the ceo and vice chairman go on "mad money" with jim cramer one week ago next morning the stock bottomsed at 195 concerns about the new ceo no ceo transparency is important. i bought the stock yesterday insider buying you love te that from the c suit swooed. >> very big "power lunch" with a fed decision begins right now. the countdown is on. the federal reserve getting ready to announce its latest decision on into rates drops in just an hour. we are expecting a quarter point hike but it is the language that e investors will be focused on. >> we are live in the nation's capitol waiting for the big decision at 2:00 p.m the fed chair will give a news conference shortly after that, probably around 2:30

welcome to "power lunch. i'm tyler mathisen melissa is at the new york stock exchange and joins us in just a moment sarah eisen is here. we are all over the potentially market moving event. what it means for stocks, bonds, borrowers, lenners and more. >> let's check in on the trading action ahead of the fed decision stocks maged to carve out small gains. but the dow is lower tentative cautious trading ahead of the fed nasdaq 1 hitting new all-time intraday highs fox and netflix having the most impact in terms on points on the nasdaq 1u7b had. bonds are on the move ahead of the fed decision yield on the two year hitting their highest level in three weeks. home building stocks lower on pace r its worst day since mid may. taylor morrison leading the

decline in that group. investors banking to an rate hike today what will policy makers say about future hikes, inflation. and the overall american economy. steve leishman has a rundown on what we can expect. >> expecting a quarter point increase to a new range of 173 to 2%. there is other stuff going on that might put a hawkish till on the fed's commentary let me go through those. one is the quarter point hike. we might get to a consensus of possible four hikes beine consensus for this year. inflation was higher, both the ppi and the cpi was higher and unemployment lower since the last time the fed met. also some of the guidance, forward guidance change. i don't know about this meeting but it is certainly on the fed's mind and we expect commentary on that from the chairman's press conference one upward revision is a three

move the median. let's check. august and november it goes down those are non-meeting months there is that talk of an additional press conference out there. that's why because it doesn't want the market to not price in the possibility of rate hikes. that's potentially hawkish depending how it is characterized to the markets it could mean 25 or 50 basis points all this extra hawkishness of rate hikes if all of this stuff happens. there does not appear at the moment to be a consensus on the feds for a big rethink of the idea that the federal reserve is going the remain relatively low compared to last cycles. back to melissa. >> thank you very much steve leishman let's get the traders take ahead of the fed decision. bob pisani is with me on the floor of the new york stock

exchange as usual, quiet going intohe meeting. >> we are kind of flattish but we have leadership from health care because that time warner deal is helping some of the health care stocks we are not getting leadership from the. >> about, though, and energy this has been a problem for a couple of weeks now. they were, and they are not anymore. nsumer discretionary, historic high the retailers are doing well semis okay right thousand with -- a little more help froc. time warner/at&t deal is a dig influence. the health care group mergers, krsk acquiring aetna, aetna up nicely cigna acquiring he can press script, disney is a potential acquirer of the fox assets yet being down this morning, and then rocketed straight up up here a lot of call options. the ar out there, they have been short disney and long

fox on this merger arb deal. >> and reverse. >> that's right. i think there are some bets here they may not necessarily be winner of the fox assets, too, going on as well. >> yeah. >> that is the most likely explanation for what happenedis abouted on the trading action we are seeing right now as for the fed, i agrewith everything s said. the edt i would ad, just a lot of trader comment about the possibility of a press conference every meeting i do not view this as hawkish. it makes absolute se i think they should do that. but the market is a little bit concerned that this is another excuse for them to throw in that extra rate hike and go to four this year. >> we heard the possibility from boss particular. boss particular was talking about this possibility it gives the fed more flexibility is the way i look at it in terms of financials it's interesting. rising rates are good for financials but there is a fear here, this is probable bhooely what is gripping investors and financials that it would invert the yield curve. there is sort of a push/pull

here. >> i think that's highly unlikely given the way the markets are right now. the important thing is the loan growth, in my opinion, you are going to see much better loan growth comments. we haven't seen that we always play banks like it is soly an interest rthing.the ecor that's what i'm hopeful is going to move thing when we finally get the numbers. >> tyler, over to you. >> thank we are less than an hour away from the fed decision on interest rates what is the market expecting to hear today michael far and greb chip. gentleman thank you for being here. e to have you here >> highest year over year cpi increase 2012.ployment aneareco multidecade lows you have got the atlanta fed saying we may grow it 4% plus in

this quarter everyone thinks the fed is going to raise rates by a quarter. is the fed behind the curve. >> yes. >> should they have risen more, and more quickly >> yes, they should have raised rates years ago. thokn a paternitial -- >> they did, this is the seventh rate hike since 2015. >> they should have started more and been more esive. they took on this role, they were going to saves. i harken the days when the fed would come out and make their steemt, there wouldn't be interviews, wouldn't be any comments and they would close their doors and the market would react. >> you are old school. >> i know, but the idea that they have to hole our hand butts them in an untenable position. because it means that they can kind of solve whatever ales us whenever it ales us.

and th creates risk for their reputation right? they could lose credibility over that >> so is it time, greg, to take some of the market crutch off? in other words remove al qaeda acome dative from the statement. first of all, there is going to be less hand holding no matter what. in his first press conference three months ago powell repeatedly said made one decision today and refused to get into the business of guiding us about what wo next. that said, the documents are going to set up an internal tension. if they are realistic they will realize their forecast has to move up, the unemployment rate forecast has to go down. we are already at 3.8%, which is where they thought wat the end r it doesn't seem li a forecast consistent with just three rate increase this is year. whether he wants to say it or not, he is goinghave to

signal hey we may not be behind the curve now but we don't want to get behind the rve. >> today's story is that the market has grown so accustomed to the idea that the'd fed will only raise rates when there is a press conference scheduled the alternative is to raise rates when there isn't a press conference scheduled or have a prconference every time. >> there is no logical reason from an economic or an accountability perfect spektdive why you would -- >> i disagree. if i have a news conference at every meeting i think it highlights how false and how incorrect their forecasts have been and how they are going to have to react more to everyday data coming in and it's going to be tougher tougher for them to forecast and be accountable. >> they are big boys, sarah. let them come out and talk about that and have mean people like steve leishman and me question them about out. that's what being a public servant is about.

>> aaron burr's advice to hamilton, talk less, more. what do you think, michael maybe i characterized you wrong. >> start with old school, an anything you say after that is probably right f this is japowell he is not going to tip hisnd that if he thinks that having a press conference after every meeting kind of disspells any indication or inclination of the fed, will do that i think he really wants to be solomonesque he is jesuit trained i don't think you can forget at. >> his last presconference ended early. >> he is less gare louse. >> if he doesn't have anything to say, he is not going to say ityou could have 100 press a week and we wouldn't get more out ofim. >> his press conference as are

shorter. >> he is a lawyer, too >> if you look at unemployment ancpi things look pretty good right now. but there are downside risks, trade, emerging markets. >> strong dollar. >> and questions about which way we are moving in terms of the economy, picking up or slowing down. >> you could think of things like the trade wars, things like emerging markets as being tail risks. they don't change your basic baseline forecasts but they are out there and the basic baseline forecast keeps getting better this is the tension for the fed. how can they sti to such a gradual pace of rate increases where the economy is screaming it is on the verge of overheating. that's the delicate dance he has to perform at the meeting and also at the press conference. >> you saw the poi higher, producer price index those prices aren't passed along yet. that could be hurting mother-in-laws but you are not going to see it because of the tuax cut

it's giving corporations room and mask inflation that might be building >> we will sou later for the fed decision, guys, thanks very much. when we come back -- actually, let's go to melissa. >> thanks, guys. stocks are steady right now. investors playing the waiting tame course, ahead of the fed decision let's bring in david kelly of j.p. morgan und and shannon shicosha david, if the fed leans hawkish today we had a couple of guests fore outlining all the hot economic numbers, including pp this mor that have come in how do the markets react does that change your view of the markets for the balance of the year. >> well, no, i mean i think the headlines from the fed will be hawkish because they have to acknowledge the stronger growth, lower unemployment, temporarily high inflation had he it gets to the press conference or further statements they have to acknowledge this is

temporary. we have a sugar rush of fiscal but it is a sugar rush like if yove a kid cake and ice cream in the afternoon they might be running around like a crazy man but by evening they are asleep in the back of the car. i think it's important for the feto say there is reason to get back to neutral past here but we don't want to be aggressive because monetary policyks at a lag and fiscal policy is at a maximum acceleration right now and we will have to back off in9 that wil the hawkish sting out of what the fed says today. >> shannon, what do you think? same question to you. >> i agree with a lot of what david said i think that the reality is that the expectations are for three rate hikes i think the fed is playing an interesting game here as far as looking at the data that we are receiving and weighing that. i also think you have to look at the yid curve. we are pretty flat already

i think if you start to telegraph a fourth rate hike, how flat can we get before we are starting to worry about inversion? so i think that the overall statement will be more hawkish, but i do think we are not going to be pointing towards four rate hikes following this meeting. >> david, it sounds like you think there could still be market gains for the ball an of the year, at least if what you view for the markets is the same as what you view for the economy. >> well, yes, first of all on the fix theed income side i think we will have backu short-term rates as long term rates rise the problem is that equity investing is a monotheistic religion, it's all about future earnings growth. we don't see future earnings gr we see wonderful present earnings investors are appreciating how much money companies are making

this year so i think equities e but i think we need to recognize that the earnings are being front loaded here. >> is it the kind of market, david, where you stick to what's working right now given the interest rate backdrop and what you are seeing for the markets >> not completely. i like the equity story. i know it's faionable to pull back but right now it's like a heir in the pack running the u.s. is leading thck rinow.e pack iing to catch u next year. it is a temporary sugar rush i expect international stocks to outperform u.s. stocks over the next year. i would beeveleight the u.s. as well as international right now. long term, an overweight towards international as the rest of the world will grow faster in the long run than we do in terms of economic growth and earnings ve to leave it there thank you both

big moves, as you know in media stock today ashe approval of the at&t/time warner merger could kick off a new round of deamaking ich ks are in play. plus, we are counting you down to the federal reserve addition on interest rates we'll also hear from fed chair jay powell after t decision is released a jackedpower h" coming to you from new york and washington just getting sed >> announcer: this cnbc program is sponsored by payton and reegel requires both. with our broad range of services and industry expertise, kpmg can help you anticipate tomorrow and deliver today. kpmg.

dpt gets unconditial approval to buy time warner. comcast our parent company is expected to go head to head with disney to buy fox assets what's the latest. >> we are doesn'ting down until we expect comcast to unveil the bid. as you alluded to, the decisio in the at&t versus the department of justice case made it easier for comcast to overcome potential concerns that fox may have had previouy about regulatory impediment to a comcast bid for those fox assets that's not to say there won't still be perha a tough regulatory review or that there aren't certain risks associated with a potal tieup of a company that has content assets already, buying more of them particularly in the form of

broadband in various parts of our country. most of the people who i have spoken to and others who have been on our air during the course of the day believe it has opened up the way for comcast hey willake that bid the question is how high as we were told by comcast in a public statement weeks back it is likely to be all cash, likely to meet if not exceed the bid disney has made in terms of willingness to divest things like the 22 regional sports networks and the businesses that contributed up to $250 million in ebitda. will they go further will there be other structural thing that comcast says they are willing to do? how high will the price be mid 30s? potentially higher than that we are watching and waiting. fox's stock is up strongly when we get the bid, fox reporting they are suppose be in on the 20th of june. that's appropriate because they

can go over this bid then. if fox says hey that looks good, it could lead to a superior offer and then disney is left with a five-day period under which it has the right to match. match it is likely to do, at least in some fashion enough to continue to offer value and here we are on regulatory risk as well from paul gallon earlier today, getting back to that overall view that yeah we think this deal is likely to go through perhaps the man who lost yesterday's case with the dodge yesterday will want some behavioral or structural remedies but nothing too dramatic a bidding war is setting up here one like we have not seen in a long time. my sense is there is a willingness to compete with each other. the question is what price will be high enough, what structure will with unthe day and is regulatory going to be an issue for the fox board when it comes to comcast or even on the disney

said even though they have already said yes the disney. >> joining us now is barton crockett of fb -- b rily fbr thank you for joining us i think the most interesting reaction in terms of this sort of little un of stocks that may be involved in some fashion in a deal is shaof disney higher by 3%. the options activity is bullish on disney, which seems to signal to the marke that this deal or disney will not be the victor in a bidding war. what are your thoughts >> i think disney wants to be to have fox but i don't think it's must-have. i think they will be a disciplined bidder i think what we are hoping for is that there could be a compromise, perhaps they could split the baby my sense is that disney is particularly interested in sky and disney might have more interest in much of the rest of it we will see. i think at the end of the day

disney walked away from fox there business would be fine. >> in terms of comcast how high do you think they could go it has been telegraphed and report that the the roberts really really want these assets, especially the international assets, which would mean -- which would be game changing for the company since there is no international presence right now. how important is that in the long run for comcast. >> i think that the roberts to their own drummerty to march clearly their investors haven't been supportive but they don't need to worry too much about that i think one of the he other wild cards here is is it just disney and comcast? i wouldn't completely discount the possibility of another enter loep he were i think the india assets of fox, where they have the leading tv network conglomerate there with star would be interesting to internet guys trying to scale presence in india.

that could be a important ingat platform loing at the future, coming across many content and platform type possibilities. >> that's where i wanted to go barton, with you if vertical mergers are on the table now, what other sort of combinations are you dreaming up and put in the not improbable category >> yeah, look, i think you have got to be careful. i do see clear buyers for fox, right? fox has the most impactful content conglomerate available today. buyers are a limited universe. verizon, the big internet guys i think you go down the food chain of impactful content so cbs and viacom are inne ukt about. if the redstones were willing to negotiate i think there would be a lot of interest. i think then you could look at some of the discoveries of the world and the liquon'sgates of the world. the question is internet guys netflix and amazon they have

done so well with content they have build it versus buy menity. the real question is how to be successful in exclusive content. amazon and facebook. you could look at those guys to make acquisitions. facebook in ticket they bid against fox in the contradict rights in india and around the world very popular in india. i would keep an eye on what they do. >> barton, i'm thinking of brian roberts when he gets into a bidding situation he usually comes out on top there are a couple of things at play here. one would be price, and form of payment. as i understand it comcast is offering to pay in cash and may be offering a higher price than disney how much of an advantage, if at all does that give to comcast. how much of an advantage does

disney have because fox and disney personally and corporately have already agreed to a deal? >> i think for the murdoch family they would rather have stock. i would be surprised if comcast doesn't find a way to give the family the option of getting stock to limit their tax leakage. >> interesting. >> on the flip side i think disney is perfectly capable of throwing cash onto its offer the form shouldn't be a problem for either of the bidders. i think it is a question of who is willing to put the most stress on their balance sheet? and do we get some interloper? i think at the end of the day, disney would love to have it if they can but i don't think they are going to kill themselves to get there. >> barton crockett, appreciate it. >> the countdown is on we are 33 minute25 seconds away from a fed decision on interest rates about of we get to that, we will talk to one of the most powerful

people in washington, representative kevin brady, the head had of the house ways and y lls committee. anbis on tariffs a have t tough him "power lunch" will be right back duncan just protected his family

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however, ryan warned there should be no illusionings about dealing with a dictatorship who has been deceitful in the past. >> the status quo was not working with north korea what was the status quo? they were racing toward a nuclear weapon, racing toward having multiple independent icbms with nuclear war heads on them the president need to disrupt the sta us quo and has he should be applauded. an fbint who accident accidentally shot someone while dancing in a denver bar appeared in court the judge ordered the 29-year-old not the carry any weapons. he did not speak during the hearing. volkswagen has been fined over diesel emissions cheating in germany and said it will accept that fine the scandal has already cost the german automaker billions of dollars in penalties imposed by the u.s. authorities

you are up to date that's the news at this hour melissa, i will send it ba you. >> thank you sue herera let's get a check on the market before the fed decision as usual, as we expect on these days, hours ahead of a decision the market aren tighg range and almost unchanged the dow is down 25 point spds down by a quarter of a point. the nasdaq up 22 points. not a bad week for the nasdaq which has booked 1% gain so far. consumer discretion year and leading. the telecom and energy the biggest laggers. no surprise given the outlook for rates right now. rick santelli. >> all you need to do is look at fed fund futures december that spike there was may 29th the height of the italian votility before that, may and 2nd meeting we were lower than we are now. unusual because lower is usually less tightening and higher more

tightening it's drifting lower as the curve continues to flatten the dollar index is hovering around 9360. off about a fifth of a cent. like said, melissa, we are in tight ranges. let's head east. d.c. to be specific. sarah. >> rick, thank you the president is back home today but etary of stae eo is still in south korea putting a time line on innings we will tell what you he said. the g interview with house ways and means chairman kevin brady to talk taxes, trade, north korea, and the economy and jns more. heoi us here in washington that's next on "power lunch.

president trump is back at the white house today. secretary of state mike pompeo stayed behind in asia to put a time line on north korea's denuclearization house with the detailshe white

hi. >> hi, tyler a couple of off camera developments to bring you up to speed on first, mark short, the white house legislative director talked about the white house's effort now to push back on congress, specifically the united states senate, which has a provision moving up on capitol ent's ability to cut this deal to allow zte the chinese electroniccompany to get back in business. i talked with mark short about that this morning. he confirmed that the white house is pushing back on that effort, trying to get leadership and committee chairmen to pull that provision out of the defense bill, where it currently is we will see whether they are successful asked why, he said that the president believes china has been instrumental in helping us get to this point with north korea. therefore, the zte deal is important in terms of the relationship with china. speaking of north korea and chain. mike pompeo, the secretary of

state, talking to reporters briefly offering timelines now for where things go from here in theic with a of the summit pompeo saying that he is confident that north korea understands there will be quote in-depth verification of their denuclearization process also saying, we are hopeful that we can achieve major nuclear disarmament in t next two and a half years pompeo saying hopeful that can be done just before the end of the president's term in office in 2020. tyler. >> ayman javers, thank y for the update. north korea clearly one of the big topic here in washingt taxes and trade are still front and center ahead of the midterm election this is fall. joining us is kevin brady of texas, the chairman of the haste nice to see you. >> good. thks for having me >> congressman, clearly, the president has a lot of authority to implement his own trade policy without you but your committee does have a jurisdiction over trade. are you planning to block him in some of his recent efforts,

especially putting tariffs on our closest trading partners and allies. >> yeah, so rinow we are focused on helping the president target unfairly frayed steel aluminum, intellectual property and technology transfers that china frankly abuse for decades. he is right challenge them. the challenge, as you know, is how do you punish china's misbehavior without hurting american businesses workers as well that's where we are engaged with the president. trade is a partnership the president has some authority we have delegated to him we have held most of it. we think a partnership is the right approach here. >> how much daylight there between the congressional gop and thite house on these issues of putting tariffs on some of our allies like canada, motion co, and the european union? does it frustrate you that he has moved rather more unilaterally in these areas. >> there is growing frustration that these tariffs, which the president is using to try to

bring people to the table, you know, is having the impact back home we are certainly seeing it on our local businesses in texas as well and across the country. that's why we think, you know, are ly focusing this on china's diss behavior is the right way to go. especially now with tax reform, we are seeing a growing economy, demonstrated for new workers, think there is a demand for more customers, which free trade done right can help us grow this economy in a major way. >> you keep mentioning china the president has put tariffs on canada, tyler said mexico, and europe as well sounds like you don't agree that's the right approach but you are not willg to do something about it am i getting that right? >> no, we are think there ought to be exemptions for fashly traded countries and products. we think that's the right way to focus this and focus on unfairly ed countries and products we are working with the

president to do exactly that. >> mr. chairman, i see you are getting a nice tour of the capitol behind you there i hope you are learning a lot as the guide takes folkugh there. let me pivot to social security. the reports earlier thisk is that the program is either in or very close to having to taps surplus trust fund to pay benefits it is a looming issue in a midterm election year. what are you suggesting take in our bailiwickn issue that is >> i think it's critical one, we have a stronger economy because of tax reforms it's unof the reasons the red is beginning gradually to their rates. it's also bringing more people back to work with higher wages that's god news for social security but growth alone won't save the program. i think at the end of the day it will take democrats and republicans working to the to save that program for the long term and img that the trustees

report -- i think that the trustee's emphasizes what i have been saying, which is both parties need to get together we think there are good solutions to save that program over time. let's get to work on it now. >> are you frustrated that any nafta deal hasn't been done yet? >> yeah. look, i think pro growth nafta can be incredibly important to our economy. we have urned canada, mexico, and america, stay at the table we think there are some big wins for the u.s. economyn new nafta. we thi taking the strength of mexico and canada we can compete and win anywhere in the worlding clt soe think 's important to have an agreement reached this year put it in a position for us to vote on it next year but we think that's crally important. i tell you, i have worked on a lot of trade agreements. i think there is close enough here, i think they ought to be able to close this out in the months ahead.

>> mr. chairman, back to social security, at least tangentially, one way that it has historically help social security has been to increase the population of the united states through immigration. next week, you are a texas congressman, there may be votes having to do with immigration and daca what do you expect theation action will be there and what do you favor? >> i'm hopeful, for a couple of reasons. the main one, economic, which is, look, on with the new tax code one of the best in the world. we need more customers that's free trade. we need more workers and provide that work force, we think to all of the above strategy we need to debt immigration poliht we need to get work force policy right. we need to get welfare reorm to. move people off the sidelines back into the work force we think the bil wee it is shaped up could be helpful that way i think following up were's four

pillars, that's warehouse republicans are focused. i'm hopeful -- i haven't seen the bill of the bill, just some framework for it, i think it could take us toward securing in immigration and actually lems finding a solution. >> finally chairman brady, i wanted to get your take on the rising debt load this country, clearly the tax cuts are helping growth in 20 minutes from now we are expecting the fed to raise rates. there are some warnings about rising rates as a time of skyrocketing deficits. when do you get concerned about that >> we always have been clearly, the deficits are growing. but they are not because o tax code and tax reform. we are seeing growth from that already. but there is no doubt we are going to have to address the spending issue in a major way. i think -- here's my -- i think the thing when i'm watching for the closest at the fed is now that we have tail winds from tax reform i want to make sure that they normalize their rat gradually. they have been trying to do too

much in monetary policy. because the fiscal policy was wrong. but now that's right, on tax reform, and the regulatory approach is far more balanced we need to let the economy have its head the new normal that economists were predicting of 2% and nothing more is gone we need to allow the u.s. economy to grow at the pace that has been the average the last half century or more fed don't squash this economy as it's just getting its head. >> a message to the fed, under 20 minutes until that decision kevin brady, chairman of the house ways and m committee thank you. >> thank you very much. >> a cnbc exclusive interview with british prime minister theresa may as the fate of brexit hangs in the air. more on that coming up. plus at the top of the hour we got the fed decision on ines followed by jerome powell's news cfenconree. all of tt is ahead we are back in tw t more. t more. that's why i switched to the spark cash card

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. welcome back to "power lunch. we countdown to the fed decision here at home a. big cnbc interview across the pond. steve sedgwick getting an exclusive with theresa may, the uk prime minister. steve joins us from 10 downing street in london. >> we talked about tech, we talked about brexit. we also talk about the relationship between the uk and the u.s., between mr. trump and mrs. may going forward of course it has beea very different response to what happened in singapore, what happened in quebec as well let's listen in to the prime minister talking about mr. president trump. >> i welcome what has taken place in singapore i think what trump has been doing with north korea is important not just for that region but for the rest of the world as well. and at the g7, president trump and i had the opportunity to

briefly talk about how we continue to want to be able to develop a e deal after we leave the european union. yes, there are some issues on which we disagree. we disagree on the steel and aluminum tariffs imposed on the european union and the uk within that and we disagree on the nuclear deal in iran the point about the relationship is that we are able to have those disagreements and talk those through. but that special relationship between the u.s. and the uk continues, and i think will endure long into the future. >> very important time for mrs. may. she has a lot of votes going on a stone's throw away from here in parliament as well.t she wan the u.s. front and foremost despite the fact that she disagrees on iran and disagrees on tariffs back to you. >> naunk steve sedgwick. the homebuilders etf, hxb down so far the year the impact of rising rates on the housing sector that's next on "power lunch.

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welcome back to power lunch from washington. minutes away from the fed's latest decision onrait hikes

one sector moving and impacted by the decision is housing, home buildingtock getting whacked today on the prosecretary of higher rates diana olick joining us. >> builders are having stocks tanking today for several reasons, take a look at the first, that is the mortgage rates shot back up aga again. that put a strain on mortgage applications according to the mortgage bankers association. politics were lower for the week and lower than the same week one year ago we haven't seen an annual drop since last april when interest rates really spiked. a report from core logic noted that half of the 50 housing markets are overvalued

back to you guys >> it's nice to be with you, diana. >> fantastic diana olick, we're just moments away from the fed's decision ra onrait hikes dot awhe,e vet n'gonyer wha i all for you right after this

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we are four minutes away from the fed decision on interest rates let's get to our panel john bellows portfolio manager lori is head of equity strategy of rbc capital markets michaen d.c. is president of farr miller in wash and a cnbc contributor what are we expecting the rate hike as a foregone conclusion, in terms of a language, what are you looking for? >> the fed's going to confirm that won't be the news, i think the news will be how they characterize inflation and the international outlook. there's question marks on both opinion and we'll see if they t a hawkish stance there's room for them to be dubbish, if they're dubbish on

either inflation that would be a surprise >> i agree i think especially any on of exal threats we need to monitor is going to pay close attention to we really don't want to see anything that spooks the market. >> didn't we get a signal from the fed already that they don't want to determine monetary policy by what is going on >> i think that they say data dependent anat's clearly not dependent. we're going to be looking for a strengthening of the message that's the real key, are they going to do more than two more this year? that's what everybody's waiting to hear. >> do they feel they need to react too far, too fast. jay powell is a careful guy, we have to watch this closely >> we talk about good news is

bad news, bad news is -- you know, that whole thing >>. >> they hawkish and act dovish they want to say they're have their finger really on the pulse. once it comes down to doing something, they air on the dovish side. i think today's not going to be an exception in that, we're going to listen to his words i think he's hands on type person but that language is going to sound hawkish. >> three more hypes in the next year and a half. >> i think there's room for them to be dovish with the market price, that's the key today. >> let me turn to michael and ask do you expect the word

tarrish or trade to be in their statement? >> i hope jay powell wants to stay away. >> i think he's going to his go to has been just the facts. the old sergeant friday. i think he's going to say, look, we are data dependent and we're going to go to the data. >>. >> as an investor, what are you looking for? >> i'm going to be very interested to see how the different sectors react after the session comes out. >> i'm watching how the consumer sectors are going to act past week. done better over the historically, these are not places you want to be when the fed is hiking. >> just to make it interesting, the home builders are having a terrible day but as you just said, this should all be factored in.

>> i don't think the reaction is going to be as bad as the window dressing as we go into this fed decision >> federal reserve raising interest rates, raising 1.75 to 2% the fed further forecasting further rate hikes are gradu increases ahead in the target range for the funds racing this is consistent with the goals -- a strong labor market and inflation near its 2% target the consensus fed forecast looking for four rate hikes this yea year here is the new rateike structure in the years ahead 2018 is now 2.375.

the extra quarter point is picked up for 2019 to 3.125. the long rains the same of 2.9. what you see there, the fed bears itself going above the long run rate next year. a little faster than being above neutral. >> wll get to that in a second want to tell you the fed removed the line saying, it's likely to remain for some time below the levels that are expected to preva prevail. it's still calling its policy a combination at this point. here's a look at the language. landmark continues to strengthen, that's the same. economic activity is rising at a solid , compared to a

moderate rate household spending has picked up on the forecast for unemployment 1/10 lower in each of the next two years the lon run estimate remains 4 1/2. e the fed is okay being a percentage point below its long run unemployment rate. not much more inflation. gdp up a bit this year 2% in 2020 back to the long run rate of 1.8% opinion a lot of news going on there >> you see that dollar reaction ticking higher in yields, which are ticking higher, especially the ten year yields. would you say the biggest news the biggest headline in terms of changes for the fed outlook, they're now projecting four rat?

>> i think that's pretty big a chunk of the market was there. i don'think it's a huge shift for the market we're doing a bit more, and we may do a bit more in the year ahead. it you'll depends on the data. notice their inflation forecast -- they added 2/10. 2.1 for 2018, 2019 and 2020. they don't see inflation getting out of control, i think it's the controlling factor to where the federal reserve goes here. i think they're doing that by adding that quarter and then we'll wait and see >> what was that language that they took out? in other words, the trajectory of rates would be below what would be historically expected

that sounded important >> if i can count on the guy to ask the most complicated question, it's always tyler,thin there. it means the federal fund is likely to remain below levels that are expected to prevail in 2001 chill out, we are going to be low for a long time to go. i want to make one other point here i thought powell was going to move to simplify this day, he did. it's down to one page now. i counted at one point, statements that got up to plus 700 words. aler going on, stuff going in there to mully i i hawks and doves. you remember the last press conference he took as many questions in a shorter period of time, shorter answers, nobody felt like they were short changed on information. i think this is the new powell

era of simplicity. there's still transparency you go or the words a little more carefully he's taking a bunch out. that's the one he took out there tyler. >> a prevette ty -- yields ticking higher on the back of that michael farr in d.c., we'll turn to you >> i don't think so. yes, we were expecting the hype, i think if you listen to steve he was expecting a little mo more -- i saw two things here. it's now 4/10 of one percent,

the yield curve got a little flatter, they're raising that short end, the 10-year is not going up quickly we have to watch that, the other thing i see going on in markets, the nasdaq is in positive territory. the risk trade is back on, people are still astuing the more solid industrials on that news >> you were looking for comments on inflation, on the international outlook. as far as that's conceed, it's upgrading, and overall, sees growth pretty good >> this is just the first step the press conference is coming up in 45 minutes that's where you expect the international backdrop

the chairman said no signs ont e economic data. a deal at the ti. if he were to repeat something like that today, you would see a reaction to that i think that's still to come, that's on the press conference the markets are responding that higher dot. what i would emphasize there they're shifting around. that doesn't change the bigger picture here it doesn't change the estimate of neutral the inflation backdrop a lot still to come, you know, watch that press conference very carefully. i think that's where he's goin to give some new answer to this. >>. >> let's get quick thoughts from steve grasso before we go out to rick santelli. your quick reaction, and steve, jump in. >> i'd like to see the financials acting well here, i think the statement, what i heard is that the economic

growth outlook looks good. i think that's been a problem for the fiials over the last month or so.whh fears or jitters seep in, and financials get knocked down a peg i like the reaction there. >> if you take a look at the s&p financials, that doesn't tell the full story are we finally going to see these financials beh or will the fears of flat thing yield flatteni out the day >> the yield curve is going to win out. you have to go with thkre. the index is up 10% year to date that's been dead money we heard them spk bay hawkish, and this was already in the mix. so i would look for the market to do the reverse, and whatever we talk about this is the reverse of the first knee jerk reaction knee jerk reaction was t s&p. i would look for the to into t e

today. >> nice prediction there >> letturnack to you and ask a question, i saw in one of your notes, you talked about the idea that the risk rate may be back on.evidenced by the fact te nasdaq is positive you pointed out that eots of thin in nasdaq has been concentrated in those st e market capase in nasdaq, give me the numbers. >> i actually went back and -- you know that netflix since january, since december 31st, through may 31st is up 83% and it's got a good chunk of the s&p 500 and the nasdaq those kind of things are carrying the index. >> how much does that fact alone worry you. those stocks are driving the market >> maybe it doesn't work >> i get paid to worry about other people's money

the concentration bothers me you have the six or eight stocks you have this concentration of these high-tech stocks tt thdarlings, what is everything else doing why in the past have we wanted to go to consumer staple stocks and people are selling them now? there seems to be an appetite for greater risk in the marketplace. complacency is still very much with it. the fed is there to take care of us as we pass the torch, he's going to keep us from destruction. you can buy buy buy. >> we're talking about technology, is tech growth or value in this market environment

in a rising interest rate environment. ot of people have viewed it as way to play th is real the darling of the qe interest rate era there was no cyccal growth anywhere so people flocked to the safety of secular growth. if the fed's right and the economy is really accelerating and the financials are going to keep moving, i don't think that trade will last. >> you would say, lighten up >> tyler >> all right, thanks, folks. >> john bellows. and our friend michael farr, old school here in the studio in washington >> let's start with the dollar it was down a fifth of a percent. it's had a reversal rather impressive

>> you're looking at the chart weded up as high as 259 's now up 4 from that point that's the high yield close to the 16th of may. they're up often the curve, it's still hovering at 40 and finally, the 30 year bond 308. the curve has attening bias, it's exaggerated now you can just see the drift melissa lee, >> let's get some market reaction we're still fairly range bound. >> as often happens, initial reaction in this case. followed by a bi aebound >> we dropped down to 2780 as you can see here, 27.85.

traders down higher arinterestee fed remove the policy. they didn't even alter that. one or two hypes more in 2018. i think ouinflation wa theinfla. upgraded the economy modestly. raised the inflation forecast for 2018 and 2019. but not dramatically, it's over 2% right now take a look at the bank stocks, they moved up rather nicely as melissa mentioned all of the key names. >> now we have the fed raising interest rates a quarter of a point. we are just minutes away from

the press conference with jay powell bill gross will join us with his take on this decision.

federal reserve hikes interest rates a quarter of a point. it also sees four rate hikes this year, it may be up a ith

from three for more reaction, let's bring in our friend g welcome, g have you with us >> you can take apart the numbers, you can take apart the language, your choice. >> the nbers in particular, i think yes they're pointed toward a 2.9% long term federate. they see fed fundsghtly higher the next year as you mentioned, potentially two more rate hikes during this year i ten disagree. i think most of those plots tend to be too hawkish,n lowered over time i would think that based upon a number of factors that haven't been mentioned in the statement, but

will probably come out during a press conference that we've got one more hike at bes in terms of fed funds >> as you're speaking, it's sarah. climb higher, 258 on thayield. we're seeing this flattening moving closer toward an inversion. what is the market telling you there. >> as we know, history tells us, the flat yield curve usually precedes the recession, it doesn't always cause a recession. it's a good indicator. and sara, the yield curve six months forward is basically flat already. it meansthe market thinks that in late december perhaps that we'll have a flat yield curve. >> what does that do to the eco? >> it narrows bank margins

beginsy strict housing mortgages. if the curve truly does flatten 's negative for economicy. growth going-forward and it's an inflation reduce iror container, which winds up flat thing the curve in the first place. >> if you're right and they only do three hikes this year instead of four. i guess that would be mildly positive >> with the two-year where it is perhaps 30 or 35 basis points. there's not much an inducement to go along, you would think that long term boend or ten year note would be vulnerable. >> i think during this stage as we've seen for the past several years, u.s. treasury rates are being dictated not just by the fed and what they

might do in the future by the ecb which we'll hear from morrow >> the difference is 250 basisa that would not want to buy at 50 basis points would prefer to buy u.s.reasury at 3%. i think we have two central banks in play here that we have to watch carefully >> som this policy has been painful already now that we're getting higher yields, slightly hawkish take from the federal reserve. does that mean emerging market coue to be a sell? what are you doing in that space? >>. >> i think emerging markets are vulnerable i think we'll hear some comment on emerging markets. the fed doesn't like to month moat the notion that they look

at the dollar in terms of strength or weakness let's be fair the dollar is the. many have dollar denominated debts in the hundreds of billions of dollars. to the extent that u.s. interest rates go up, the burden on emerging markets gets more severe i think the fed must acknowledge that further interest rate increases which strengthens the dollar, which puts a burden on emerging markets may be part of their decision making going-forward. >> you know, bill, i guess one of the advantages of calling a fund that's called unrestrained, is doing whatever you want being unconstrained is having its down sides as well rarely have i had to ask about

volatility in your fund. you've certained experienced it over the last few weeks. basically in italy politically and in terms of their bond mark 99s. what would you like to say about the performance and share hold irs who may not bes accustomed to the fund in recent weeks. >> i think first of all all of the bad trade numbers on that one particular day have been made up. i mean iks t, the fund is up 2 over the last several weeks. the trade of the year, not this century, but the trade of the year, i would think it is the difference between that ten-year german bund and the 10-year treasury at close to 3%. one of these days, and hopefully be narrowed and so in the ot to meantime, there's some volatility as the bund does

better or as treasuries go up based upon fed decision on this particular day so investing requires patience and i've been at this for 35 or 40 years i would suggest to be patient. this is a trade th will work out. >> absolutely, bill. and your record certainly proves that we appreciate your time as always good to see you. >> bill gross at janus we are moments away from the jerome powell conference. we will bring that to you live more power to you, coming straight ahead disrusiness and taking on a life of its own. its multi-cloud complexity creating friction... and slowing innovation. with software-defined solutions, like hpe oneview,

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together we'll make the right choice. the fed raising rates a quarter point. we're just four minutes aw that fed chair powell's news conference john, i'll kick it off to you. what would you ask the fed >> so as has been noted, the yield curve is flattening today. as the fed raises rates, they're

gett cser to neutral policy is there any argument or consensus for going beyond yes, it's there in the dots, bu it will be interesting t he opines on that. oes it matter what the cur does because there are so many other factors cooling downand down >> i think the curve has their attention, i think rightly so. the flattening of the yield curve is signaling that the growth outlook over the long term is moderate and i think they need to be concerned about that at this stage. you're approaching neutral, be cautious don't overdo it, that's what the yield curve is telling you think what i'd like to know is, where they see inflation headed much as opposed to what the data is showing us so far.

>> there's a tight labor force, and wages have barely budged >> exactly >> the things, the improvement, the broadening out of th data wh investors are worried about is those things getting out of hand i think it could give some stability to this market >> we were just talks about some of the takeaways here on the market clearly the fed is sending a message that higher rates are coming, they're going to come faster, 9 economy is good. is the fed behind the curve? >> the fed doesn't want to do any harm, what is telling you? >> will the fed, to the panel move t high, too soon and

there by possibly increase the risk of tipping the economy into a recession. we don't seeny of that right now. growth is good global growth is good. trade tensions are building and tariffs are coming from every angle and emerging markets are slowing. >> we don't know what the tariff situation is going to be >> what takes chairman powell off center here, we all established there's been a death in the phillips curve. this is good to tyler's point is this as good as things get? we're looking at historically low unemployment growth may be slowing, but the united states is full steam ahead, what changes his policy plan what's the biggest thing they're looking at

they cannot explain lack of inflation. >> the markets are a forward looking instrument what do you do if you think right now is as good as it gets. >> i think you have to go sector by sector, stock by stock, and find out the best long term opportunities that aren't going to blow up in the context of these macro drivers we have going. > fed chair jay powell is going to the podium. >> i know a number of you will want to talk about the details of our announcement today. i'm happy to do this in a few minutes. because monetary policy affects everyone, i want to start with how the economy is doing the main takeaway is that the economy is doing very well most people who want to find jobs are finding them.

inte rates have been low for some years while the economy has been recovering from the financial crisis for the past few years, we've been grat of gradually raising interest rates in particular, we think that gradually returning interest rates to a more normal level is the best way the fed can help sustain an environment in which american households and businesses can thrive. we've takeother step in that process by raising our target range by a quarter of a petage point my kwleegs and i meet eight times a year and take a fresh look each time at what is happening in the economy and consider whetherur policy needs adjusting we don't put intereste decisions on hold or auto pilot. >> history has shown that moving interest rates too quickly or

too slowly can lead to bad economic outcomes. we think the outcomes are likely to be better overall if we're as clear as possible about what we're likely to do and why to that end we try to give a our expectations for how the economy will evolve and how our policy stands to make change i hope to foster a public conversation about what the fed is doing to support a strong and resilient economy. one practical step in doing so is to have a press conference after our meetings,we're g to do that beginning in january. that will give us more opportunities to explain our actions and to answer your questions. having twice as many press conferences does not signal anything about the timing or the pace of interest rate changes. this change is only about iming communications my colleagues and i will continue to issue projections on the

existing quarterly schedule. economic growth appears to have picked up in the current quarter. largely reflecting household spending the overall outlook for growth remains favorable. several factors support this assessment fiscal economy is boost ining t economy. foreign economies continue to expand and overall financial conditionsemain accommodative. these observations are consistent with the projections that committee participants submitted for this meeting the media projection is 2.8% this year. 2 pbt next year and 2% in 2020 compared with the projections made in march, this growth path

is little changed. in the labor market, job gained averaged 180,000 per month over the last three months. well above the pace in the longer run to provide jobs for new entrants into the workforce. the unemployment rate declined over the past two months the labor rate has been unchanged since late 2013. that is a positive sign. and we expect the job market to remain strong. as you can see in our summer of economic projections, the meeting of committee participants projections for the unemployment rate stands at 3.6% in the fourth quarter of this year a percentage point below the meeting estimate of its longer run normal rate. >> this median path is just a

bit lower than that from march after many yeaf running below ou2% longer run objective, inflation has recently moved close to that level, indeed, overall consumer index increased 2% over the 12 months ending in april the core pce index which tends to be a better indicator of future inflation, rose 1.8% over the same period. as we had expected inflation moved up as the unusually low out of the calculationch dropped the recent inflation datahave been encouraging, after many years of inflation below our objective, we do not want to declare victory. ensure that inflation remains near our symmetric goal on a sustained basis as we note in oustatement, the committee would be concerned if

inflation were running persistently above or below our 2% objective of course many factors affect inflation. inflation may be above or below 2% for example. the recent rise in oil pri will likely push inflation somewhat above 2% in coming months that development should have little if any consequence over the next several years >> relative to the march projections, the meeting inflation projection is a little higher this year and next. today we took another step in raising the target range by a quarter percentage point bringing it to 1 3/4 opinion

none of these changes signals change ir policy views for example, we remove the language stating that the federal funds rate is likely to remain for some ti below levels that are expected to prevail in the longer run. the economy has strengthened and the economy has raised the federal funds rate to near 0 as we continue to note in our statement, we expect to make further gradual increases in that rate. if t economy evolves broadly as we anticipate the federal funds rate will over the next year or so. move well within the range of estimate estimates we thought now is an appropriate time to remove this from our statement this will impact strong labor

market conditions and our 2% goal it may raise the risk that phe road. jeopardizing the economic expansion. >> if we raise interest rates too rapidly, the economy could weaken the committee's gradual approach is projected on e path for the end of this year by 2020, the median federal funds rate is modestly above its estimated longer run level these projections are very similar to those made in march

most participants did not revise their conclusions. >> first our program for ducing our balance sheet which began in october is proceeding smoothly this program will proceed on schedule and our balance set will continue to shrink. as we have said, changing the target range for the federal funds rate is our primary means of adjusting the monetary policy >> and finally, as discussed in the minutes of our may meeting we're making a small technical adjustment to keep the federal funds rate on the target range. we rely on interest reserves up until now, we have set the rate at the top of the target range for the federal funds rate in recent months the federal funds has moved up as short term interest rates have moved generally.

we are now setting the rate five basis points below the upper end of the target range. this minor technical adjustment has no bearing on the appropriate path for the federal nciaconditions more rally. thanks for listening and i'll be happy to take your questions on inflation, i'curious if there's anything that's happened since martha has changed your assessment of the risk of earn nation increases beyond what you forecast in the year to come. and on growth, you mentioned fiscal policy is adding to growth, i'm curious if you can break that down a little further for us and say, what effects do you think the recent tax cuts are having on growth opinion. >> i'm thinking about inflation or the way the committee's th k

thinking about inflation we've seen it move up 2% part of that has been id y idiosyncratic things part of it is tightening in the labor market and the economy is pushing labor up we continue to think, and the committee continues to think that we are just about at our 2% goal as i mentioned, not ready to declare victory until we sustain that over time, which we haven't done yet >> you also asked about fiscal policy, and there's a range of views on the committee, and i think a range of views among economists generally but i can say that the committee members, committee participants generally believe that the fiscalhanges, and that includes the tax cuts, individual and corporate and the spending changes will provide meaningful support to demand significant support to demand

over the course of the next three years. and the question -- the other hat about the site. it is done -- it makes sense if you lower corporate tax rates and allow faster investment, you am encourage greater investment, that should increase potential output i think the amounts and timing of that coming in are also quite uncertain. there's also the possibility that there would be more labor supply again in amounts and timing that would be more uncertainty. that's how the committee is thinking about fiscal policy >> the fed is about four interest rate increases away from what might be considered a neutral fed funds rate i wanted to ask, how you're

thinking about what to do once you get to neutral under what conditions would you decide once you get there, that it's okay to stop raising rates, and under wh contions would to keep going >> so for many, many years, we've been far from maximum employment and stable prices, the need for accommodative policy has been cl as the economy strengthened and as we've gradually raised interest rates the question comes into view of how much longer will you need to be accommodative, and how will you know how will you know at what point policy will be neutral meaning that interest rates are neither pushing the economy up nor trying to restrain it. we know we're getting closer to that neutral level the committee is discussing actively the questions that you raise. and really it boils down to a question of, what is appropriate

policy you ask, how will we know? i think we'll be very carefully looking at incoming data on inflation, on financial readings, and on the labor market we have to acknowledge there are uncertainty fans around the level of employment. what is the interest that pushes the rate neither up nor down we'll be guided by incoming data and try to keep our minds open as we move forward. >> 2.1% above target for 2 1/2 years, starts to feel like some alternate frameworks that have been discussed here, be it price level targeting or trying to set in deciding how symmetric is too symmetric, what sort of

parameters are you using >> our target for ouum term objective for inflation is 2% pce inflation we feel that target has served the economy we, and i'm mitted to it, the committee is strongly committed to it, the sort of barriers to making the material change to that would be very high. we think it's fundamental and we think it's worked. >> you ask about price level targeting and that sort of thing. you know, there are some ideas that sort of take cog any distance of the fact that rates are lower or near the zero lower bound. and that could put downward pressure on inflation expectations if we're going to be down zero bound and undermine the credibility of the 2% inflation objective the idea is to have a make-up, if you're below target for ailee above target the idea is to enhance the credibility of that 2% target. this is an idea that's been

written about for many years it's not something that the committee s looked at seriously, i imagine we will be having discussions about it, but not something we have on the calendar right now >> thanks very much. over the weekend we saw some significant tensions in canada, there's the potential for further action against china right now. how big a risk do yocurrently see this as being to the united states economy and what kind of feedback are you getting in terms of corporate investment intentions? is this something that's beginning to feature more prominently in your discussions with u.s. companies. >> congress assigned us very important jobs, and maximum employment stable prices, we have a role in financial stability. congress is specifically given

authority over trade to the executive branch i wouldn't comment on any specific trade actions i will say that we have broad contacts in -- among business leaders around the country and the reserve bank presidents in particular have that, so they report in beige book and then in person at the fomc meeting, and they come back and say that concerns about changes in trade policy are rising i think it's fair to say, and also that you're beginning to hear reports of companies holding off on making investments and hiring people. so right now, we don't see that in the numbers at all. you the economy is very strong we reelly don't see it in the numbers. it's just not there. so i would put it down as more of a risk. >> steve liesman, cnbc you said the a difference of

opinion among economists, but looking at the longer run gdp growth rates for the members of the committee, there's not a lot of difference. it's 1.8 to 2. is that showing us that not a single member of the committee including yourself agrees with economists at the white house that they can achieve long run sustained growth rates above or at 3% or higher. do you believe in that >> you know, first of all, that's a rnge, i think.t we're all on the same number, there were a range of views about potential growth. and there's so much uncertainty around this, the thing about fiscal policy is, you don't have thousands of incidents to -- you don't have big data in a wayve . only a few iere.

i think our approach is going to be to watch and see. and hope that we get significant effects to potential growth out of the tax bill. and we're just going to have to see. >> i think we're looking at a reasonable range of estimates and we're putting -- different participants are putting different estimates in, and we're going to be waiting and seeing >>. donna borack with cnn. you said earlier it's too early to declare victory on inflation. i want to circle back to a question that was asked at the initial press conference what does the fed say in regards to the inflation target. has the economy given any thought on how comfortable it would be rising above, whether it goes higher than 2.1, if it

reaches 2.2 and 2.3. now that you to hold these regular press conferences, starting next year, how do you plan to explain that to the american people that inflation is not overrunning >> what longer run principles and monetary strategy, we would be concerned if inflation were to run persistently above or below 2% and that's what we mean by symmetric. we're looking at it equally on either side and it's a matter of persistent overruns. we know inflation is going to bounce around. for example, as i mentioned, later this summer there's a good chance that headline inflation will move up above 2% because of oil prices things buffet inflation back and forth. so we acknowledge that we understand that and if inflation we topersisten 2%, then we would be using our tools to try to move inflation back in the direction of the target we do understand, though, we

don't have the ability to precisely hit that target. so we expect that inflation will be above or below and we just hope that that happens on a symmetric basis. >> associated press. at this meeting you hiked the funds rate, you changed the dot plot to move from 3% to 4% for this year, and you took out a sentence that you'd been using for years about how long rates might stay low but you say that none of this signals a change in policy views. but shouldn't we see from this combination thinks theed is moving to tighter policy >> i think what you should see is that the economy is continuing to make progress. the economy has strengthed so much since i joined the fed and even over the last couple of years, the economy is in a very different place.

unemployment is now 3.8% and moving lower the decision you see tod is another sign that the u.s. economy is in great shape. owth is strong labor markets are strong inflation is close to target and that's what you're seeing. for many years as i me many years we harest rates held low to support economic activity and it's been clear that as we've gotten closer to our statutory goals, we should normalize policy that's what we've been consistently doing for some years now. >> "washington post. can you give us an update on what the fomc thinks about wages? are we finally going to see that wage growth pick up this year? i know you're casting more inflation, but is that going to translate to wage growth >> you know, wages have been gradually moving up. earlier in the recovery they

were -- there are many diffe wage measures, of course but just to generalize, wages were running roughly around 2% and they've moved up to in between 2% and 3% as the labor market has become stronger and stronger i think it's fair to s that some of us and i certainly w have expected wages to react more to the very significant reduction in some of that was stemmed from low productivity which is something we've t about. nonetheless, we anticipated and many people anticipated in a world where we're hearing lots and lots about labor shortages wherest the wage reaction? i would say it's a puzzle. the it's a bit of a puzzle and frankly i do think there's a lot to like about low unemployment

one of the things is you will see pretty much people who want to get jobs. many of them will be able to get jobs you will see wages go up you'll see people at the sort of margins of the labor force having an opportunity to get back into work they benefit from that society benefits from that there's a lot of things to really like including higher wages as you asked our role, though, is also to make sure that maximum employment happens in a context of price stability and financial stability. which is why we're gradually raising rates. >> just a follow-up. inflation and unemployment, the new projections for unemployment lowered them befinflation higher how much is the fed willing to accept that's an overshoot for

both of those before it affects policy >> you mentioned nemployment modown, inflation moved up by truly small amounts if you look at the summary of projections. i thinks are moving by a tick or a semi-tick between now and march. and you ask -- you know, i think we take a longer run view that we're shooting for -- we're aiming for 2 the% inflation, inflation around 2%. we know it'll be above or below. we're not going to -- we didn't overreact, i think, to ilation being under 2% we won't overreact to it being over 2%. and i think we'll always be using our tools to move inflation in the direction of the target if it leaves -- if it moves away from the target persistently as i mentioned. in terms of unemployment, you know, you have to acknowledge that we are -- no one really knows with certainty what the level of the natural rate of unemployment is. that the rate that is sustainable over a long period of time. and we know that probably that

rate has declined as the u.s. population has become more educated, has become older, older and more educated people have lower unemployment rate we don't know this with precision. so we have to be learning as we go we've looking at data. and informed but what's coming in i think i mentioned at the last press conference, estimates by members of the committee have moved down by a full percentage point since maybe 2012 as we've learned, as flsn't really reacted.ed i can't give you a precise number, but we will be very much informed by incoming data. and this uncertainty is why -- the fact we live in that uncertainty is why we've been gradually raising rates. we're not waiting for inflation to show up we're moving gradually and trying to navigate between two risks really one would be moving too quickly.

inflation never gets back to target and the other is moving too slowly and then we have too much inflation or financial instability. and we have to raise quickly and that can also have bad outcomes >> bloomberg news. mr. chairman, i have a couple fe on excess reserves.terest the and you mentioned, of course, that the ioer was raised by the kmie 20 basis points that's a result, you said, of upward drift of the effective fed funds rate in that target range do you think that that's going to resolve that issue? or might there be further action required by the committee in the future to continue lowering ioer relative to the mid-point of the range? and further, was there discussing the committee today about what's causing that? is it purely technical perhapd to issuance.

or is it telling you about the level of scarcity in true excess bank reserves? thank you. >> thanks. so i would say that remember the important thinis that we want the federal funds rate to trade in the target range. that's the whole idea. ioer is the principle tool by which we assure that will happen and we've said, you know, our basic documents that we will adjust our tools at appropriate. we don't expect to have to do this often or again, but we're not sure about that. if we have to do it again, we'll do it again. again, don't expect it to happen you ask why. of course we're looking carefully at that. and, you know, the truth is we don't know with any precision, really no one does you can't run experiments. you know, with one effect and not the other. you know, i think there's a lot of probability on the idea of just high bill supply leads to

higher repo costs and the arbitrage pulls up federal funds rate towards ioer. we don't know that's the only effect and we'll have to be watching and learning frankly we don't have to know today. what we need is to have the federal funds rate trade in the range. that's what this minor technical adjustment accomplishes. >> edward lawrence from fox business with the numbers you're looking at, we talked about people getting jobs, the wages increasing are we seeing with the fiscal policy, a fundamental shift in the economy where there's lower natural unemploymentlso possibly a lower rate of natural unemployment and lower inflation? >> your question -- your first question really is we think the natural rate of unemployment is lower. so i think we do believe it has

moved down significantly over a long period of time. we don't think the natural rate of unemployment, it's not one of ose variables that moves around a lot it tends to be moving by the education level, the population, the functioning of the labor market things like at so it may have moved down, too, on a cyclical basis lower as the economy gets hotter. there's some possibility of that you know, the thing is if you look back, there's been a lot of studies done realtime estimates of natural rate of unemployment have uncertainty bands which are quite wide so we have to remember that. very much be guided by theng da. you ask about inflation. you know, inflation we look at the 2% inflation objective as something that central banks, the fed really control