committee. comments he made recently that yield curves don't matter. that's the only thing that bothers me we have 56 basis points between the two-year and the ten-year treasury and a fed official saying the yield curves don't matter the last time that happened was ben bernanke the minute it yielded, we were inside recession within nine months >> we have done a lot of work looking at the yield curve there is some predictive power there. it is an imperfect tool. there is yuseful information

there. the time lag between that is pretty long and variable even if we continue to flatten, we don't think that should sound immediate alarm bells. >> danielle, eric, thanks so much >> thank you big companies spending big bucks today, making a major investment target buying a shipping company and t-mobile making a push into tv we have the details on all of those details. r na will janet yellen say in hefil news conference as fed xha chair? stay with us here on "power lunch.

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t-mobile is acquiring cable provider, layer 3 tv the new shar joining us is t-mobile coo, mike s sievert. welcome back to "power lunch." what does this do? what do you offer now? >> well, we made a big announcement today that we are entering the $100 billion pay tv market there is a reason for it we have been for five years now as the carrier tackle whag ing thought was the most hated industry in america. it turns out to be the second.

table cable tv is filled with companies that have a history of abusing customers. >> will this allow me to cut the cord with my cable provider? we didn't announce a product today. the short answer is yes. we are bringing t-mobile with tv we are planning to bring together home tv and mobile. today, home tv lives on an island completely separate from the rest of your technology life the user interfaces are stuck in the '90s that programming guide and everything coming at you in an untargeted way it is no wonder millennials and generation z are fleeing the market not because they don't love tv but the way it is delivered pales in comparison to the relevance of this social media fueled video you get in the mobile world >> i work for cnbc which is run by nbc universal do you know who owns it? >> i do.

a company whose stock retreated a little bit today >> comcast are you trying to put my parent company out of business? >> i want people that love content to be able to find that content. that's what this is all about. the issue really isn't about there not being enough content out there. we are in a golden age of tv the issue is about access and discovery. >> we'll help them find it >> we like that. we like that what will be different between your ultimate product and what we have now? give us a vision on how it will look and how it will physically interface with this product? >> well, two or three things one, it certainly won't be based on an old style linear tv format with a programming guide and a d pad remote control that type of a model is not what people are looking for we are going to bring together the best of what the internet has to offer and digital media

consumption is growing incredibly rapidly also, 250 plus channels of high-definition cable tv they don't care about where it comes from they want access to all the content. they want to be able to discover it in a way that is targeted to them a d pad and a channel guide is no wonder people aren't watching tv i have a 22-year-old son and a 21-year-old son. they don't watch traditional tv, because it can't capture their eyeballs the way a mobile phone and social media can >> do you co-exist with or do you displace the likes of at&t's directv, netflix, hulu, for instance what happens when you finally roll that product out? >> we will coexist with ott providers like netflix we think it should be a total replacement for traditional cable and satellite tv think about satellite. every one of those customers, if they have broadband, gets it from a different provider.

40 million households get their broad pand from broadband from a different tv. all it needs is an internet connection that can come from t-mobile and our 4g and 5g capabilities we are a major broadband company. it can come from comcast or charter or a dsl provider. >> you are not going to have to be a t-mobile customer to use the tell advice product? but i assume you will get some kind of discount in price sng. >> bundling your phone service >> we offer incredible values but we won't be inspired by the bundles we have seen by companies like at&t that spend billions of dollars buying directv, a satellite dish and only gives you the best deals if you drill a satellite dish into the side of your house that is not an inspiring way to think about bundles.

we'll offer great values this is about value and also about experience tv is being left behind, as i sid. that's why it is losing share. it is not because people don't love tv. it is certainly not because they don't love those giant, gorgeous panels what's being brought into your home is antiquated >> the last quick question, mike from the stock perspective, the stock is up on this deal even though analysts say there is little financial and product details. the company stuck with its free cash flow target, 3445%. is that saying there is no impact or at least not for the three years on t-mobile's profitability for cash flow? >> we see up side. we intend to make all of our investments in this tv capability within the guidance we have given 45%-48% cash flow over the next three years starting in 2017 we have incredible assets to bring to bear.

things like our 16,000 retail stores and 71 million customers and nation-wide network which last month became the first to hit 30 megabits per second in wireless we have assets that are very different from other companies >> we are going to leave it there. thanks so much for your time, mike sievert, the team mobile coo. republicans say they have a deal on tax reform some details need to be worked out yet. one of those details could be first in, first out. a controversial accounting item that could hurt many small investors like you the top exec from td ameritrade joins us aft terhe breeak amazon, efforts to get your stuff to you the same day you order it we'll be right back. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce.

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complete the final two years of his term >> i accept in appointment it will be my great honor to serve minnesota as united states senator. though i never anticipated this moment, i am resolved to do everything that i can to move minnesota forward. i will be a fierce advocate in the united states senate for economic opportunity and fairness >> omarosa manigault is out. she has re-signed. the white house announcing her resignation is effective as of january 20th the new jersey band, bonn v bon jovi heading into the rock & roll hall of fame. congratulations to all of them

that's the news update nina simone, long overdue. baltimore. >> my favorite moody blues apple making a $390 million investment sending that stock soaring today. josh is live in texas with who they are >> this is the second investment from apple's $1 billion advanced manufacturing fund back in play, 200 million went to corning now, $390 million to finasar they are critical in empowering some of apple's most popular features in technology including face i.d. and they are going to use this money to build a new plan i spoke exclusively with jeff williams this is about building out greater capacity for these

chips. >> vixles are at the heart of some of the most p technology they produce when we were working on iphone 10, we realized we needed a much more advanced vixle and way more capacity if you take the entire worldwide for vixle wafers >> finisar stock is surging on this news. jeff told me apple coin veuld it in more companies. don't think of $1 billion as a hard and fast ceiling. i checked in with finisar's ceo, jerry rauls. he hopes to have this new plant

up and running and will hire 500 people include technicians and operators. >> this $390 million, they don't own finisar stock. they are making the investment in the plant that's what apple would own? >> that's my understanding this is an investment in the technology that investment, that award is being used for these two purposes, to build out that plant in certainsherman, texas does that investment entitle you to certain benefits? does apple have first dibs on fiscal supply coming out of that plant? jeff williams wasn't wanting to get into that detail they are going to build out this plant and hire these 500 people. hopefully, it is online before september when apple unveils its new devices, guys.

josh lip tton, thank you republican leaders met with president trump to announce they have basically reached a tax bill agreement we don't know what is in it but what remains to be seen is what provisions made the final cut. one is known as first in, first out, or fifo you could call it fifo i call it fifo >> let's call the whole thing off. >> that would force individual investors like you to sell oldest shares, the first ones they bought first, raising presumably their capital gains tax liability. here to tell us what it coul mean for mainstream investors is steve quirk, executive vice-president of the trader group at td ameritrade michelle asked you but do you know whether fifo survived this final cut? is it in there >> we do not know yet. we have people that are there but unfortunately, i don't think those details have come out yet.

>> our producer spoke with elon mooy >> you mentioned a moment ago that so involved are your customers that a large number of them have written their representatives. >> they have we have given them an answer through a site where they can take action. we have had 17,000 write their elected officials. in this instance, it is a main street versus bail street question there is an exemption for the mutual fund companies. >> if i'm a mutual fund shareholder and i have bought fund shares at different prices along the way over 20 years, i do not have to sell the earliest purchases first. >> it is also the manager. >> the managers also embedded in the portfolio, they don't have to sell. >> the best example is somebody close to retirement who has accumulated stock either through

their company or personally up until today or even as recently as i would go back 1960s we have had people writing to us and saying, i have been doing this since 1970s, '60s, tax lot and accounting and tools for the way that i dispense these stocks would now be rendered ino inoperable >> it is for somebody who has been long invested if you have been investing for 50 years, a lot of people do that your gains on those from way back when, you would rather hold on to those until the most recent shares. >> it is going to change behavior what's going to happen if i am a retire reholding on to some stock which maybe i got a very long time ago, i'm probably less likely to sell that. i might have a concentration now

which changes behaviors. that's not positive. >> what about somebody who is thinking, wow, my taxes will go up so much next year, i'm going to sell everything right now >> that's what's going to happen that's why they are waiting to see what's going to happen they are going to change their behavior at the end of this year >> you might see a wave of selling between now and year-end it raises, as larry kudlow p says >> $2.7 billion over ten years >> that is a sneeze. >> we are one firm with 1 million client accounts. >> what does this do to your internal accounting? >> that's the problem. there are some etfs which would qualify as exemptions. basically, you have to figure this out if you are a retail client of course, we are going to help them with that exercise. it really is just no the a clean

exercise for something that is so small we are supportive of the tax proposal in general. this provision for wall street and main street investors is inevitable >> the thing that would be most galling to the individual investor is that the portfolio pl manager of the mutual fund doesn't have to abide. it encourages you to go to a mutual fund than individual stocks which you are pushing them to adopt a behavior that may not be in their best interest >> one more knit to pick >> if brian sullivan sells a stock. i get whacked. mutual funds are exempt. do we know if brian sullivan offer melissa lee sells a mutual fund if it is fifo

>> we asked that steve's position was that, yes, mutual fund investors are exempt from this so that they can either specifically identify the shares that they are selling or use the typical way, which is the average cost per share >> if you think about it, take it one step further, who knows your tax scenario better than you do a mutual fund manager is doing this without having full visibility into the retail into the client it is not always in their best interest >> if i own a mutual fund for 20 years and i have huge capital gains on that and i have accumulated mutual fund shares over time and i want to sell now, can i identify now that i want to sell the most recent shares versus the shares i bought 20 years ago for mutual funds sh. >> today, you can. >> i don't be penalized under fifo for also owning mutual

funds? >> you meant individuals who own this >> mutual fund managers would be exempt. >> but not the share holders the individual shareholders would have to sell their first in, first purchase shares. that's different from what i heard you say earlier. >> basically, there is no escaping this. >> we either cleared that up or created more confusion target is spending $550 million to buy shipt in annest to compete with amazon >> that's a hard one to say. the same-day delivery target is buying personal shopping and delivery platform shipt. target says the delivery option will begin early next year it pulls inventory from the stores to deliver to you the same day by the summer, it will be available in half of its 1800

stores but, at least a start. it will be done through the shipt app. you are in direct communication with the consumer to place the order. they need a shipt membership, 99 dol a year from target and costco, kroger and meijer, for example it is a unique deal. shipt will be a wholly owned subsidiary of target but still operate fairly independently continuing in its own retail partnerships it is aggressively growing its retail partnerships and while target will own shipt, they won't sell orders with nontarget

stores last mile to where all the action is. >> instacard is for groceries, $135 a year unlimited delivery there is going to be deflation in delivery. >> it is going to have to be macy's offers the same day delivery option and it is available at other retailers i don't think anybody does it for free yet >> thanks, courtney. >> michelle? >> rick santelli tracking the bond action at the cme rickster >> right after the inflation data of this morning, we saw the markets give up some ground in the form of yield. you can clearly see how we have come down and how this 240 area has been a bit of a ceiling. let's look at a seven-year we don't normally look at one. let's pick march that's the last time the seven-year was hovering this close to 230 basis points. now, let's have some fun.

let's pick the same date it isn't at the highest level until march. 229, 230 on 7th. 237 on 10s this could be the first part of the curve that may invert. will it be today i'm not sure it is possible finally, at one week of the dollar index it keeps coming down off the 94 level. all these charts are in play we are minutes away from the fed decision and also janet yellen's last press conference. don't touch that dial.

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volatility did kick in a plus or minus. to the down side right now the futures are 1480, down 8%. >> jeffrey gundlach, the ceo of double capital is the latest to weigh in on the bitcoin battle here is what he said in the last hour >> it is in the big rock phase talk about junk bonds, wait for the big rock we are starting to see that. one of my corporate bond traders pulled up something called crypto kitties each picture is unique apparently, somebody bought one for 100,000 doltz. th they are trying to flip it for $400,000 if you short bitcoin today, you will make money. can it go higher it is a mastiff momentsive mome. crypto kitties, that's the rock, something is wrong here. >> when you see something like

the frenzy that's happening in bitcoin, does it tell you something about the broader market, not that it would be systemic if bitcoin failed crazy, weird things happen at the end of a big cycle is this the bell that's going off to say we have reached that nutty moment, the same way as the pets.com puppet back then. here is the silly season, the big rock >> is it a good idea how many people are investing in cryptocurrencies >> how many people >> a couple million. >> is it millions? >> a couple million would be the best guess based on the number of accounts that have opened up. that's all you can go on, how many accounts you know of. that's where you could make the bullish argument for bitcoin there are 7 million, 8 million people in the world. 5 billion adults 1 billion people with checking counts 18,000 bitcoins mined every day.

you could make the argument for scarcity of product that could send the price a lot higher. >> if more people come in. >> i am not saying it will >> so penetration is low >> low >> specially since there are no institutions >> think this way, how many people own commodities do that many individual investors actually own that many commodities? is it even 3%. this idea that the individual investor is suddenly going to seize this asset class there are plenty of paradigms out there to suggest that it is not going to that big. >> of the gold market. you name it. >> how many railroads were there in the 1880s >> a couple hundred. >> now, there is five and they are successful these coins, block chain, crypto currencies, will probably be the same way we are awaiting jamie dimon, speaking at a conference in michigan also, waiting for janet yellen,

speaking after the fed's decision we are waiting for the congressional conferees. we are waiting for a lot a lot to look forward to here on "power lunch."

dow is up 100 points right now, but remember, it's a fed

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jamie dimon speaking with axios' michaelke allen >> it is a hugeror a error it's no different than me digitizing our bank. i don't sit around and say, well, prove that we really need it we do mpvs on doing good banking on mobile, we simply do it so i look at competitive taxes as almost the same thing. >> you made a reference to this. i've rrd of you talk about corporation sharing the winfall from tax reform. what are some other ways you can share the windfall >> you will have a benefit to start and you guys know this from economic theory, if corporations and province go up that will become competed away over time. it's not like you will have access return and that shows up

in lower prices or higher wages. so the short end would be, i think it's a legitimate thing for people in america to say how does it help americans how does it help corporations? job, education, capital investment and keeping in mind, okay there's one form we know for a fact, productivity is driven by capital investments. capital investments is driven by profitability. just keep that in mind it's not always exactly the same there's always work through some kind of formula and the models that people will show what it will do to growth. i don't know exactly, but the models don't incorporate the fact that you've gone from a very competitive system to an uncompetitive system so i look at that and say throw the model out and figure out the right thing to do and then do it and don't get crippled by your own models that are insufficient. >> do you think that all corporations should do something to share the windfall? >> we've been listening to the ceo of j.p. morgan jamie dimon speaking at axios.

we are awaiting the fed interest rate announcement, janet yellen's final and let's bring in david kelley, and scott mieger, guggenheim partners global chief investment officer. welcome to you all this is a fed meeting where everyone is expecting the same thing, but what could be the risk that could come about in the news conference. >> i think the big thing we're going to be looking for is some comment about inflation, meaning there's been a lot of discussion that maybe what they've thought is transient is more permanent and to see whether there's any comment that gives a nod to their concern about this because this could have a big impact on the new chair that's coming in next year. >> and if it is more permanent, does that mean, in your view that they remain dovish or that they go hawkish even with this low inflation environment? >> i think if they think it's more permanent, i think it might give them some feeling that they have leeway to slow down on rate

increases, and i think that there's a lot of discussion in the fed right now about undershooting the 2% target for so many years, and maybe that there should be some willingness to acknowledge that there could be a period of overshoot >> christy >> yeah. i think that's exactly right i think today will be about what i call the two ds, do we see revisions to forecast and estimates and of course, what does that boat look like do we see real dovish sentiment expressed? >> let's add another d, david kelley here is an issue we brought up earlier not to blow the entire fed bridge out of the water. five new voting members, i'm not going to say this meeting is irrelevant, i would never say that, david, but how much do we have over half the voting members will be different than the ones we're going to hear from today some of them unknown, literally unknown. >> that's true the yellen fed has done a good

job of telegraphing a path for interest rates going forward and a path for normalization, but what i think it will be interesting in the statement today is they're going to have to talk about rising asset prices and strong global growth, fiscal stimulus and these sort of things have got to come up in the statement in order to justify continuing tightening given this lack of inflation and it's not just about inflation and they have to make it clear that the reason for tightening isn't just because inflation is out of hand because it isn't. >> in response to brian's question, you said you think they'll stick to the path that janet yellen has laid out, how do you know when so many people are going to change? >> well, first of all, i think the chair himself jay powell, i think, is much less of a macro economist than janet yellen was, and therefore will be less likely to change path anyway what's more -- >> why wouldn't that make him more likely to change path, actually, since he's a businessman and not a ph.d in

economics? >> yes in listening to him he tends to listen carefully and he hasn't dissented once and i think he will listen to the consensus of opinion and the consensus is he ought to normalize rates >> david, we are waiting for the decision and the s&p is up two the nasdaq is up 13. let's go to steve liesman. >> federal reserve raises interest rates one-quarter-point cut to a new range of one quarter to 1.5%. the federal reserve raising interest rates by a one quarter-point cut to 1.5%. the vote was 8 to 2 with two regional fed presidents dissenting charlie evans and neel kashkari. there are further rate hike ahead and economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate. the median forecast remains for three rate hikes next year or a 2.13% fed funds rate and 2.75 in 2019 and 3.06 in 2020 and those

are both slight bumps for 19 and 20 and remaining on track for three rate hikes next year the fed lowered the unemployment rate forecast to below 4%. i believe that's the first time the median has been below four and 3.9 expected for 2018 and 2019 for the unemployment rate and the fed raised the gdp outlook or the growth outlook for next year and a strong 0.4% to 2.5% and that means it will equal the expectation for this year, though no change in the long run rate of 2.1%. the inflation rate is still seen bumps up against 2% next year. the statement speaking about the economic condition says the labor market has continued to strengthen economic activity has been rising at a solid rate job gains have been solid and the unemployment rate declined further and all of that very much the same language last time and household spending expanding in a moderate rate and picking up in the recent quarter inflation is a little bit different language here. inflation had remained soft and

now they're saying it declined outright this year and it is running below 2% the hurricane, they say has not and will not alter national economic activity. finally, they say the committee expects labor market figures to remain strong instead of strengthening somewhat further so, guys, 8 to 2 on the vote and another quarter-point cut and the expectations for another three rate hikes next year and a little bit of increase in the outlook for growth and a little bit of decrease in the outlook for unemployment back to you. >> can you repeat those numbers on the growth for next year. did i hear you say from 0.2% to 2.5%. >> up by 0.2%. so that would equal this year so it's 2 1/2, 2 1/2 and going back down to the long run rate of 1.8% steve, don't move. let's bring in the panel and discuss everytihing we heard. it's declined outright and running below 2%

>> i think there is an interesting tension here because on one hand they're talking about this low inflation situation. on the other hand they're upgrading the growth forecast, and i think that is going to become an interesting tension for the board because they're going to have to make a decision what's more important? slowing the economy and what david was talking about slowing the rate of asset increases because there are certain parts of the markets that are becoming overheated and speculative or dealing with this inflation issue. do we need to raise inflation and stay dovish? >> so christy, pick up on that point because what i heard david talk about was asset inflation and so on and so forth which i suppose could be looked at as precursors of inflation type labor market and so on and so forth. if there's not much inflation in the system right now, are you seeing the precursors that could lead to it in 2018 or beyond >> we could see some things that could lead to inflation and certainly tightening labor markets. you obviously saw unemployment

hit the 1.4% in october and maintain in november, and therefore not surprising and they dropped the unemployment rate and we have tax policy that we're talking about today that could also be stimulative adding .3 to .5 to the percentage point of gdp and those things can impact inflation, but that's not what we're seeing in the data yet, and i think the thing that characterizes this fed and will characterize the next fed is this idea of conviction plus consideration. they have a path forward, but they listen to what's happening in the real economy. >> sorry, christy. scott, whoever wants this. david is there, as well. do you think the federal reserve understands the impact of technology we had a story ten minutes ago with courtney reagan, amazon prime, everything seems to be deflationary in our actual lives with the exception of healthcare and college costs. >> i figure it was steve who wanted to answer >> brian, if you look at the

long run outlook ending up at 2.8%, i think that speaks to a world and -- by the way, the language also says we'll end up in a place that's lower than normal, they know that the world has changed when it comes to the demand and the price for money which is a direct outgrowth of technological change you also hear them talk about it and you heard janet yellen and other members about how technology has changed the macro outlook. i think they're aware of that and i think you're right to think about just how profound it may be for how the macro economy works relative to it >> steve thshgs , this is scott. do you think that the fact that they're acknowledging the structural changes in the economy that could be alluding to structurally lower inflation means that the terminal rate at the end of this cycle will be lower than what a lot of people are anticipating >> i mean, they're already seeing that and, scott, you've seen that week after week. you've been here for these meetings and you've seen the terminal rate come down. i have to check my note, but i

believe it was at or near 4%, and 4%, scott, you've also been around long enough to know that 4% was the bottom of other rate hike cycle cuts so we are indeed, according to the fed live in a new world and inflation starts to surge in the way you and i both remember from the late '70s, but right now, they're seeing a world of continued low inflation and a world of much lower interest rates and by the way, you and your buddies in the bond market are trading fixed income that way. look at what's happening in the long end of the curve, but you're trading at 240 with a 60 basis-point spread to two-year money so you're not acting like there's a whole lot of inflation. >> i'm getting increasingly worried that they're just missing the big danger here. >> we haven't had an inflation problem in 25 years, but we've had a tech bubble and a commodity bubble and a housing bubble and all of those were fueled by too easy money and

market corrections or recessions and one of them the greatest recession we've seen since the great depression the inflation is not the enemy. >> no, david -- >> david, thedanger is debt an leverage of the things that you mentioned, the one that hurt the macroeconomy was the debt bubble equities can remain and blow up as long as it remains in the financial system >> what david is suggesting and correct me if i'm wrong, david, but you're suggesting that cheap money has led to different asset inflation bubbles, et cetera, as we've watched over time here and therefore they're not worrying about inflation or they shouldn't worry so much about inflation. instead they should worry that they are, i think you think, creating asset bubbles >> and the problem is i think the asset bubbles will get worse right at the end because we've gone from extreme caution to normality. now we can see bubbles of

enthusiasm i'm worried of another year or two -- >> what do you mean bubbles of enthusiasm are you talking about bitcoin? >> you can talk about that and art prices and home prices in big cities there are plenty of -- you can look at european high yields down at 3% and all around the world the prices are not sensible based on long-term fundamentals. >> these prices look like they're bubbles, they're not fueled by leverage and isn't that the key difference here in terms of not being worried about this sort of ending badly like we've seen in the past >> i suppose if you never have to go cold turkey you don't have to worry about the drug and i think we're addicted to easy money and i am afraid this will end badly. >> there is a leverage problem when you look at the amount of corporate debt relative to gdp, we are sitting at record highs. >> but profits are good and there are profit growth. so why is that a problem

they can service their debt no problem. >> i remind people, economic expansions don't end of old age. they get shot by the federal reserve and as the fed keeps raising rates, eventually the economy will slow and corporate profits and cash flow will come under pressure and that debt levels and that process that leads to the debt deflationary pressure that we saw in the last recession. >> the bond traders that -- hold on the bond traders that watch cnbc every day, they're interested in this conversation. let's round it out to the other 99% of the population that doesn't trade bonds. when is the fed or whatever going to cause a recession >> by the end of 2019 or the first quarter of 2020. >> christy >> think the real question is how far and how fast the fed puts up the brakes is this too far too fast >> i don't think it is i don't think the conversation is are they putting on the brakes -- not enough brakes.

it's could they put on too many brakes >> is for next year too many brakes >> i don't think so. i think that might be fine, but getting beyond that could potentially cause a stall sooner than 2019. >> david >> i don't think we'll have a recession in 2018 and i do think that as the fed normalizes in 2019, each successive rate hike will hurt the economy more and the first few rate hikes actually helped the economy grow and that's why we haven't seen an ounce of effect in the negative way of the raising rates so far and it will get worse as you get into 2019 and i just hope you're monitoring at that point and we're setting rates at the final level >> final word to steve and fundamentally, you agree with scott, the 2019 and 2020 is the time of reckoning. >> yeah. i think there's not much problem in 2018 and we're under more risk in 2019, but we'll have to watch it this is a very, very unusual, long expanse

>> i wish i could tie it off with maybe another debate and i'm interested in the comments that are being made that sund like they want us to plant fed market wisdom and they want us to incorporate asset valuations into monetary policy which fed officials will be reluctant to do which they don't want the fed to do, and i'm reluctant here for the fed to come in and use monetary policy to quash and worry about market valuations for the barometer. >> hang around, everybody. we'll get reaction from the equity and bond markets. bob pisani is at the new york stock exchange rick santelli tracking it all at the cme. bob, you first. >> i think tyler, let's take a look at the s&p. we're up and we're up for a good reason because the market and the market friendly answered the three questions that they care most about the market does number one, on future rate hikes, that's number one we had three back in september and it looks like for 2018 and

it looks like we've got three now. that's the most important thing the market wanted to hear. number two, the economic projections. we got a bump up in 2018 and 3.9% unemployment and 3.5% gdp and the whole inflation debate here declined outright and staying below 2% and acknowledging that once again and that's certainly market friendly overall, and you've got the core cpi this morning that was a below expectation, and you put that all together, generally those are market friendly and we are up probably three points on the s&p over where we were before we started. as for the press conference, everyone wants to hear from yellen about her grade and i want to hear her grade for managing the end of qe and reducing the balance sheet and how she feels they've been handling that, and someone will ask her, i hope, about the impacts of tax cuts and you bet someone will ask her about the bitcoin craze and how she feels about that i think this might be an interesting, reflective press

conferenc conference. >> should be. >> bob pisani, thank you very much the bond market not moving much. here's my question, could you remember a scenario, you're ringing in the new year's with your friends and you say the federal reserve will raise rates and the economy will grow pretty quickly and the equity markups will be off the charts and ten-year bond-year-olds will be lower to end the year than when they began >> you know what it's not far from expectations that any of us talked about. truly, how far are we from the ten-year note? only eight basis points. eight basis points and this morning for a while, maybe 2.5 or 3 basis points and i still think as we roll into the end of the year it's highly likely the long end could be unchanged in the form of tens and steve liesman says 236 how can anybody be worrieded about inflation and the answer to that question is about the federal reserve.

because if every one of these people and most people in america who really think that the inflation issue isn't a hot issue, but it's underestimated and they also own treasurys it would still be at 236 because the rest of the community is buying the long end because they're at 32 basis points >> fair enough had to get boons in there somewhere, i knew. >> darn right. >> i had it in the boon office last comment from you. where do you think the bond market and the federal reserve and the economy, give us the 2018 story, please >> 2018 looks good if you're an investor take advantage of it because eventually real rates will go up, but i think that will be more of a problem for asset prices and the new year looks pretty good. >> okay. thank you all very much. straight ahead, we'll get more reaction to the federal reserve, the bond market,

inflation, tax reform, the fed, the economy with bill gross. plus, we're counting you down to what bob pisani talked about, janet yellen's final news conference as chair of the federal reserve. it should be an interesting one. stk ou for your heart... your joints... or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally found in jellyfish, prevagen is now the number one selling brain health supplement in drug stores nationwide. prevagen. the name to remember.

breaking economic news the fed raising interest rates another quarter-point cut. janet yellen set to hold a news

conference minutes from now, your money, tax reform and everything else, bill gross. it's interesting because i'm not a big fan of the dot plots i don't want each like saying that on the air because people are, like, what the heck are you talking about? it's basically the economic projections that they put in the squares and it's like a children's light bright, right there are two now who see the fed funds rate above 4% in the year 2020. are they right, and if they are, where would the ten-year bond yield be >> ooh it wouldn't be pretty, brian as to whether they're right it all depends on inflation and a 4% fed funds rate is higher than as you point out that basically would imply inflation at 2.5% to 3%. i don't think it's going there, but we shall see i note that most projections from other fed members say the dots as you call them, as we

call them are around 3% on a long-term basis, so that's a little bit of an aberration, and i think what we saw today was a mild, upward push in terms of those dots and maybe a little bit of a negative influence in terms of the bond market and we don't see that at the moment >> and we were talking about a lot of stuff that was important, right? we talk about yield curves and we're talking about the bond market and all of this stuff that all of us and you and a bunch of other people that watch cnbc like to talk about, however, i venture to guess, bill, the majority of our audience just wants to know, is the economy going to continue to grow are they going to make more money? are they going to pay more when they buy a house if we see four interest rate hikes next year as many project, will that put us into a recession as scott said earlier in late 2019 that's what people care about. >> yeah. i don't think we see four. the fed sees three i see two to three

i suggested in the past that the fed funds rate needs to be at 0% real that means that a 2% fed funds rate if inflation is 2% that's a 0% reel. that's where the fed is trying to go, although inflation is not sort of abiding by their future projections, but you know, four hikes would put fed funds at 2.5% we've got a two-year, brian, at 1.8% and that two year will not be at 1.8% if we get four fed fund hikes and the ten-year will not be at 2.36 it will be closer to 3%. that will affect mortgage rates and that will affect cover and interest rate coverages with corporate bonds. i don't think four hikes are really installed >> inflation's like the 14-year-old dog we have, and all 14 years you thought you'd train it and it would listen and it just never ended up and it still runs off that said, bill. i'll ask you to broaden it out

just a bit because the fed did what was expected. i just got an e-mail from trulia saying homebuyers have nothing to fear from higher fed rates. do you agree maybe not the bond market. do you think housing is at risk? >> i don't agree with that i think a lot of mortgages, not all of them, were targeting in the ten and 30s, but a lot of variable floating rate mortgages into the extent that the fed has already raised interest rates by 75 to 100 basis points and is expected to raise another 50 to 100 and that affects the average monthly payments we saw a similar situation not, you know, quite as extreme, of course when the fed raised interest rates to 5.25% in 2005 and 2006 it affected the floating rate mortgages and the crisis so i think it matters. i think the fed has to stop around 2% to 2.25% before it

really starts to bite. >> this is scott mineard good to see you. what do you think in terms of the policy coming out of washington since we're talking about housing? where we're going to lose some of the interest rate deductability and we will always lose deductability for property taxes for large homes. do you think that's going to be adversely affect housing in certain markets? >> are you asking for a friend >> bill's house is paid off. >> it can help, scott. maybe it slows things down the markets in some of the major cities in california, as well, is very hot and, you know, as we know in the past hot markets eventually being able to produce a potential problem going forward and so i wouldn't argue for these measures, but

realizing that they're probably going to come into effect, i think it does put a damper on housing prices and maybe for the better >> bill gross of janus henderson and also our resident real estate expert from new port beach. if you're looking for a home, bill may have one. >> thank you >> thank you very much >> i've got a few. thank you. >> exactly >> your clients, are they worried about this the deduction, and christy, i'll have less money which means i have less money to invest with wells fargo. >> i think it's a concern. for me the bigger concern is are we destabilizing very important ecosystems where we think about true generation of economic powers, silicon valley, hollywood and all these epicenters and how do these changes actually impact these ecosystems and do they change them and do they change the productive capacity of the important regions. a lot of people would be happy to disrupt those ecosystems. >> well, hollywood >> maybe you would be happy, but

it might not be economic and i'll wrap it right here, folks and the truest thing i've heard all week if anyone says that they know what the consequences of the various provisions in the tax bill are, they're lying. they don't know, and i think there's a lot we don't know. >> i think that's absolutely right. >> i'm glad you agree. >> we're on the same page. >> welcome back. >> we are moments away from janet yellen's final dance, final news conference as the chair of the federal reserve, we will take you there live on the other side of this break, we promise. stay with "power lunch." ♪ ♪ ♪ ♪

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invest with confidence. we are waiting for janet yellen to come to the podium there at the desk for her final press conference as federal reserve chair. let's get back to christy mitchum, wells fargo asset management ceo and guggenheim partners and investment. christy, talk about what you see in the markets and where the opportunities are for 2018 >> i think we have a pretty benign outlook for markets in 2018 i would say more of the same, but less of it so i think we are -- >> more, but less. >> that's a great oxymoron

so we'll see continued growth, and i think we will see continued upticks in markets, but i think it will be much more moderated. so the question is what do you do i don't think you pull your money out, but you put it in different places and i think you think about hedge, equity hedge and taking some beta off the table, and i think you think about the liquidity premium, if you have some capital that you don't need immediately, garner that illiquidity premium without taking a downtick. >> what does it mean explain that in language i can understand lock your money up a little bit. you can't get it tomorrow and you can't get it the next day, and you get a premium because it's illiquid and use that as an opportunity to maintain your yield and move it in credit quality. is that a two-year cd instead of a one-year cd. >> it's more of an investment in private credit and those kinds of things. scott? >> history shows that at this stage of the fed tightening, stocks will do very well and

maybe another 15% next year, you know, given what's going on in the global economy and emerging markets look very,a tractive an the periphery of europe and we have accelerated, sustained growth in europe and let's face it, the ecb shouldn't be buying bonds at this point and it's pumping liquidity in the system and we know that drives asset prices up. >> he thought the rate of 3% on the ten year would be the moment that really causes interest rates and treasurys to compete with stocks, and that would be negative for the stock market. agree? disagree >> yeah. i think there's some flexibility around that number, but we have been at the point where people have gotten paid to extend out and risk so because rates have been so low people have been pushed into higher areas of the credit spectrum, high yield and they've been pushed into equities, right? and the question is when does that trade no longer make sense

for them when is the risk that they might pick up not pan out in terms of return and that's the tipping point. >> it's interesting that i'm a bond guy and i'm talking about equities why? because most of the bond market makes no sense when you look at high yield, the default and loss adjusted return on a portfolio of high yield using the high-yield index for the next decade would give you the same return as if you bought a ten-year u.s. treasury security i think the moment of truth comes when credit spreads. janet yellen is at the podium, folks. let's watch and listen >> good afternoon. today the federal open market committee decided to raise the target range for the federal funds rate by one-quarter percentage point bringing it to 1.25% to 1.5%. our decision reflects our assessment that a gradual

removal of monetary policy accommodation will sustain a strong labor market while fostering a return of inflation to 2% consistent with the maximum employment and price objectives assigned to us by law. before the decision, i'll review recent economic developments in the outlook. following a slowdown in the first quarter, economic growth stepped up to a solid 3.25% pace in the second and third quarters of the year. household spending has been expanding at a moderate rate business investment has picked up and favorable economic conditions abroad have supported exports. overall, we continue to expect that the economy will expand at a moderate pace. while changes in tax policy will likely provide some lift to economic activity in coming years, the magnitude and timing

of the macro economic effects of any tax package remain uncertain. smoothing through hurricane-related fluctuations, job gains averaged 170,000 per month over the three months ending in november, well above estimates of the pace necessary to absorb new entrants to the labor force. the unemployment rate has declined further in recent months and at 4.1% in november, it was modestly below the median of fomc participants' estimates of its longer run normal level broader measures of labor market utilization have also continued to strengthen. participation in the labor force has changed little on net over the past four years. given the underlying downward trend in participation, stemming largely from the aging of the

u.s. population, a relatively steady participation rate is a further sign of improved conditions in the labor market we expect that the job market will remain strong in the years ahead. you may have noticed that we altered the statement language about the labor market outlook this change highlights that the committee expects the labor market to remain strong with sustained job creation, ample opportunities for workers and rising wages we anticipate some further strengthening in labor market conditions in the months ahead however, we expect the pace of job gains to moderate over time as we gradually reduce the degree of monetary policy accommodation. allowing the labor market to overheat would raise the risk that monetary policy would need to tighten abruptly at a later stage, jep archer daniel jeoparc

expansion. even with the check growth and stronger labor market, inflation has continued to run below the fomc's 2% longer end objective the 12-month change in the price index for personal consumption expenditures was 1.6% in october, up a bit from the summer, but still below rates seen earlier in the year core inflation, which excludes the volatile food and energy categories, has followed a similar pattern and was 1.4% in october. we continue to believe that this year'ssurprising softness in inflation primarily reflects transitory developments that are largely unrelated to broader economic conditions. as a result, we still expect inflation will move up and stabilize around 2% over the next couple of years nonetheless, as i've noted

previously, our understanding of the forces driving inflation isn't perfect. as emphasized in our statement we will carefully monitor actual and expected inflation developments relative to our symmetric inflation goal, and as i've noted before, we are prepared to adjust monetary policy as needed to achieve our inflation and employment objectives over the medium term. let me turn to the economic projects the participants submitted for the meeting. as always, participants had their own individual views of appropriate monetary policy which in turn depends on each participant's assessment of the many factors that shape the outlook. the median projection for growth of inflation adjusted gross domestic product were real gdp is 2.5% this year and next, and

moderates to 2% by 2020, a bit above its estimated longer run rate the median projection for the unemployment rate stand says at 4.1% in the fourth quarter of this year and runs close to 4% over the next three years, modestly below the median estimate of its longer-run normal rate. finally, the median inflation projection is 1.7% this year, 1.9% next year, and 2% in 2019 and 2020 compared with the projections made in september, real gdp growth is a little stronger. the unemployment rate is a bit lower, and inflation is essentially unchanged. participants generally identify changes in tax policy as a factor supporting this modestly stronger outlook, although many noted that much uncertainty remains about the macro economic

effects of the specific measures that ultimately may be implemented. returning to monetary policy, for the past two years, the fomfomc has been gradually increasing the funds rate as the economy has continued to make progress toward our goals of maximum employment and price stability our decision today continues this process we still expect that the ongoing strength of the economy will warrant gradual increases in the federal funds rate that expectation is based on our view that this rate remains somewhat below its neutral level, and that is the level that is neither expansionary nor contractionary and keeps the economy operating on an even keel because the neutral rate currently appears to be quite low by historical standards, the federal funds rate would not have to rise much further to get

to a neutral policy stance, but because we also expect the neutral level of the federal funds rate to rise somewhat over time, additional, gradual rate hikes are likely to be appropriate over the next few years to sustain a strong labor market and stabilize inflation around the 2% longer end objective. even so, the committee continues to anticipate that the longer run neutral level of federal funds rate is likely to remain below levels that prevailed in previous decades this view is consistent with participants' projections of appropriate monetary policy. the median projection for the federal funds rate is 2.1% at the end of next year 2.7% at the end of 2019, and 3.1% in 2020 compared with the projections made in september, the median

path for the federal funds rate is unchanged through 2019 and a touch higher in 2020 i should note that the economic outlook is highly unsecertain a participants will adjust the appropriate path for the federal funds rate as their economic outlooks and views as the risks to the outlook change. policy is not on a preset course additionally, the committee's balance sheet normalization program initiated in october is proceeding as we've noted previously, changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy and we do not foresee, and the normalization program. hence, our statement no longer mentions this program. of course, we would be prepared to resume reinvestments if a

material dedeterioration in the economic outlook would warrant the sizeable reduction in the federal funds rate finally, i'd like to note that although i have one more fomc meeting to attend in the new year, this will be my last scheduled news conference. over the next month and a half i will have a smooth transition to my designated successor jay powell i am confident that he is as deeply committed as i have been to the federal reserve's vital public mission thank you for being such an attentive audience these past four years and as always, i would be happy to take your questions >> marty, associated press madam chair, could you give us any insight into the discussion and how it dealt with the major

tax changes that congress is considering now? there have been thoughts that with these changes happening at a time when the economy's already -- with the unemployment so low that the fed may be forced to increase its pace on rate hikes did any of that discussion come up in your meeting >> so, yes, we did discuss tax policy, and let me say that most of my colleagues factored in the prospect of along the lines of what's being contemplated by congress into their projections. i should emphasize that some of them have been incorporating those expectations into their projections throughout the year. so changes to the projections that you see since september should not be viewed as an impact, an estimate of the impact of the tax package and in

particular broader expectations of changes to fiscal policy have been reflected in financial market conditions, i think, over the past year. for example, we have seen a significant increase in the stock market and at least some portion of that, i would judge, likely partly reflected, expected tax changes and that effect, along with other financial market affects projected consumer spending and would have affected wealth that's been part of participants' forecasts now for some time. i think my colleagues and i are in line with the general expectation among most economists that the type of tax changes that are likely to be enacted would tend to provide some modest lift to gdp growth

in the coming years and you see that in part that's one of the reasons, i think, for the uptick you see in estimated growth and decline in the unemployment rate the views of participants, i believe, have been informed by a wide range of analysis including the joint committee on taxation and other outside evaluators and my sense is that their estimates are essentially in the same ballpark, although they recognize, as i emphasized that there is considerable uncertainty about the impacts and that will have to be monitored over time. more specifically, they tend to see the packages boosting both consumer spending and capital spending to some extent.

to the extent that the changes have a positive impact on the potential gdp and longer run growth, let me just say that this is something that should it occur, would be very welcome to participants as long as it's consistent with the attainment of our employment and inflation objectives i guess i would also urge you to program that when you look at the projections that there are many factors that affect those projections and changes in tax policy, that's only one of a number of factors including incoming data that is to some extent altered the outlook for growth and inflation all of that factors into the projections you see. bottom line, when you look at the assessments of the funds rate path, participants continue to see gradual increases in the target rate for the federal funds rate as being appropriate

to discusustain a long labor ma. there is uncertainty about what the likely effects will be and my colleagues and i will be committed, as always, to evaluating incoming data and altering the outlook as appropriate. >> dow jones newswires you and others have said that soft inflation should be transitory are you confident that that will still be the case particularly regarding wage gains they've been pretty moderate in recent months that the economy is growing and confidence is high is there something going on in the economy that is making it difficult for businesses to raise wages? >> so, it is true that incoming wage data suggests only modest upward pressure on wages

that leads me -- that's one factor along with the fact that inflation remains low with feeling that even though we have a 4.1% unemployment rate that the labor market is not overheated at this point. >> remember the modest pace of wage gains also probably reflects slow productivity growth, but when you ask me about the outlook for inflation, and i talked in detail about this in the past and recognize that there is uncertainty about what's holding inflation down, but my colleagues and i continue to believe that the factors that are responsible this year for holding inflation down likely to prove transitory that said we all agree that our inflation objective is extremely important. we recognize that there's been a prolonged shortfall. this is a semiet rick 2%

inflation objective and we continue to indicate that we'll be monitoring inflation developments closely and so this is on the horizon, and recognized to be one of the risks facing policy. >> thank you nick tamaros from the wall street journal i want to follow up on a question about tax changes when you addressed it earlier today and when you spoke to congress last month you often described that you would welcome higher growth in the context of the employment and inflation mandate, and i guess i wonder how you judge the major provisions of the house and senate tax plan, and the corporate rate cut and the immediate expensing of the big-ticket purchases and new rates for pass-throughs and temporary rate cuts for individuals. do you see those on balance boosting the productive capacity of the u.s. economy as opposed to simply increasing aggregate

demand and related to that, how would you view the benefit of such tax changes now when the economy is nearing full employment versus the earlier periods when there was greater resource slack >> so i think my colleagues and i mainly see the likely tax package for boosting aggregate demand and also having some potential or boost aggregate supply or changes on the corporate tax side and the reduction in the corporate tax rate expensing will lower the cost of capital, and while there are a range of estimates and uncertainty about how much stimulus that will provide to investment in general, i would see some stimulus to investment, and supply effects and the

stronger pace of investment could boost capital formation and thereby raise productivity growth and potential gdp or output to some extent. exactly how large those effects might be remain uncertain, but that is a channel, and i suppose it's also possible, and i'm not sure how significant this would be for the lower marginal effect of tax rates for those groups that would see them and could boost labor supply and again, there are a range by estimates and literatures. i indicated i think participants who reviewed a number of pieces of the analysis including the joint committee on taxation estimates and the many outside analysts who have weighed in on this, and been influenced by that kind of analysis, but there

is a good deal of uncertainty as to what the impacts would be and to the extent there are larger impacts than those analysis assume on aggregate supply or potential gdp in the context of an economy that has had disturbingly low productivity growth that would be welcome and could support faster gdp growth, at least for some period without, you know, without creating the need to tighten monetary policy to offset that so there are potentially both demand and supply affects here so supportedly, you really don't at the end of the day see very much change in the federal funds rate path, participants do recognize that the unemployment rate is lower than their estimates of it's long-run sustainable rates. so i think we are in the vicinity of full employment.

>> heather long from the "washington post." you've mentioned that the committee thinks there will be wage increases next year, i'm wondering if you can clarify if that is coming in part or mostly from the changes to the tax plan is that what the expectation is, would drive the wage increases and i was also wondering, i've heard from so many female economists and ak deem ya and at the fed about what an inspiration you've been to them. and how mel lan cali they'll be to see you go. and rise to your level >> i'm sorry, remind me of the first part of your question. >>wages. >> okay, wages >> is the tax policy driving wage increase expectation? >> i think generally in a strong labor market where many firms

are having difficulty qualified workers, we would expect just through normal demand and supply channels to see upward pressure on wage growth over time and as the labor market is tightened, we've seen some very gradual drift upward in wage gains. they remain -- it remains at a low level, but would expect in the context of an ongoing strong labor market to see some more pressure, and i believe that's the main thing that my colleagues are factoring in. on your question on advice to women in minorities, the federal reserve, my colleagues and i are very focussed on wanting to see and do what we can to foster greater participation of women in minorities in economics we would love to -- if we could,

increase our hiring ourselves of women in minorities and we see that both women and minorities are studying economics in disproportionately and disturbingly low numbers although, the women in stem fields generally are about even with men, represent about 50% in economics, women majors constitutes something like 30% of undergraduate majors and there is disproportionate low enrollment of minorities i will just say from my own experience, i think economics is a terrific field i've thoroughly enjoyed my career in economics and think there are many different paths that people can follow that lead to satisfying careers and that there are very interesting and

important questions that economics addresses and it is a great field and would like to encourage greater involvement and think that people will find that satisfying. and just in terms of the type of research that's done in the field, i think also a greater diversity, more women in minorities may change the focus to some extent of the questions that people choose to look at and the analysis that they bring and range of thinking that bears on research and all of that would be a healthy development >> steve leaseman, cnbc. every day it looks at the stock market it goes up triple digits in the dow jones to what extent are there concerns about current market evaluations or if we keep going, should that animate monetary policy

finally, maybe as a sign of what's been going on with valuations, this crib to currency called bitcoin keeps going up every day what is the policy of the central bank of the united states, the introduction, use, and incredible rise in popularity of bitcoin. >> okay, let me start, steve, with the stock market generally. i mean, of course the stock market has gone up a great deal this year and we have in recent months characterized the general level of asset valuations as elevated with that reflects is simply the assessment that looking at price earnings, ratios, and comparable metrics for other assets, other than equities, we see ratios that are in the high end of historical ranges. and so, that's worth pointing out. but, economists are not great at

knowing what appropriate valuations are and we don't have a terrific record, and the fact that those valuations are high doesn't mean that they are necessarily overvalued we are in -- i've mentioned this in my opening statement and we've talked about this repeatedly likely a low interest rate environment, lower than we've had in past decades and if that turns out to be the case, that's a factor that supports higher valuations. we're enjoying solid economic growth with low inflation and the risks and the global economy look more balanced than they have in many years so, i think what we need to end and are trying to think through is if there were an adjustment in asset valuations, with the stock market, what impact would that have on the economy and

would it provoke i think when we look at other indicators of financial stability risks, there's nothing flashing red there or possibly even orange. credit growth at successive levels so, you know, this is something that the fomc pays attention to, but if you ask me is this a significant factor shaping monetary policy now, well, it's on the list of risks. it's not a major -- it's not a major factor then you asked about bitcoin, and there i would simply say that bitcoin, at this time plays a very small role in the payment

system it is not a stable source of value and it doesn't constitute legal tender it is a highly speculative asset. and the fit doesn't really play any role, any regulatory role with respect to bitcoin, other than assuring that banking organizations that we do supervise are attentive that they're appropriately managing any interactions they have with participants in that market and appropriately monitoring anti-money laundering bank secrecy act, you know, responsibilities that they have. >> i don't believe there's been any specific about that, just generally banks have anti-money

laundering responsibilities and this applies to bitcoin as it does in every other realm. >> john and then we'll go to sam. >> donna with cnn, turn back to the perspective tax bill questions, in your view at all, is the republican tax bill an ill-timed fiscal stimulus? and are you concerned at all it will wind up squandering the tools both the congress and the fed have when it comes time to dealing with the recession >> so look, i will just say that it is up to the administration and congress to decide on appropriate fiscal policy and our job is to maintain our focus on employment and inflation. we continue to think you should conceive from the projections that a gradual path of rate increases remains appropriate,

even with most -- almost all participants now factoring in their assessment of the impact of the tax, the tax policy you know, it is projected that the tax cut package will lead to additions to the national debt and boost by the end of the horizon, the debt to gdp ratio, and i will say -- and this is nothing new, this is something i've been saying far long time, i am personally concerned about the u.s. debt situation. it's not that the debt to gdp ratio in the -- at the moment, is extraordinarily worrisomely high, but, it's also not very low. and it's