fashion. >> right which is why this stock is going higher >> i don't know. >> we'll keep an eye on it >> all right >> tho, judge. thor industries bought it during the show. >> delta it is going into the green southwest won't hurt it. >> long energy xle. >> thank you melissa lee and "power lunch" starts now >> indeed it does. thank you very much. you are looking at a very snowy federal reserve. the temple of money where in just one hour the new chairman jerome powell will make his first big decision on interest rates and hold the first news conference as fed chair too. >> and you are looking live at the financial capital of the world where investors are awaiting for that decision the statement and the forecast for the rest of the year >> welcome to this special edition of "power lunch" from a

snowy stock exchange and i'm michelle caruso-cabrera with melissa lee and tyler. just under an hour until the race decision dropsful right now we're rallying into the close this hour. but it could get more volatile depending on what the fed does remember, on any given fed day, there is the market before the decision and after the decision. the industrials are higher been 139 points almost 140 the s&p 500 higher been 13 points an the nasdaq higher by 29 points or .4% highest level since september of 2008 which we look at bond yields, highest since april of 2010 there you go that is where you could see them and now moving on to crude, hitting the highest level in a long time. rallying up 6% in the last one week and getting closer to $70 and gold is pushing higher so tyler, over to you. >> michelle, thank you very much as michelle just said, we are

less than an hour away from the first big fed decision in the tenure of the new chair of the federal reserve jay powell steve liesman there is not very good visibility in washington today because of the snow but we're going to get higher visibility on the future of interest rates in about an hour's time. >> i think that is a great way to put it. some on wall street are concerned the new fed chairman jay powell right out of the box, the first press conference and meeting will signal tighter monetary policy when he said head winds have become tail winds for the economy and he has not shown his feathers about being a hawk or a dove he's seen acceleration and but that wages have not run hot. >> we see wages trending up but most continuing to grow at 2.5%. so nothing in that suggests to

me that wage inflation is at a point of acceleration and so i would expect that some continued strengthening in the labor market can take place without causing inflation. >> so here are the things we're looking for clarity on to use tyler's idea, three or four rate hikes, how we process the impact of the tax cuts and stronger growth domestically and abroad and rising deficit with the fed balance sheet and how hawkish is this chair goldman sachs say public remarks by fed officials suggest a broad shift in the outlook toward a potentially faster pace of tightening and we expect a median dot to show four hikes in 2018 and here are what we are looking for. could see some change in the forecast the gdp out look of 2.5% for 2018 and unemployment 3.9% maybe that comes down and core inflation 1.9% is the current out look of the fed. so a bunch of fed re-sets on the way. a re-set of the out look of the

new board, a new chairman in the wake of a new economic and especially new fiscal policies will play strongly today let's go to melissa down at the nyse. >> we're joined by upon pis annie and we're setting up ahead of the fed >> this is the s&p 500 because this is a picture perfect fed day here, the drift is the te tendency to drift higher in the federal reserve meeting. it is well studied tends to move up about .05% or 50 or 60 basis points in the 24-hour period but the full screen, that is what is happening. it is up about 60 basis points in the last 24 hours and happens eight times a year and very well studied phenomenon the fed staff said this is a puzzle but it is not a puzzle to me, the fed is acting in a

market-friendly manner overall there is a path potentially to a bull case scenario the feds trying to figure this out. how to be friendly to the market but the mark has already determined they might be handle one dot increase, one increase in expectations. >> so a fourth this year -- >> three is the expectation and two next year. so five is the total for the next two years the market might be able to handle one more. two would certainly move the market down. that would be an expectation nobody is betting on right now so the important thing is after that, we might get some comments from the president on friday on the whole china tariff issue the hope is that he will propose these but not actually impose any tariffs. that is perceived to be market friendly so i'm trying to lay out the bull's path for the market to rise in the next few days. >> and before that steven was talking about what we could expect out of the language, if they did a news conference after every single fed meeting and traders were thinking if they change that and make every

meeting live that could indicate a former hawkishness that could be negative for the markets even if we maintain three dots for this year. >> i would be surprised if they went through with that i think the like the idea of having a pause every three months and then coming in with some important policy comment. i think going to -- we do it eight times a year now i think that would probably be a lot. but right now if the market is surprising surprisingly optimistic that these bullish cases will occur, not too hawkish and the president is not going to actually impose any tariffs at this time. >> we'll see if the drift keeps up through two thanks michelle, back to you. >> you are absolutely we have this nice rally going on ahead of the fed decision. let's bring in liz ann sanders from senior vice president with charles swab i think you just heard tha are you in agreement with what the market is thinking here, that not too hawkish of a fed when we see jay powell for the first time and maybe the president is not so hawkish when it comes to tariffs when we hear

later on this week what he want to do about intellectual property. >> certainly the hope is the case on the latter i think proposed versus impose is an important distinction and i think the market was relieved when some of those exclusions were put in because i think trade as a broad macro issue has been one of the things troubled the market most. so anything that kind of takes maybe a step back would be a positive i think there is a number of things to look for with the testimony in particular today. leaving aside what we are looking for in the statement and any movement on the dots plot but it is also interesting to just powell's overall tone his method of communication, whether that differs from what we saw in the congressional testimony, whether he's clear, whether he mentions maybe things like a rule-based methodology more so i think there is obviously going it be a more keen eye on what the press conference looks like because it is his first time.

>> so we've also talked about -- you just heard melissa and bob talk about the potential and there are rumors he may announce that they are going to have a press conference every meeting consensus has been throughout this process they don't make a move in rates unless there is a press conference because they want to bible -- to be able to about it and every single press conference that means you have risk of a hike every single meeting. >> i think that is valid and that rumor of adding a press conference to every meeting has been around for a while. we don't know whether it is founded in reality but the thinking is if the fed is on a path toward having every meeting live, there is two options for accomplishing that add a press conference to every meeting which would send a signal every meeting is live and so to some degree raise rates at one of the off cycle meetings. i won't get inside of the head of powell and the members of the fed. but from 2004 to 2006 we had

consecutive increases and each were 25 basis points and every other one occurred at a meeting without a press conference so that is another important factor today even if there isn't one or another, we are not getting a decision on rates until the next one but to see if there is any hinting on the possibility that every meeting should be considered live from the market's perspective >> but bottom line is any sign of hawkishness i would anticipate there is market weakness, right? what would you do. >> i think there is an expectation that we could see the dots plot move more toward four for this year there are plenty of economists and strategists, our firm has been out there in the three to four camp. so the notion that we may be inching from three to four is not a major shock. i think if the move was closer to four or more definitively four -- but the problem is there

are so many other forces driving markets and i would say this on any day, zblouft fed day, i think it is a silly exercise -- for those of us appearing in the media or for the media with each day with every move in the market to have one thing to point to that defines where the market moved in one direction or another. >> it is -- liz ann, it is what we do for the living. >> we have the affect of algos and other moving pieces that any reaction by the market has a lot of explanations. >> often, yes. liz an, thank you very much. she'll join us back in a bit to talk about the fed meeting during this special fed edition of "power lunch. back to tyler in d.c >> they are cheering down there at the new york stock exchange, michelle if you haven't heard, we're about an hour or little less from the fed decision on interest rates jerome powell's first meeting as chairman and first press conference to discuss it more joined by michael farr president

and ceo of far miller -- and i should memorize that i should know that and christian ghouta and we're going to have a fed food fight because you disagree. let's go to the first item which is how many rate hikes will there be, carrish gnaw you think the fed will be more aggressive than michael does. explain how many and why. >> yes, i do so i think this is a transition moment from the fed. they are transitioning from a concern that inflation could be stuck too low. that is last year's story, to the risk that with fiscal stimulus, the economy could overheat not this year but a couple of years forward. i think they want to get ahead of that. i they they need to respond to the headwinds turning into the tail winds and i think that means going to four hikes this year and three next and one in 2020 will they get the whole way there this week? will they space it out between march and june close call but i think they get there to four hikes. >> and if you do that

four-three-one, you see the fed funds rate in 2020 at what level? >> 3.25 or 3.5. >> and a ten-year yield of what. >> at this point we might not see a ten-year at four but potentially a curve that is very, very flat, maybe evenin verting as the market says hang on those rates now look too high as the sugar high from fiscal is dropping away. >> counter argument from mr. farr you got the under in this. >> i'm going with three. >> you're going with three you just changed what you told me -- >> no, if i had to bet, i would bet on two before i bet on four. >> okay. >> i would bet on two before four but i think we'll see three. and i think we'll see three because i think that powell is very aware of what the fed did in 1937. they were too aggressive and threw us into a huge recession last 13 yield curve inversions, nine of the 13 we went into recession and he will be careful. i think there are enough headwinds from the tariffs,

perhaps a trade war with china, what is going on with russia, what is going on with the mueller probe, think there are enough things that will keep the fed in wait-and-see mode as they should be and i'm also concerned about a yield curve inversion. >> so three possible and two more likely than four. you say that the fed wants to get ahead of overheating you say you think the fed is a little behind where it would ideally like to be. >> my view is if you are j. powell you don't want to end up doing more than four hikes this year or even, god forbid, a 50 basis point move sometime. a stitch in time can save nine here get on with this more steady sequence of rates, and hikes and reduce the risk that you have to make an abrupt move later on. >> let's talk about the stylistic differences we might expect to see and here from powell when he gave his testimony a month or so ago on capitol hill.

i thought this guy speaks clearly and concisely. >> and he'll never make it. >> does he need to be clear or should he be opaque, ala greenspan who said if you understood me, i clearly have failed in my job what do you expect >> i think that j. powell -- you have to remember he's not an economist. >> he's a lawyer who is playing the role of economist and i think he will speak lawyerly i think this interview that he has after this meeting, he should be -- try to be more greenspan-esque. and his goal should be a nonevent interview -- >> and shouldn't make headlines. >> he can't avoid making some headlines. stylistically, i would add to the important points you make, but almost by way of personality, he's going to present a more confident outlook. janet yellen was somebody who worried a lot about resk --

risks to the outlook and it is good that we had a woryer in that seat at that time when there were plenty of risks to go around but j. shows in his congressional testimony that he will project more optimism in terms of where the economy is going. the other thing by the way is -- janet was focused on the labor market j. is not ignoring but it but a discussion and less labor market sent sic. >> he did not tell me what the fed would do i saw him on saturday night. he looked cool and calm and collected. he looks like he's got this. >> and they project more confidence because maybe he has more to be confident about. >> that is exactly right. >> that is good point. >> the world that yellen thought she was handing off to powell is not the world powell inherited, he got a gigantic fiscal boost double barrel and in spending. >> and already tariffs and also may have a trade war and he also

has other issues. >> tariffs are inflationary. so they don't help you with inflation. >> we'll leave it there, gentlemen. come back and we'll do it again. >> thank you for your time. up next, we are in d.c. where there is a lot of wheeling and dealing going on to try to avoid another government shutdown d.c. does not handle snow well and the white house is set to handle the tariffs to punish china for stealing our intellectual property. nce details on "power luh" when we return from washington and wall street. we'll be right back.

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now you can get it, too. welcome to the party. it is more than just the fed happening here in washington it is a busy, busy place d.c. these days. and we're once again heading for a possible government shutdown that is one. and now we learn that tomorrow the white house will announce new tariffs on china and kayla tushy is covering it. >> this set of penalties would target china directly for theft of intellectual property which they have been investigating since august the package will be announced tomorrow but it will be subject to change.

it will add levies on imports. the president wants $60 billion in tariffs but the final number will be determined by law based on the economic harm found to be done trade chief robert lighthizer said they will try to spare consumers. >> they have the power to raise tariffs in these circumstances the the process that you would use would be one, develop an algorithm imto put maximum pressure on china and minimum pressure on u.s. consumers. >> the package will not include restrictions on chinese investment in the u.s. or visa for chinese students the president will be briefed again in two weeks to consider a second set of actions and sources say he's worried about a potentially severe impact on american colleges and universities lighthizer who is testifying on capitol hill this morning said the administration is gaining out potential retaliation from china. he said that is inevitable in any of the scenarios you could expect it is an

interagency process but u.s. agriculture will likely be the target. >> and the farmer's are worried about that, the soy beans and others in the midwest. thank you. the fed decision not the only countdown in washington right now. we just -- with just days away from another possible government shutdown and elon has the die tai -- the details of what is in and out. >> the lawmakers are closing in on an agreement and expecting to see the text of $1.3 trillion spending deal today. now republicans sources tell me that the bill will include a proposal to toughen back ground checks for gun purchases as well as a fix for the so-called green glitch which favors farming co-ops over agriculture companies in the tax law those were two of the outstanding issues that republican and democratic leadership had discusses during a meeting this morning on the senate floor majority leader mitch mcconnell said they are making good progress >> i'm pleased to report that

the appropriation package is currently being finalized. i'll have more to say once the bill has been filed but i'm proud to announce it will meet a number of vitally important objectives this includes the largest year on year inquiry and funding for our service members in 15 years. along with major steps forward for law enforcement and border security for the fight against opioid addiction -- >> now sources tell me that border security provision includes $1.6 billion for fences, not a wall, as well as border technology. as far as the gateway project is concerned, i'm told that both sides are claiming a win here. there is not direct money for that tunnel between new jersey and new york but there is increased funding for programs that could channel money to the project so the house still appears on track for a vote on this tomorrow the senate would follow suit on friday but again word of caution here that the senate could still drag

out that process and lawmakers could still miss the friday deadline michelle, back over to you. >> all right warning duly noted. big spring storm pounding the east coast and wreaking havoc at the airport and we'll have a live report plus facebook and the fed and the markets and all of that and more in a special edition of "power lunch" as the first day fm peldungj.owl ri his press conference ...with its high-tech cameras and radar... ...contemporary cockpit... ...three hundred and sixty degree network of driver-assist technologies... ...and sporty performance... ...what's most impressive about the glc? all depends on your point of view. lease the glc300 for just $449 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.

snow starting to fall this morning could continue all day, even into tomorrow in some areas on the east coast, let's get to miguel who is outside in the snow in ham iltop township, new jersey hey, miguel. >> reporter: that is right the snow is falling for a few hours now. pretty consistently. but the wind has been picking up which is making it harder to see. and the snow falling might seem light but it is heavy and compactible snow this is snow ball and snowman making snow and not driving snow and that is why people are opting to stay off the roads and actually new jersey transit -- so the buses after 3:00 p.m., they are going to be suspended, hopefully keeping more people indoors and off the roads because as the snow continues to fall, the roads are only going to get more slippery and dangerous. earlier we were talking to people out here in new jersey at one of the shopping centers and

they were advertising patio sets and advertising plants for the spring but they were not feeling spring-like at all one of the guys i talked to just got back to the area from vacation and thinking about going back >> just got back from florida and it is beautiful and now we come back to this. so i think we're going to go back to florida tomorrow >> reporter: so he's ready to go back to florida. you can't really blame him what we have been seeing a lot -- and the reason the roads aren't more covered is because we've been seeing a lot of salt trucks and plow trucks and trying to keep the roads as safe as possible. back to you. miguel martinez via in new jersey. mark zuckerberg about to break his silence about facebook and that could come today. and what can he say to users not

to close their accounts and the countdown to the fed decision. j. powell is expected to raise rates but we'll know for sure in just about a half hour's time. stay with us s on holiday. what do you need? s on holiday. i need the temperature for pipe five. ask the new guy. the new guy? jack trained him. jack's guidance would be to maintain the temperature at negative 160 degrees celsius. that doesn't sound like jack. actually, jack would say, hey mate, just cool it to minus 160 and we're set. good on ya. oh yeah. that's jack. show of hands. let's get started. who wants customizable options chains? ones that make it fast and easy to analyze and take action? how about some of the lowest options fees? are you raising your hand? good then it's time for power e*trade the platform, price and service that gives you the edge you need.

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hello, i'm sue herrera here is your news update new development surrounding the austin, texas, bomber. police have told people to evacuate a five-block radiance around the suspect's home outside of austin. authorities say the suspect blew himful up in his vehicle as officers closed in on him. german chancellor angela merkel is criticizing the trump's plan to impose tariff on steel and aluminum saying she considers them to be unlawful and delivered that message in an address to german lawmakers. amazon workers in spain have gone on strike beginning a two-day walkout, complaining about the level of wages and overtime but amazon said the wages are competitive. and sports fans in new orleans are paying their final

respects to saints and pelicans owner tom benson who died last week at the age of 90 after a week-long battle with flu. that is the news update this hour melissa, downtown to you stay dry. >> thanks, sue we'll try. le-- less than 30 minutes ay from the fed interest rates and the focus is on the statement in which j. powell said as fed chair. the marks ahead of that decision stocks holding steady and firmly in the green the dow had been high as 150 points at high and now up 105 and s&p higher by about nine the action in the bond market, yield on the two-year hitting the highest level since september of 2008, the five-year at a highest level since april of 2010. >> and mark zuckerberg expected to break his silence on the company data issue julia boorstin joining us from los angeles. >> reporter: a source tells me

that the ceo mark zuckerberg will speak out about the cambridge analytica scandal and we expect a facebook post about rebuilding trust in facebook and how he is working with engineers to make facebook more secure this after yesterday facebook said, quote, mark cheryl and the teams are working around the clock to get the facts and take the appropriate action moving forward because they know the seriousness of the issue the company is outraged we were zefed. two class-action lawsuits have been fired, and that is from users saying the case is about the disregard with which they have chosen to hold personal information and a shareholder accusations means they made false and misleading statements as the market cap has bost $40 billion since last week. meanwhile on capitol hill, facebook executives are meeting with staffers at six congressional committees and we're waiting to see whether the

ftc finds that facebook violated the commitments to protect user privacy as part of a settlement with the ftc from seven years. back over to you >> thank you, julia boorstin. digging deeper into facebook joining us kara fisher great to have you with us. what is the latest that you are hearing when it comes to zuck and whether or not we'll actually hear from him, or slash see him. >> well he probably will appear on facebook. i hope he doesn't do what he did in puerto rico and appear as a cartoon character but probably a statement and does that and a blog post. it is not clear whether he will do a video or a live video he's done that before to different levels of success. he's going to have to appear all kinds of places. the key thing is where he appears before people where he doesn't have control he has to appear before reporters in a public setting or the congress wants him and the european regulators want him to

appear so he'll have to make a lot of appearances and some very tough ones i think the key thing he has to do is, one, apologize immediately and very earnestly that is the key part that he has to do to start >> that is what i was going to ask you. because it sounded like what you were suggesting, there was nothing he could say today to fix this problem because it is a situation he controls, his medium, et cetera. that he has to appear before other people -- but what would you want him to say today, is an apology enough what more. >> no. of course not. they've done this before he's well-known for posting these long -- often rambling essay. if you remember the 6,000 word essay with issues before around the russia issues and the election issues. i think they have to have a concrete series of steps about what they are exactly doing. if they are investigating other third party developers, what they've done with cambridge and what happened with cambridge

they can't do what they did yesterday by saying they are outraged i'm outraged by their outrage. it is not about facebook, it is about their users and what they are doing to protect users and around privacy they have to be crystal clear about every single step they are making and transparent and facebook is not known for this they are not particularly -- they on fis kate and slow roll things i don't need to say these are fair people. i'm sure they are trying their best you don't have a situation where they are maliciously lying or anything lik but they have to be concrete about what they are doing and how they are doing it and then mark has to appear again and again in difficult settings where he answers questions >> right kara, if you were to interpret the markets' reaction to this whole thing, facebook has seen much more in percent off their cap as the other social media companies and or could face the same problem this is a much bigger problem for facebook if regulators come

down and govern how they can use and monetize data? >> enormous. it is enormous the focus should be on facebook. facebook is where it is all happening and the biggest one with the most impact you could look at google and youtube and look at twitter, but really facebook is where all of the action is spent and where all of the problems -- and it is not just this issue with cambridge analytica, around election and fake news and tech and it is appropriate that facebook is the focus given how big and powerful they are but the others will see action too. >> kara, two questions for you is mark zuckerberg the right guy to still run facebook at this point and with all of the focus on zuckerberg, it feels like cheryl shandberg has gotten a pass here. she bears this do-gooder mantle. >> she's the adult. >> she's the adult in the room and floated as potential

secretary under what would have been a hillary clinton presidency where is she -- she's the person they hired to do this kind of thing and she is silent as well. >> right you know, absolutely ceo is an adult and he is an adult. we can't juvenilize these mens and he is the ceo and founder and a lot of these things are technical issues. >> should he still run the company? >> yes of course of course. i think -- and cheryl absolutely has to be out there at the same time this happens to be something i think the ceo should speak about. but she's also a leader there. but he can't rely on her like -- like you can't fall back on her because mark is incapable. if he is incapable of addressing this he shouldn't be ceo and he is capable and he is the leader of the company and should be out front and she should be out front and so should the other executives like chris cox who runs the platform, the cto and all kinds of people should be

out front. but in general, the two leaders should absolutely be there with mark first and foremost full stop >> kara, thank you always good to hear from you kara swisher tyler, over to you. >> thanks very much. michelle and melissa, about 20 minutes until the latest fed decision the markets bracing for a rate hike they are rising. j. powell is set to hold the first news conference as fed chair after the announcement at about 2:30 eastern time and what will he say about the future economy and the rate hikes don't go anywhere. the suspense is killing us

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the fact that j. powell gives crisp precise answers and that means we can ask for questions and if steve liesman asks more questions at once -- >> when he testified in front of congress, he was clear he was concise he said things >> that is right and also he didn't have a lot to say there and the answer ended as chairman bernanke and janelle yellen often saw the rule as not just fed chairman but chief economist and explaining in detail why they were doing what they were doing. >> because he is not an economist and doesn't feel on gates or qualified to do that and is a lawyer by history and speaks in a more lawyerly and precise way. let's get to the meat of the matter here. you are anticipating that the fed may raise some of the metrics, in a positive way for the economy, slightly faster growth, slightly lower

unemployment, moderate inflation and that that would imply down the road a more aggressive interest rate posture. >> sure. the last set of forecasts had the economy growing at 2.5% this year the private sector is now a 2.9. we expect the fed to move in that direction but the question is do they raise the path of interest rates. the rate is coming we'll have four rate increases i'm not sure if this is the meeting for. >> that they like to take a another few more months before they signal that strongly and if you listen to what fed officials have been telling us, they did not display a sense of urgency vice chairman randy quarrels said, yes tax cuts will elevate the rate of growth of the economy but also make the economy more -- given more capacity to grow and therefore won't be inflationary. >> so if i'm hearing you right, you expect that there may well be four rate hikes this year you just don't expect them to signal

it right now because that would take a away their -- away their freedom of movement. >> that is right keep in mind there is unpredictability in the process because there is 15 or 16 dots and the chairman is only one of the dots so we might see some move up or more move up a few months later and a lot is the body language and what j. powell is saying. we're listening for the bias, is it clear from his body language that the bias will move faster rather than slower because the risk are shifting. >> let's talk about the composition of the fed which is shifting as the chairman shifted. how important is it -- is it important at all that j. powell get a unanimous vote do you expect it to be unanimous? >> i do expect it to be unanimous because they are going to raise rates and that is what they are voting on and people like brainard and rosen are talking about the need to move faster the economic data is clear in that respect

and i would add that some of the people have begun to worry about things like financial stability, is the market too high and you just had this great dose of fiscal stimulus and this meeting is not where you would encounter some dissent if he powell wants to go faster or stop the process, that is when it is becoming more -- >> and the market has settled down and pulled back from the pace in january. >> that is right. >> and that is not to be overlooked thank you very much. good to see new person fantastic. over to melissa. >> thanks. market steady as with you count down to the federal reserve decision let's bring back liz an. great to have you back they were talking about the news conference if you were lucky enough to be in the news conference and could ask jay powell one question, what would that question be? >> i think i would be curious as to how he personally plans to approach the press conferences it is his -- i think it is his first ever press conference. and it is very different to

speak to the press than it is to speak to or listen to congress so i think to try to get some color on what he might view as necessary changes. leaving aside the numerical changes, but just try to glean his approach as chairperson to not only these press conferences but how he plans to communicate to us, to markets on a going forward basis. >> liz, on that note, market participates who come on say one of the biggest risks that the market faces especially in the wake of the rally that we've seen over the last year is a policy mistake by a new head of the federal reserve. how worried are you about that >> i don't know. there has been a lot of focus on what was janelle yellen's first meeting in 2014 and the so-called gaffes when a question was posed about the time spread between ending qe and starting rate increases and she was viewed as having made a mistake of mentioning six months

so i think there will probably be more attention on any of these perceived guffaws and there was some criticism in his testimony in front of congress and i think he did a fine job and it is different relative to the press but a sharper eye is on him in this meeting than those in the past. >> liz ann, thanks again we'll see you in a few minutes for more pre and post-fed. >> two years hitting a new high. how traders are positioning ahead of the news. can't afford to go anywhere. it was my very first car accident.

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we are moments away from the fed decision on interest rates. let's see how bonds are trading. rick santelli is tracking the action at the cme. curve flattening going on. >> there's been curve flattening, yes. predominantly for the last 19 trading days as ten-year rates flat-lined and short end rates climbed higher as we get closer we are actually

down a little bit on all maturities except for the next one, intraday tens it's up at the top of the closing range which has been in the 280s for 19 trading days there it is at 2.89. year to date, it's been flat but flat at the top and now it's really at the top. remember, we made a high yield close for the year from the 21st of february at 2.95. not far away and the dollar index, big day yesterday. give a third to a half back today, as you see. failed yesterday at 90.5 again it is holding the pivot around 90 many traders will be watching the 90 level after the statement is read and the general complexion of the curve and which side of 2.90 ten-year notes are trading at. >> just moments from the latest rate decision by the fed then jay powell's first press

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welcome back to "power lunch. we are moments away from the fed decision on interest rates a decision with major implications for the market, the economy, and your money. and then jerome powell's first news conference as fed chair at 2:30 p.m we'll take you there live. traders and investors will be poring over the comments over just how hawkish the fed will be and if they are worried about inflation. what can we expect let's bring in the panel head of u.s. equities strategy with rbc fast money trader steve grasso here and joe davis is chief global economist with vanguard. also with us, the chief investment strategyist and senior vp with charles schwab. good to have you here. lori, what are you looking for today? >> i think the market is getting

to know jay powell a little bit. first i will be looking for how the market reacts. we want signs that economic growth is still good and a guidepost. people are still trying to figure out exactly what -- >> i think we lost your mic. in the meantime, steve grasso? >> to pick up where lori left off you want to see if he's thinking three or four for 2018. we have heard him sound hawkish, dovish we want to see what we get from jay powell today do we get a tax reform analysis that we thinks will be a lot less hawkish than he once thought? does he think productivity will ramp up? where is inflation the mysterious inflation number, is he still perplexed by that? >> we have the mic situation ironed out lori >> i think markets are still trying to figure out if they trust this guy they want to know there is not a policy error, that they are going to move at a measured

pace, not stifle growth. at the beginning of the year people said will they move too far, too fast. people are focused on growth they want to see you maintain the specific balance. >> joe, how worried are you about a policy mistake what would it be >> i'm not concerned about it now. what we'll see is hopefully more confidence but not more hawkishness. this is a nuanced message. we'll see that today i'm more concerned about 2019 in terms of if the fed like our outlook is three hikes this year, three next year. you have a fed funds rate well above the rate of inflation. i'm not concerned about that trajectory now. >> in terms of everybody's focused on how many dots, how many hikes this year and next year, joe. really the language, there is leeway in which jay powell could be more hawkish by minor

language tweaks. what will you focus on when the statement hits >> just the balance between growth which is a little bit mixed. we'll see fiscal thrust this year it's the focus on inflation. we have seen modest uplift again, it's going to be a balanced statement today the fed has to be happy that the economy is really unfolding according to their hopes and expectations i think they want more data throughout the course of the next several months before you would become more confident, even more hawkish. >> still, every time there is a transition a lot of people get worried. i asked how worried you were about a policy mistake you focused on the press conference today what about in the next year? >> well, i think that's the way to think about any potential policy mistake there might be people who view something he says or something in the statement as a mistake. we ultimately won't know until down the road when we see not

only market behavior which is not the only factor we ought to be considering, but actual data. i think important are some of what we see to the numbers today. i think adding to the conversation already, is there a change to the terminal rate? what happens to the summary of economic projections specific to gdp and inflation? i think the actual specific numbers are where we'll get a little bit of a guide. ultimately a mistake comes if the fed gets too aggressive in, say, the long end of the yield curve doesn't suggest it's appropriate, if the data doesn't support them being aggressive or the other side would be if they maintain a dovish tilt and you start to see inflation accelerate >> right. >> there are two ways they could make a mistake if that happens >> less than 30 seconds away as a trader what's the first thing you look at on your screen >> right now it's the reverse. we say that when we have been on

the floor for almost 25 years now. they'll probably try -- they ran him up into it they'll try to sell them off i would be a rally on the dip. >> two years at 2.33%. ten-year at 2.893. the dow up 132 let's go to steve liesman with the fed decision >> up by one quarter point, the federal reserve raising interest rates to a new range of 1.5 to 1.75 the federal reserve saying in a statement from the march meeting it expects further gradual increases ahead. it added a new line saying the economic outlook has strengthened recently. the fed also raised the outlook for the funds rate in 2019, 2020 and the long run, but didn't raise it for 2018. it remains three hikes but by a whisker. looks like they needed one more fed official to raise by a quarter to get to that point of being for four

but the median remains at three. they did raise it to 2875 for 2018 so two hikes for the median forecast for 2019 to three raised it very aggressively for 2020 now looking for a median forecast of 3.4% on the fed funds rate that's a full two rate hikes from around what they had previously of just one the long run was also increased to 2.9 from 2.75 they raised the growth outlook for this year and next they lowered the unemployment forecast in some cases sharply down to 3.6 for 2019 that's .3 of a percentage point lower. little change to the inflation outlook. they raised growth, lowered unemployment don't see a lot more inflation coming on the way. let me tell you about economic outlook. they said economic activity is rising at a moderate rate. that's a downgrade which is

curious from what they said previously at a solid rate inflation expected to move up and stabilize around 2%. they changed it a little bit near term. more seeing the inflation coming rather than this year, they said in coming months job gains are strong household spending and business fixed investment moderated not solid as they previously said other language is the same including saying in the long run the fed funds rate would end below the normal longer run. the big news is this 2019 and 2020 upgrades to the funds outlook. just barely escaping the four rate hikes planned rather than three. or forecast rather than three. >> reaction to that, we are seeing the financials rally sharply. we are seeing yields spike keep in mind it was tight intraday still across the entire curve we are seeing that move particularly you can see here with the financials, obviously expecting more rate hikes. steve, stick around.

liz ann sonders is here, lori, steve and joe. what did you hear? >> makes sense the financials are rallying here. we have a combination of confidence expressed in the underlying economy rates moving up. a perfect storm for financials. >> steve, they were positive on the economy. >> very. they rallied the market right off those statements popped the market higher you would expect lower market. you would expect them to sell this it was almost robotic the way they interpreted it. it was what we would expect to have seen and they are selling the market off the highs we rallied around five or six handles in the s&p now they sell off. >> it's early in the post fed decision >> often changes, yes. >> joe, from what you heard do you think this was hawkish, dovish i feel like there is a little bit for everybody. >> a little bit for everyone it's clearly more confidence their forecast is what we had ativanguard for some time. three hikes, close to four in

2018 three more next year that symbolizes more confidence in terms of their outlook, the fiscal stimulus adding to that most importantly the unemployment rate. it's likely that the burden of proof for the fed not to gradually raise rates over the next two years is rising as the unemployment rate falls. >> steve, same question to you >> you know, i think the market dodged a bullet here in terms of what it was looking for. it's difficult to process. on the one hand you could say the fed is getting aggressive here when it comes to the outlook for 2019 and 2020. on the other hand, you can say that's 2019 and 2020 i don't need to lose sleep over it now the fed does see the market, the economy strengthening. it's also important and i think we'll question powell about this they don't see a lot of inflation to go along with the lower unemployment rate or the stronger growth.

that's significant and part of what we are doing today and i said this in the 1:00 hour is resetting expectations how does the new board, the new fed chairman process the new data we learned he doesn't process it in terms of very much near term inflation or even needing to kind of run very hard when it comes to interest rates. saying, you know what, down the road if i have to, i'll raise rates. >> got it. all right. let's talk about the reaction in the bond market. rick santelli standing by. we saw equities rally and fall back bond yields spiked what are they doing now? >> let's start with the dollar index. that was exciting. if you look at it, initially it dropped quickly. then it turned the other way before the statement was read it was down 22. i saw almost double down on that now it's within striking distance of unchanged. two year no-yields i saw 2.36, 2.37, 2.34

we are down a basis point since the statement. i saw 2.92, three basis points away from testing the high closing yield for the year back exactly where it started at 2.39 the onlymaturity that's holdin onto one basis point of gain at this point is the 30-year bond at 3.11, now 3.12. i think the most fascinating aspect of the effects of the fed today on the treasury market isn't the directional basis point here or there but the fact that the yield curve shifted in a parallel way maturity yields all went up and came down about the same amount. and we are still flirting with so many days in a row spending time at the lofty end of an established range. the fact of the matter is if we close today and don't have a 2.9 handle i think it means a lot. 3% will get a lot more difficult

in between meetings unless we see some big economic data points do much better, aka, think retail sales and productivity >> the ten-year is at 2.9 now. we'll watch that level as the day goes on here rick santelli, let's bring in bob pisani what's the stock market telling us in response to this >> this is a slightly more hawkish than was expected. traders have been making a bet the last few days. the risk of a much more aggressive fed has lessened a little bit the data was weaker recently, less inflation concern trade still a threat out there but less inflation was a major issue here look what happened we got almost 4, not quite two hikes to three in 2019 more aggressive in 2020. that was more aggressive than people thought look at the s&p. we were up 11. we went up to 16 immediately

after but have come back down to up 13 now. modest move there overall. i think the key point is the more aggressive commentaries about future rate hikes. it is certainly good news. they raised the outlook. economic outlook has strengthened recently. i see gold has been up, oil as well the dollar is pulling back that's a good sign for the markets overall. now the big hope is tomorrow or friday, excuse me, on the china tariffs from the president and the hope of course is while he may talk about it, he's not going to actually impose tariffs like steel and aluminum. that leaves it open to comments. there is a path to potentially having a little bit of a move up in the market for the rest of the week back to you. >> all right, bob. thank you. let's bring back in liz ann sonders of charles schwab. you said before it is a passtiche of things.

we have this decision, the statement here what's the next catalyst you are looking forward to we have the press conference but do you see, as bob mentioned, a path for the markets to go higher by the end of the week? >> i'm not a short-term, one-week trader, but there were some important dots connected, no pun intended, with what happened today as put in this statement. you had the change to the summary of economic projections to the more optimistic side. on both growth and the unemployment rate. importantly, no change to the inflation rate which i think directly connects to why the dots didn't jump up for 2018 i think the story here is reflective of the fed that still views a tight labor market as eventually leading to an uptick in wages and inflation that they believe maybe the phillips curve isn't dead and buried. up until this point there have been plenty of reasons -- many secular -- for that not yet to be kicking in.

they are not going to step up and be significantly more hawkish until they see the whites in inflation and wages' eyes maybe in the near term there will be a continued focus on inflation data, wage data and the leading indicators they have shown that that's the factor that's keeping them from getting too aggressive this year >> at this point, lori, what they described is kind of goldilocks, right? when they anticipate unemployment falling to 3.6% and yet not worried necessarily about inflation and not raising expectations if they are raising rates they expect growth. >> you could hear a collective sigh of relief around wall street when the comments on inflation were relayed here. that's the thing that's stoked a lot of years on wall street. they didn't come through. >> it could make people feel more secure that inflation isn't

spiking. but the flip side is they are definitely bewildered by the lack of inflation. i think this is something that's an overlay with this fed, the last fed i think this chairman needs to sort of address it and get in his head a little bit about what the thinking is and why. liz ann said it before is the phillips curve dead and buried, still there or if it is dead and buried, why is it dead and buried and what are we looking at now to give us signals moving forward i think that's what the marketplace truly is or wants to be miopic on and has any type of ammo. >> in terms of market reaction, trader reaction, we noted the jump in financials that's no surprise we had just as strong if not a stronger jump in semiconductors up a percent off the back of the decision. >> people look for growth. when you look for growth, when you want the water you go to the

beach. when you want growth you go to tech traders look at semiconductors and they have been on fire when you look at this when the fed tells you about growth, you go to where it's been in the tech space, specifically semiconductors recently. >> i have been watching the sectors flip through on the screen tech isn't up as much as financials today semis may be doing well but that's a cyclical side, not the secular side of tech what i like about the market reaction is we are moving to new leadership areas, the more value oriented part of the market. >> steve -- >> i want to pick up on the issue of leadership. one of the things we are looking for here and the market wants to know is how did jay powell do the first time out if jay powell just engineered a shift in the expectations of the fed to higher rates to be

commensurate with the new shift in the economic outlook that went with tax cuts of higher growth and done so in a way where the market seems to be reasonably stable and the fallout from this is a couple of basis points higher on yields, i think it's a prettygood first effort here. we'll see if these levels hold i'm glad liz ann is here i know how dispassionate and objective she is about these things if you are thinking, hey, this is the first shot out of the box. he had a pro the problem was outlook for better growth and i had to shift up interest rates. did i do so in a way that didn't dramatically upset markets the first ten minutes or 13:20 of this says he's got it done at least for now. >> joe, if you were able to ask a question of jay powell at the news conference, what would that be >> what influence is computer technology stunting or keeping down inflation our research shows digital

technology subtracting 50 basis points a year from core inflation trends we have not seen much of that research corroborated from the federal reserve and others it's important because of the distance between where core inflation is today and where the fed and everyone wants it closer to 2%. there hasn't been widespread acknowledgment that the technology is keeping a lid on it and not amazon prime but the use of computer technology throughout the entire u.s. and global economy so that's what i would be asking for. have they quantified it at the fed? if so, how much of a drag is it? do they anticipate that being permanent? that has implications for how far the federal reserve may need to go next year and in 2020. >> sure. it would inform the review of how many rate hikes if they thought it was a permanent way to reduce inflation at this point. >> it would. >> thanks, guys. ladies, too. liz ann sonders, lori and steve are sticking around until powell

begins his first news conference as fed chair. meantime we want a quick check on the markets here. this about 14, 15 minutes after the fed decision the dow is higher by 50 points from before the decision was announced. up 202 points, good for a gain of .8% s&p up by .62% nasdaq up by half a percent as well take a look at the cyclical sectors. financials up a percentage on the back of the decision industrials up by a percent on the back of the decision look at the fixed income market. we are looking at yields closely. we had seen continued flattening of the yield curve today we have the ten-year note. the yield slightly higher compared to before the fed decision 2.911% is where the ten-year note is now. taking a look on the shorter end. before the decision it was 2.33%. just about where it was there. 2.324.

tyler in. >> melissa, thank you very much. the decision is out but we are just getting started in a moment we'll hear from bill gross of janus henderson and the exciting press conference, his first with the media, jerome powell we'll be right back. each day our planet awakens with signs of opportunity. but with opportunity comes risk. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward. it's simply a matter of following the signs. they all lead here. cme group - how the world advances.

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the fed raised interest rates by a quarter of a point. let's get more reaction. there you see the range. 1.50 to 1.75 bill gross is with janus henderson. hi, bill >> hi, tyler >> steve liesman summed up this sort of maiden voyage for chairman powell by saying at least as far as he can see in market reaction there was no disappointment and no surprise, no shock do you share the view? >> i think that's true a little bit of a shock to me in terms of stocks, but good for them in terms of the increase. i'm amazed though that the bond market has not reacted a little more significantly in terms of higher yields. i mean, looking at the dot plot, and i think chairman powell can

explain it a little bit further in a few minutes but the fed's projections for the next year or two, 2020, you know, they are projecting fed funds above 3% you know, with fed funds above 3% the ten-year at 2.91 doesn't belong there i simply think the market, including myself, by the way, doesn't believe what the fed seems to believe in terms of how high they can raise policy rates in the future. >> yeah. based on what he did or what they did with respect to their economic prognostications taking the gdp up, taking the unemployment rate down, keeping inflation roughly where it is, you would suggest -- and the idea that there are at least going to be three hikes this year, three next year. you would at least think maybe the reaction in the bond market would be more intense and higher >> yeah. i think so

that's my surprise today i have been bearish on bonds i suggested a bear bond market the fed will be limited in terms of how high they can raise policy rates the dots suggest they think they will the market and i think they probably can't one way to point it out would be to suggest that nominal gdp at about 4.5% has been about 150 basis points higher than the ten-year since the great recession. to me that's the new normal policy environment i think the fed has to consider that they don't want to talk about it they have to consider it a 3% ten-year to me is adequate if the fed doesn't raise rates by more than two or three times. but the dots suggest they might be wanting to. >> i know it will be a great

comfort to you, bill, that i share your view that there will be a bear market of bonds. maybe a shallow bear market. it could be troublesome. that said, if i buy that argument what should i do with my fixed income money now? should i look at corporate, overseas, what >> i think corporate and high yield spreads are widening i suggest that while we are not headed for a recession, we may be in a period of lower gdp growth than the fed thinks or than the market thinks so it's a little bit dangerous in terms of high yield bonds and corporate bonds. so what should you do with your money? it's a hard predicament in the bond market. i would say definitely keep it short. reduce your duration relative to your targets reduce your average maturity relative to targets and be satisfied with the short-term rates that are being raised by

the fed at 25 basis points every quarter or so. >> yeah. expect bonds to be bonds bill, thank you. always good to see you. >> you're welcome. nice to be here. >> bill gross. we are minutes away from jerome powell's first news conference as fed chair. we'll take you there live as soon as it begins. the fed chair in the chair when ow lchrerninwo minutes. hi, i'm bob harper, and i recently had a heart attack. it changed my life. but i'm a survivor. after my heart attack, my doctor prescribed brilinta. it's for people who have been hospitalized for a heart attack.

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moments away from jay powell's first news conference as chair of the federal reserve. lori and steve remain with us. most important thing before we into the news conference >> just in terms of the confidence he exudes >> style listcally when he comes out he's got to look like he's in command. >> he's got to sell it he's got to get equity investors comfortable with the plan. >> only because he's new or because he's not an economist or all of the above >> all of the above. let's not ignore the fact that he's new if you look back when janet yellen took over the market sold

off 6% around her confirmation to the first day she took the jo we have had a lot of turbulence around powell. i have sensed a little bit of nervousness about this transition in talking with investors. >> when he appeared before congress the markets had a tantrum. here we are in a period of volatility people cite the possibility of a misstep by the fed which i'm not sure would have been cited i janet yellen had continued we know her. >> the market fears what they don't know if we think about what knocked the market off in the beginning, the onset of the sell-off was inflation. inflation scares anything around inflation is what the market is hungry for, thirsty for. look at the market now a couple of handles lower than we started this whole thing. to get granular, there is a 20-day moving average. 27-34. that's considered the bull-bear line, momentum indicator the market ran up in

anticipation i would think we are in for lower markets. it should not trade higher on his testimony. >> we have talked about the big f.a.n.g. sell-off. if facebook hadn't happened -- how much of what we saw over the last couple of days was what you were saying, nervousness about jay powell coming on board and yet facebook was a layer on top that obscured what would have been the otherwise obvious nervousness. >> i can't get into facebook specifically there were specific company issues there i think that big sort of internet trade has had problems and was looking for excuses to sell off it's been overvalued, crowded, the thing that got you here to this lofty place in the market you're going to take profits at this point or move to something new. what i like is we are moving to something new. that was a very healthy reaction that we saw with the financials upswing. >> the tech sector trades at 11% premium to the markets, highest

since 2009 that was the moment you say do valuations line up with what we are expecting to see now we know the fed will do probably three this year as far as we are concerned and for most investors 2018 is it, is it smooth sailing ahead >> if you look back, i will go back five years. tech has outperformed. if you go back five years, consumer discretionary outperformed financials outperformed. those three bets pretty much seem safe if the overall market will move higher i don't think anyone is going to question a valuation on google i don't think anyone will question valuation on facebook facebook trades at that time w lowest p.e. in, i don't think you can question valuation on a handful of tech names. amazon will always be a valuation question that's the one people will look to to sum it up, i think the horses that led will be the horses that continue to lead we saw industrials money come in

yesterday. that's based on the infrastructure play they thought was dead and buried. now it seems to be resurrected those are the names that probably will take the market further. >> quick market check here we are seeing the markets back off of the highs hit on the back of the fed decision. the release of the statement the dow is higher by 148 points. just about where we were up .6%. s&p 500 higher by 11 on the s&p 500 in terms of sector leadership, financials maintaining gains up 1% on the session. we are seeing nice gains in industrials and materials and energy continue to lead. let's go to jay powell for his first news conference as fed chairman >> good afternoon. i have a brief statement and then i will be happy to respond

to your questions. the job market remains strong. the economy continues to expand. inflation appears to be moving toward the fomc's 2% longer run goal as you already know we decided today to raise the target rate for the federal funds rate by one quarter percentage point bringing it to 1.75% this decision marks another step in the ongoing process of gradually scaling back monetary policy ac kaccommodation which s been under way for several years now. job gains averaged 240,000 per month over the past three months, well above the pace needed to absorb new entrants into the labor force unemployment remained low at 4.1% while the labor force participation rate moved higher. over the past four years the participation rateremained roughly unchanged. that's a sign of improvement given that the aging of the population is putting downward

pressure on the participation rate we expect that the job market will remain strong although the growth rates of household spending and business investment appear to have moderated this year, gains in the fourth quarter were strong and the fundamentals remained solid. the economic outlook has strengthened several factors are supporting the outlook. fiscal policy has become more stimulative. ongoing job gains are boosting incomes and confidence foreign growth is on a firm trajectory overall financial conditions remain accommodative against this backdrop inflation remains below the 2% longer run objective. overall consumer prices, as measured by the price index for personal consumption expenditures increased 1.7% in the 12 months ending in january. the core price index which excludes prices of energy and food and is typically a better indicator of future inflation rose 1.5% over the same period however, as we have noted for

some time, the shortfall of inflation from 2% reflects at least partly some unusual price declines that occurred nearly a year ago in coming months as the earlier declines drop out of the calculation inflation should move up closer to 2% and stabilize around that level over the medium term. of course, various forces will continue to affect inflation at times it may be above 2% just as at times it may be below. our inflation directive is symmetric. we are trying to prevent persistent deviations from 2% in either direction based on the projections committee participants submitted the median projection for inflation adjusted gdp is 2.7% this year, 2.4% next year. the median projection for unemployment rate stands at 3.8% in the fourth quarter of this year and runs at 3.6% over the

next two years, almost a percentage point below the median estimate of the longer run normal rate. finally, the median inflation projection is 1.9% this year, 2% next year and 2.1% in 2020 compared with the projections made in december, real gdp growth is stronger the unemployment rate is lower and inflation is slightly higher as i noted earlier, today's decision to raise the federal funds rate is another step in the process of gradually scaling back monetary policy accommodation as the economic expansion continues. this gradual process has been under way for more than two years and has served and should continue to serve the economy well in making our policy decisions over the next few years we'll continue to aim for inflation of 2% while sustaining the economic expansion and a strong labor market in the committee's view, further

gradual increases in the federal funds rate will best promote these goals. by contrast raising rates too slowly would raise the risk that monetary policy would need to tighten abruptly down the road which could jeopardize the economic expansion at the same time we want to avoid inflation running persistently below our objective which could lead us with less scope to counter an economic downturn in the future par 'tis tants projection of the path for the federal funds rate reflect our gradual approach the median projection is 2.1% at the end of this year, 2.9% at the end of 2019 and 3.4% at the end of 2020. by 2020 the median federal funds rate is modestly above the estimated longer run trend most participants revised their projections up since december although the median projection for this year didn't change. the medians for 2019 and 2020 are somewhat higher than in

december of course we'll be watching how the economy evolves in the months and years ahead relative to, ma multiple employment and price stability objectives if the outlook changes we'll adjust monetary policy appropriately. finally, i will note the program for reducing our balance sheet which began in october is proceeding smoothly. barring a significant and unexpected weakening in the outlook we don't intend to alter this program as we have said, changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy. as always, the committee would be prepared to use its full range of tools if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate thank you. i'm happy to take your questions now. >> mr. chairman, welcome interesting changes in the

forecast higher growth forecast a full point above the long run lower unemployment, .7 below the long run yet very little change in inflation what does that say about what you and the committee believe about the inflation dynamic and how is it that in that context you justify three rate hikes this year and i sense three next year and a full 600 billion annual rate decline in the balance sheet. where is your big concern here is it overkill when it comes to rates or underkill >> you're right. the outlook did improve as was in your question the committee's estimates of growth went up the estimates of unemployment went down. there was a slight increase in inflation. i think that reflects essentially, if you think back to the era after the crisis of unemployment was 10% now it is 4.1% you have seen gradual upward

pressure on wages and inflation despite a large increase that suggests the relationship between changes in slack and inflation is not so tight. it has diminished but it's still there. when you see the small changes in unemployment that reflects the flatness of the phillips curve, if you will >> is the biggest risk here doing too much, too little >> we are trying to take the middle ground there. you know, on the one hand the risk would be that we wait too long and we have to raise rates quickly. that fore shortens the expansion. we don't want to do that on the other side if we raise rates too quickly inflation then really doesn't get sustainably up to 2% that will hurt us going forward. we need that we need to make sure inflation expectations are anchored at 2%. we are trying to take the middle ground and the committee continues to believe the middle

ground consists of further gradual increases in the federal funds rate as long as the economy is broadly on this path. >> thanks. chair powell i want to ask about the inflation target, what you outlined as preventing persistent deviations. symmetrya that's part of the projection for core pce at least next year. how do you define symmetric relative to the experience of the past five years? would the fed be willing to accept the overshoot of the target as it's seen during the undershoot and how high is too high to maintain a symmetric target 2.25 2.5

and for how long >> what we have said is that we would be concerned with sustained or persistent deviations of inflation above or below. we have also said in minutes and speeches and things like that that it is a symmetric object e objective. that's how we think of it. i think i wouldn't characterize what we have done over the last five years as tolerating an undershoot of inflation. we were always pushing toward 2% that's how we look at it i can't give you the exact number we haven't agreed on that. it just is that we are always going to be seeking 2% inflation. in doing that we are going to be considering, by the way, the other side of the mandate. we have to balance it against the deviation of employment from unemployment from its goal also just the duration of it as well >> hi, mr. chairman. l.a. times even with the extra fiscal

stimulus of the tax cuts your meeting growth projection is just up to 2.7% this year and drops down to 2% by 2020 is the continued talk in washington about tax cuts bringing growth to 3% or higher on a sustained basis overselling the potential impact >> let me say what that really is the summary of economic projections is really a compilation of the individual rate forecasts the committee made one decision at the meeting to raise the federal funds rate by 25 basis points the summary of economic projections is individual forecasts compiled and written down you have identified the median as 2.7%. that's an interesting statistic. i would say that the central tendency is interesting, the full range you have a range of views around the table. one of the great benefits of the system is we do have reserve banks with staffs and governments with different

views. the committee doesn't vote or agree upon the medians so you will have a range of views 2.7 is the median for '18. it doesn't say what we think is possible i would say it's hard to say that's well above almost all estimates -- current estimates of potential long run growth it would take significant increases in productivity and labor force participation to get there. >> hi, gina with bloomberg news. obviously you guys reduced your neru estimate today but if you continue to see job gains, participation rising slightly, pretty sustainably moderate wage increases at what point will you question whether you are actually overshooting full employment and if you question

that, how will it impact policy? >> i guess i would start by saying that the natural rate of unemployment is not something that we can observe directly we look at a wide range of indicators on that you know, 15 or 20 at least. also i think we all understand that any point estimate is surrounded by wide uncertainty bands. so as the actual unemployment rate declined from 10% to 4.1% the committee's median estimate of the natural rate of unemployment has declined by a full percentage point. the committee and people are generally influenced by data as they see unemployment going lower they can looking at aspects including wage and price inflation. i don't think -- we are mindful of the uncertainty of that we'll be looking at that if unemployment does continue to go down we'll continue to do

that as i mentioned earlier, there is no sense in the data that we are on the cusp of acceleration of inflation. we have seen moderate increases of wages and price inflation we'll be alert to that the theory would be if you get below the sustainable rate of unemployment for a sustained period you would see an acceleration of inflation. we would know it then. we are very alert to it. it's not something we observe at the present. >> thank you very much sam fleming from the financial times. you and other policy makers have talked about head winds turning into tail winds recently does that imply that you think now a high and neutral rate of interest is operative in the u.s. economy and how would you assess the implications for monetary policy? second question, this is your first press conference, so it's early to ask, but would you like to do this more often?

thanks >> longer run values like the neutral rate of interest, the natural rate of unemployment, the potential growth rate of the economy are pinned down by slow-moving forces over time so they don't move around much i wouldn't expect a committee's predictions or projections or estimates of those values to move quickly they'll move slowly. so is it possible that the neutral rate of interest would move up because of, for example, greater fiscal expansion there is literature that says that there are reasons that might be the case in fact, it did tick up .1 as you know in the median at this time but i think generally speaking the committee sees the neutral rate of interest as still quite

low. it's not seen as having moved up and it is open to the possibility that it will oh, press conferences. so that's something that i'm going to be carefully considering. i have not made a decision about it my colleagues and i are committed to communicating as clearly as possible about what we are doing and why we are doing it i would want to think very carefully about it and make sure no one would take more frequent press conferences as a signal of the path of policy so it is something i'll be thinking about >> adam shapiro with the fox business network you brought up fiscal stimulus and the impact it's having how is the change in the federal budget deficit -- because the similar luis is coming -- stimulus is coming with great debt is there a level of treasury supply at which the fed would consider adjusting its balance

sheet roll-off given how much the u.s. government will have to borrow going forward and a second question, things beyond your control, the president's expected to announce new tariffs against china. does the committee discuss what potential impacts that could have in regards to inflation and do you have a timeline as to how you would respond to that? >> so in terms of the balance sheet, we have said we carefully developed this plan, socialized it in a series of meetings last year we announced it and said we wouldn't change it really unless there was a significant downturn that required meaningful reductions in interest rates i have no inclination to revisit that we'll use monetary policy as the principal tool of adjusting policy so on the second question on tariffs, a number of participants in this fomc did bring up the issue of tariffs. if i could summarize what came

out of that it was first that there is no thought, i think, that changes in trade policy should have any effect on the current outlook. second thing i would say is a number of participants reported about their conversations with business leaders around the country and reported that trade policy has become a concern going forward for that group >> marty krutzinger with the associated press you talked about projections based on the outlook of the members of the fomc. can you tell us anything about the staff forecast and how that was impacted by the -- we had a $1.5 trillion tax cut, $300 billion in increased government

spending the staff forecasts you are working with, are those reflected -- how were they impacted by that and how did it impact the discussions >> we look at the staff forecasts and the board forecasts and, by the way, there are 12 excellent reserve bank staffs who have their own views and do their own work. we look at those as informing the decisions of the policy-makers. it is really the policy-makers' views that we talk about in the sep. we don't talk about the staff forecast it's a particular thing done under particular rules and circumstances. really, it's the policy makers that then take it as input and create their forecasts which drive policy >> no impact though? [ inaudible that's a major increase in government stimulus. it had to have had an impact on the discussions, i would think. >> well, you're right.

fiscal stimulus is a meaningful input into the sep and particularly in the changes over the course of last year and this year individual their staffs a range of estimates, a range ever l of literature and came up with their own estimate and submitted those as their summary of economic procejections those are our projections. >> heather long, "washington post." what will it take to get to four rate hikes this year it is clear that many think four would be appropriate, but clearly something was holding a number of the foc members back is it concerns about these potential trade tariffs that are going into effect, is it just people want to wait and see a little longer before they raise? can you give us more insight why to why people didn't go to four

this time even though the economic projections look very healthy? >> i would go back to the thought that, you know, we made would be decision at this meeting. and that decision was to raise the federal funds rate by 25 basis points the projections are really just individual projections they are submitted and compiled. and, you know, you're mentioning the median as being three and four being close but i think like any set of forecasts, those forecasts will change over time and they will change depending on the way the outlook for the economy changes. so that is really all i can say. it could change up, it could change down. for now these are the best forecasts that people could make and it could be that if the economy is a little bit stronger or a little weaker, then the path could be a little less gradual or a little more gradual.

[ inaudible question ] >> no. >> jim >> mr. chairman, a quick follow on the trade question. on trade, what would have to happen in policy and particular in federal retaliation from countries around the world for trade policy to become a concern for the committee's outlook? and the second question, you mentioned for activity growth earlier, what is your current assessment of the path and has anything in policy, any policy change in recent months changed that assessment? >> you know, for trade, what i mentioned is that fmoc participants reported in that they had heard concerns which were relatively new about future trade actions really and they are seeing it as a risk to the outlook kind of thing. and so the kind of things people are talking about would be more

widespread retaliation and more widespread actions back and forth kind of thing. i can't be anymore specific than that in terms of productivity, productivity as i'm sure you know has been very weak since the financial crisis it has averaged only about 0.5% a year for the last six years i guess. so that is well below, you know, longer run averages. and it would certainly be a good thing to see it move up. it has moved up a little bit, but not decisively and, you know, you asked about fiscal policy and the connection to productivity. i think in the tax bill there are incentives for -- a tax cut bill that allows experiencing of investments should encourage additional investment that should encourageductivityproduc. a theory lower tax should

encourage more participation so i think it is important that we have a focus on productivity in the country it is not something that we are really do at the fed but, you know, we're certainly hopeful that there will be supply side effects like that from the tax bill. i think estimates are really all over the place in terms of the amount and the timing of those >> take your catch yot caveats t plo plot as it were. but it expects palmost 3.5% in 2020 which is above the neutral rate does that increase the risk of a fed-induced recession, decrease the risk of a soft landing which is asking in a way about the fiscal policy and as a followup, is that fiscal

stimulus starting to lead to questions within the fed around this narrative of secular stagnation and the economy entering a new sort of low rate environment? thanks >> i would say that remember that forecast three years out, so you're right, 2020, there is i think it is 3.4% is the median of the sep dots for 2020 which is 40 basis points above the estimates of the neutral rate which i would characterize as modestly restrictive, 34 modestly tightening. but it is highly uncertain we don't have the ability to see that far in the future so i really want put a lot in that it could make sense, you could imagine narratives in which that would make sense, but honestly i wouldn't put too much on that. so your second question was --

[ inaudible question ] >> you know, we've been through many years of growth around 2% and i've given a number of public remarks where i've called on, you know, the country to focus more on potential growth and productivity and labor participation which drive potential growth so i think it is really important that we do something do what we can as a country to increase our potential growth rate i would say in the bill that passed congress, the tax cuts and jobs act, there were elements that should encourage productivity as i mentioned. so encourage investment which should help productivity, encourage labor participation. we don't know the effects, we don't know the timing. as you look around the table, there is a wide range of views on the amount and timing of those. i think all of us would agree that we hope that they will be large. >> i have a question about the future of the mechanics and

monetary policy. wanted to know whether you favor sticking with the system that you have now keeping interestseo rate or do you want to shift back to the old way of doing things at some point of targeting the fed funds market and do you have any concern that if you do stick with the current system that is rates rise, that you might see issues where the fed is being criticized for paying out ever larger shares of money to banks to control interest rates in a some might perceive as a subsidy to the banks that are getting this money? >> our current framework for implementing monetary policy is working very well. we have excellent control over rates. and it is working and you described it accurately. we haven't made a decision to keep that as our longer run framework. we haven't really addressed that

question we've had meetings where we've talked about it and we've agreed that it is working well, and it is not something that i see us as needing to you are againstly address. i think we're continuing to learn about the fwram work for examp for example the size of the balance sheet will depend on currency and reserves. we don't know the demand for reserves in a rld wouworld wher have regulations that require banks to hold lots of high quality liquid assets and reserves so on it is not something we're looking at resolving in the nea term you mentioned the question on interest on excess reserves. and i think it is a misnomer to think that there is a subsidy there. we fay interest on excess reserves, we can't pay interest in excess reserves that is above the general level of short ter interest rates so we're paying rates that banks can get from other interest

rates from other -- any other investment in the short term money markets. in addition remember that those are liabilities. the assets that we have on the other side are treasury, securities and mortgage backed securities which yield higher than interest on reserves fp so in fact it is not a subsidy and it is not a cost to the taxpayer >> thank you very much several of your colleagues recently have been speaking and expressing concern about financial imbalances and rising signs of financial imbalances. i was would on wondering if you give us your view on the asset markets. do you see any bubbles and do you have the tools you need to combat those thank you very much. >> since the financial crisis, we've been monitoring financial conditions and financial stability issues very carefully.

and fmoc receives regular briefings about the staff framework and sort of measures of various aspects of financial stability risks. and the current view of the committee is that financial stability vulnerabilities are hod wr moderate let's say and i'll go through a couple pieces if you look at the banking system particularly the large financial institutions, you see higher capital, higher liquidity. you see them more aware of their risks and better able to manage them with stress testing and if something does go wrong, you have better ability to deal with the failure of those institutions and so therefore you don't see high leverage, you don't see excess risk taking in great quantities what you saw before the crisis if you look at household balance sheets, they are in much better condition. if you look at nonfinancial corporations, you see -- you