>> joe >> an all-time high, prologuic >> steve weiss >> right back at you, scott. xpo is my final trade. >> gee, why did i know you were going there? i appreciate that. we are an hour away from the fed decision news conference to follow. "the exchange" picks that ball up right now ♪ thank you, scott hi, everyone i'm melissa in today for kelly evans. the countdown is on. markets trading in a tight range as investors brace for one of the most anticipated fed decisions in a long time with inflation running at a 39-year high, fed chair powell surprised the markets retiring the word transitory and admitting it is time to phoning us on high prices and speed up tapering what does it mean for the markets and the economy? our panel of experts are standing by as is tyler mathison live outside the federal reserve in washington, d.c. for the big

day. ty. >> reporter: melissa, i wish you were here because it is october in december here in washington it is a lovely day people are scootering, but in this building behind us or in the annex behind it, the decision has been made right now chair powell is probably being briefed by his staff about what questions to anticipate when he meets the press at 2:30. the decision has been made, the language has been settled on we don't know what it is transitory is out. will persistent be the new transitory is it the new black in fashion sense? we will find out here within an hour one other thing we should point out, we are probably the only reporting crew right here as close to where the decision is being made as anybody because everybody else is virtual, melissa. >> and you can probably feel the excitement, tyler. i have sat with you for so many of these days, ty, and we have scrutinized this statement with only small tweaks and minor changes. today it could very well be very different in terms of how much that statement gets overhauled.

>> reporter: well, there are lots of fed meetings that are inconsequential relatively p speaking i don't want to say they're meaningless, they're not, they all mean something but this one has the potential to be a big change, because what we're going to hear today is chair powell talking about what pivot really means what does that mean in terms of the tapering of asset purchases, how fast, how soon will it end, and what do the fed governors say, the fed folks on the fomc say about the pace and scale of interest rate hikes in 2022 and beyond this is about as consequential a meeting as we have had in years, melissa. >> it is all about, it will be all about the dots, the dot plots. all right. it is a waiting game meantime. markets slightly lower ahead of this decision. let's get to dom chu with the numbers. dom. >> melissa, tyler, you know it is a consequential decision when there's no action in the markets. the reason why is because every

trader and investor out there has jockeyed for position ahead of this and is now waiting to hear, waiting to see what the fed is going to do for that reason, the dow is down .03 of a percent. that's how flat it is right now. only ten points to the downside for a dow basis of 35,534. the s&p 500 is down a little bit more, down about a quarter of 1%, about nine points. 4,624. the nasdaq composite, the outsize underperforming down 131 points to the downside, 15,105 as always, interest rates. the real epicenter of everything on a fed day so watch what is happening with the ten-year u.s. treasury note, the benchmark yield just a hair below 1.45% right now. the two-year note yield just a hair below 77 basis points or .77%. that means the banks will be a big part of the conversation today as they often are on fed rate decision days

if you take a look at some of the moves in the exchange traded funds that track the financial sector, the banks overall, look at the financial sector spdr ticker xlf, up about .2 of 1% now. 30% gain on a year-to-date basis. we have been locked in a relative trading range over the course of the last three months. it will be something to watch. of course, the names that will move the market the most, the heavily weighted ones are names like apple, alphabet, amazon, microsoft among others, the most heavily weighted stocks out there. you can kind of see them just fractionally lower except for amazon, down 2% right now. they will be big ones to watch, melissa, of course, as the fed decision comes out back to you. >> dom, thank you. the last fed meeting in early november fed chair powell announced they would begin the process of gradually tapering. a few weeks later as the inflation numbers continued to come in hot the fed sounded more hawkish. now investors are trying to

gauge how much faster it could be and what their projection suggests about rate hikes next year steve liesman is here with what we can expect at top of the hour steve. >> melissa, a significant change likely coming in fed policy to be announced in now less than 60 minutes with expectations the fed will speed up the removal of pandemic emergency relief and set the stage for interest rate increases earlier than previously signalled to address high and persistent inflation. here is what the fed probably has on tap it will speed up the taper to 30 billion from 15 billion a month. that will end it around march. no longer is calling inflation transitory and almost certainly forecast higher fund rates in its own forecast in 2022 and beyond the difficult for markets pricing resets amid more aggressive fed policy and the uncertainty of how hawkish it will be. fed officials will likely increase their outlook for rate hikes next year and beyond respondents to the cnbc fed survey see a 70 basis funds rate in 2022. you see the fed look for just 30

basis points in the september projections. respondents see a 150 funds rate by the end of 2023 the fed had been at just 1%. now, since fed chair powell pivoted towards worrying more about inflation in testimony on november 13th, s&p mostly unchanged. the nasdaq, it is the one that's taken the brunt, 4.5%. 20 basis points have been added to the two-year yield. the ten-year is unchanged which kind of makes the nasdaq move even more puzzling we will see if after the statement and the press conference the market has fully priced in the policy pivot presaged by powell or if powell and the fed are more hawkish than they've let on. melissa. >> under the unchanged numbers we saw a lot of volatility in the last few weeks >> yes, certainly. yada, yada, it is unchanged, right? >> exactly neil hennessy and chief investment officer at hennessy funds on rates on the economy, julia coronado, founder of macro policy

perspective. thank you for joining us on this fed day. julia, i want to start with you. what are you expecting in terms of the most notable changes out of the fed today >> well, steve gave a great summary of what has become a very uniform consensus around the speeding up of tapering ending in march, adding some rate hikes into the 2022 baseline, getting rid of transitory i think the changes to their forecast will summarize the pivot here they're going to revise up near-term inflation pretty substantially yet again and revise lower the unemployment rate i think the way chair powell is going to cast this pivot is against the backdrop of an economy that's running really hot. hotter than they expected. we have q4 gdp tracking in the same territory as the first half of the year after a somewhat sluggish q3. that presages a lot of tightening in the labor market in the next few months, so i think that they're more confident that they're not going to have to decide between their

two mandates, but they will actually meet both of them so that they'll cast the lift-off in rates next year against the expectation that they will be in the neighborhood of maximum employment, just as their new reaction function specifies, and, therefore, it will be appropriate to lift off and precede towards a more neutral setting of policy. >> what are the rates markets telling us about the economy because it does seem that the flattening of the yield curve that we have seen going on in the past month or so is telling us that rates will be higher in the short term and longer term there's a question mark around growth >> so the market's clearly pricing in a sooner and faster pace of rate hikes perhaps two to three next year and a total of five by the end of 2023. really, the messaging from the market is that the curve is extraordinarily flat, the market's really thinking that the economy is going to, you know, not be able to grow at the same pace as it has in the last

couple of years. so really the flatness of the curve is quite dramatic, and it seems to be very much at odds with what the market -- what the fed is saying, the term of the fund rates is going to be. it is around 1.5%. the fed thinks the term of the funds rate is around 2.5%. today we will get more information on what the pace of the hikes is going to be and what their expectation is going to be for the term effect funds rate to me the messaging from the curve is extraordinarily pessimistic on the outlook for growth over the next couple of years. >> so, neil, there's a discrepancy between what the fed might be telegraphing and what the markets are sully sell graphing, specifically fixed income i'm wondering what you see and what backdrop you are investing for. >> well, you know, the feds are going to say what they're going to say, but they really can't do a whole lot, melissa, in my opinion. you have to look at the financial institutions, you look at the banks they are so strong and very,

very strong. if you start to go back into 2005, '06, '07 and '08 and you raise rates really too quick they will have to mark the market and they could run into problems i don't think the fed are going to raise rates in any meaningful way to hurt corporate america. as dominic was saying when the show started, everybody is looking to see what the fed is going to be doing but you will look at amazon, facebook, microsoft and apple, and these companies and/or stocks have been running the stock market, but there's a lot more to the stock market and investing than those six stocks yes, the feds might come out and use different language, but the bottom line is really they can't do a lot to hurt this economy because there's so much, so much cash sitting on the sidelines in the consumer pocket, in the s&p 500 companies. all companies have a tremendous amount of cash they're continuing to grow slowly but surely in the ensuing years. >> neil, do you think that the fed comes out extremely hawkish

and raises rates too fast, that it won't hurt the stock market at all it wouldn't hurt the economy >> it is going to be volatile. this is all headlines. right now it is another headline today, the feds, what they're going to do, is it the pandemic, is it the chain supply problems, is it inflation, is it the pandemic, is it the meme stocks. these are headlines, but behind the headlines are fundamentals fundamentally most companies are in very good economic shape, and that's you look at -- you are going to see the high-growth arena get hit in here like you are seeing with the nasdaq at the end of the month the nasdaq was up 24%, but if you take out those six companies i mentioned, it was up under 10% so people are going to be moving out of those, melissa, into high-quality value stocks. >> right >> that's going to take the market higher. >> if the backdrop neil paints, julia, is correct, then the fed -- there's not a big

possibility of a big misstep, and yet a lot of people are already saying that the fed has committed a misstep and has committed a policy error by not moving to quicken the taper faster, by not moving toward rate hikes faster, julia i wonder if you think the fed is sort of in a box at this point, that it is faced with the potential hiccups of omicron and the impact of the variants on the economy, but it has got to go forward >> yes, so i think you're making a great point, that there are plenty of people saying that the fed is going to make a mistake in one direction or another. but i think what neil is bringing up is very important, which is that the fed is going to feel its way along. it is going to be flexible just as it was flexible in pivoting towards a more hawkish stance now because that's what the data are telling it is appropriate. if we losemore momentum faster or if there's a stronger tightening in financial conditions in response to their pivot, they will calibrate

accordingly. so they're not locked into any path chair powell will remind us that the dot plot is not a promise, that the uncertainty around 2022 is still extraordinarily high. so the fed will promise to meet its mandates as best as possible i don't think the fed is boxed in to anything, and i think that they will remain flexible and very focused on not making a mistake, on tightening enough to keep the recovery in a sustainable zone but not too much that we, you know, head into a recession so i think that that's what we're going to hear from chair powell, is that they're going to calibrate according to the incoming data and that's part of the new reaction function. right now that data is saying get rid of the easing first, you know, get out of tapering faster that's what they're going to do. beyond that, really the momentum going into q1 and q2, how much of that cash that neil cited stays on the sidelines versus

finds its way into the economy, all of that is going to matter for the rate path and what is actually realized. >> subadra, what will you be looking at in your part of the world when the fed statement comes across and the statement is published i wonder what part of the yield curve will you be focusing on? >> highly focused on the dots. really, we will be looking to see if there will be three hikes in the median dot for next year, four in 2023, or if the fund rate will be a lot higher. i mostly agree with neil as well as julia in the sense that i don't think the fed is going to really sound very hawkish at this meeting they don't have enough data to guide the markets for rate hikes for the next several years so i think what they're going to do is have a risk management approach where they're very, very reactive if they need to, but for the most part at this meeting i don't see them suggesting a lot of hikes for next year or the upcoming years

because they don't really want to flatten out the curve too much and fed policy could lead potentially into a recession so they want to be very careful about the communication and not sound very hawkish today >> all right thanks for your thoughts, all. we appreciate it tyler. >> melissa, thank you very much. of course, the fed expected widely to speed up the hike timeline and the taper timeline. our next guest says never mind that pay attention to the number of rate hikes that may be in the pipeline here to explain, david wes el, our friend, senior fellow economic studies at the brookings institution. good to see you. >> great to see you. >> thank you for bringing in the beautiful weather. >> it is a good day to be outside, isn't it? >> you can't help but feel this pi pivot, this change in fed policy suggests that the fed was behind the curve, was slow to move or made a mistake am i right on that or am i wrong on that? if there was a mistake, what was

it >> i don't think we know whether they've made a mistake two things surprised the fed one, that inflation has been as high and persistent as it has been secondly, that so many workers remained on the sidelines of the economy, which suggests maybe they're closer to their maximum employment goal than they had expected to be at this point i think the problem they have here is they have to weigh what is the bigger risk, that we're going to have lots more and persistent inflation in 2022 and 2023 or that omicron and other developments will slow the economy. so they have to decide which is the bigger risk and adjust to that. >> they have a very difficult needle to thread here, and you are basically -- what i hear you saying is time will tell whether they, quote, made a mistake or not? >> exactly i think what their goal today must be is to keep their options open by speeding up the pace of tapering, they leave open the possibility of raising rates perhaps as soon as march of 2022, but they don't have to decide that now.

they will have a lot more information when that decision comes. >> so the last guest in the last segment said that she expected the fed to take action, but maybe to sound more dovish than the popular consensus today suggests in other words where people are saying we are going to go from one rate hike in 2022 to maybe three. where do you come down on that >> well, it is always dangerous to make a prediction half an hour before you actually get the announcement, but i think there's quite a bit of division in the commentary on the fed there's some people who say they're behind the curve john steinsen, an economist, co-chair of the nbr, monetary policy thing, thinks they should be raising interest rates in every meeting in 2022. another saying be careful, sometimes central banks overreact. i think they're going to say we're on the case, we're worried about inflation, the markets demand that, the politicians demand that and the public

demands that but they will be careful to keep their options open and not make firm commitments about 2022. the problem chair powell has is there are going to be these dots at the last meeting only half of the fomc expected a rate hike in 2022 today i'm sure we will see more. he will have to decide does he want to embrace the dots or talk away from them. >> what is causing the inflation and what is the new word that's going to replace transitory? what is causing it and what is the descriptor going to be >> i think the issue is there are two different things causing it, and they have to decide what is the most important. one set of things is very covid specific, and, you know, will used car prices come down as the market stabilizes? will demand for goods wane as people go more to services so if it is all covid they can afford to relax but there's a lot else going on. we've had a substantial amount of fiscal policy some of the supply chain kinks look like they will be around for a long time. there are a lot of people who have pent-up savings that they

will be available to spend so there's a balance, and they have to get that right i personally think that we're going to see inflation come down next year. that's not very controversial. the question is will it come down enough and fast enough to avoid infecting inflation expectations >> david, great to see you >> good to see you, tyler. come to washington sometime. >> i love it it is so nice down here. david wessel, brookings institution. back to you. coming up, the omicron variant is now present in at least 36 states. we have the latest numbers and what health officials are saying next plus, a victim of unrealistic and impractical expectations that's what one economist is calling the fed as it finds itself stuck between a rock and a hard place we have 40 minutes to go until the fed's decision on interest rates "the exchange" is back right after this this is "the exchange" on

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♪ a surge in covid cases and increased concerns about the omicron variant are prompting shutdowns on college campuses and broadway meg tirrell is here with the very latest. meg. >> hey, melissa. we are seeing case numbers, hospitalizations and deaths all rise cases up 40%

now, averaging 120,000 per day in the united states deaths up also 40% over the last two weeks, now to more than 1,200 every day in the u.s community transmission across the country, now we are seeing 90% of counties considered high transmission or substantial transmission those are the red and the orange on the map there that's where the cdc recommends everybody mask up indoors regardless of their vaccination status now, most of the transmission we're seeing right now according to the cdc is still the delta variant. the overall prevalence across the united states is about 3% of omicron, but it various regionally you can see really high prevalence in the new york/new jersey area, about 13% of the sequences they're looking at in those states are omicron you are seeing an effect on college campuses in particular in just the last couple of days hearing from kornell, nyu and princeton that they've all cancelled events they're moving finals online due to surges in cases, some of

which they suspect are omicron cases. now, the way the public health world is responding to this and health officials from the u.s. is emphasizing that booster vaccines appear to work really well dr. fauci focusing his scientific presentation in the white house covid briefing on all of the data we've seen so far and he had this to say >> our booster vaccine regimens work against omicron at this point there is no need for a variant-specific booster >> mel, we did just see the first data for a moderna booster actually presented by dr. fauci from the vaccine research center at nih, also showing a similar trend, that when you give the boost you see the antibody levels really going back up against omicron. mel. >> meg, can you speak to the overall number of covid cases? i saw a chart for the state of connecticut this morning i'm not sure it can be ex extrapolated for the united states as a whole, but cases

look to be the same as last december this is implying delta is still raging and causing the case levels to tick higher. >> absolutely. there's really concerning reports yesterday from a cdc briefing of public health officials where in one scenario you have a high level of delta cases, then you get an omicron surge on top of that we are also hearing that flu is ticking higher as well you are looking at what one person called a triple whammy of the three respiratory diseases circulating it at the same time which doesn't spell good news for the winter >> thank you, meg tirrell. coming up, tech stocks have gone nowhere up next, how the powell pivot may be to blame. "the exchange" is back right after this

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gold. your strategic advantage. ♪ welcome back market slightly lower. the nasdaq the biggest laggard, down just about .8% here tech stocks have not gone anywhere bob pez sisani at the nyse with more >> since the fed stopped characterizing inflation as transitory, software stocks are down 10% cathie woods arc innovation fund down 4%. big names, all down 11% to 30% since powell turned hawkish.

investors instead fled to cash or into apple. apple is up 8% since powell pivoted and it has become something of a safe haven for tech investors the fed's aggressive about face has called into question sky-high tech valuations on big names. jpmorgan software analyst sterling was on yesterday reducing ratings on adobe and a dozen other software stocks saying cash flow growth rates are the key to understanding the market he wrote, quote, this has been consistent since 2000 and brings into focus whether growth rates can sustain or moderate at a tolerable level to keep valuations propped up. this may be the first of many reevasions bank of america's internet analyst noted after a strong 2020 his internet stock was down 13% in 2021. he said, our b of a strategy team has a somewhat bearish view on the s&p returns in 2022 given high valuations and potential impact of higher interest rates.

we expect a chop py 2022. his main hope for a stronger 2022, valuations have already begun to adjust. we will see if we keep adjusting. we will see what powell has to say in about half an hour. >> bob, thank you. still ahead, the fed's impact on housing. mortgage rates expected to rise following a faster taper coupled with sky-high home rft orfor e usre looking at a peecstm thhoing market that's next.

♪ >> welcome back to "the exchange. i'm rahel solomon. here is your c nnk news update at this hour the senate voting overwhelmingly to approve a $770 billion defense spending bill. only ten senators voted against the bill the bill goes to president biden's desk for his signature in southern california cleanup has begun after a powerful storm dropped record-breaking rain rivers of mud and debris formed when more than 4.5 inches of

rain fell in less than 24 hours. remarkably though, no injuries reported on the news tonight more severe weather forecast across the west including a chance of an unheard of december tornado in minnesota that's tonight at 7:00 eastern and the navy says that it has successfully tested a laser weapon and destroyed a floating target in the middle east. that system could be used to counter drone boats carrying bombs used by yemen rebels last year it was used to take down a flying drone. you are up to date tyler, i'll send it back to you. >> rahel, thank you very much. of course, everybody knows that there's a direct tie between interest rates and housing. the national median sales price for sold homes is sitting at a record high, just above $400,000 if rates go up, what happens to prices what happens to demand for once, i get to say, hi, di you are actually here. >> and i get to say hi, ty, back >> it is so wonderful. so if rates rise because of fed

action and housing mortgage rates rise as well, what is that likely to do to the pace of sales, to the price of homes >> well, it is just going to make it that much harder for the first-time home buyer to get into the market, and they're already having so much trouble the reason actually we saw home prices rise so dramatically, so swiftly last year was because we saw more than a dozen record lows on the 30-year fixed. now we are well above that, about 50 basis points higher than we were a year ago. that takes out of affordability and makes it harder for those buyers to get in we could see sales pull back a little bit the question is will we see prices pull back a little bit, and that's going to be about supply i don't see a lot of supply coming on. >> melissa >> part of that, diana, also could be the raw material cost which we have seen gone up on the other hand, if fed powell is successful and, you know, a faster taper timeline, more rate hikes mean that inflation is actually nipped at the bud, then maybe buyers can see some relief on that front? >> well, i'm not sure because actually some of these commodity

prices that are going higher are not just about inflation like we saw lumber drop back to its normal level over the simmer only to spike back up over 100% last month because of canadian lumber tariffs and because of bad weather in canada and, of course, very warm temperatures here so you see more builder demand i don't know you will see material prices come down that much >> back the last time inflation was high in the late '70s, early '80s, i remember people saying that housing, real estate was a good -- albeit an imperfect hedge against inflation. is it? >> that's a weird, unique moment we are in right now because normally it would be a great hedge, but we are seeing home prices, home values so inflated right now, and so many investors in the market. the number of single family investors, not just large institutions but, you know, hedge funds, smaller groups, pouring into this market and fuelling all of this demand for housing, which is pumping up the value of these homes if these investors, which are no

longer just mom and pop investors we saw in the past, if they say, okay, i'm seeing rising rates, i will actually get a better yield somewhere else and they start to perhaps sell off some of the homes, and i'm talking 15 million rental homes in the single family sector, what does it do to the value? is it a great hedge? maybe not. >> if the investors pull out, that could pull out the rug from underneath those prices? >> it could. i'm not saying investors will, but they were hunting for yield and that's why they went into real estate. if you see yields go higher, maybe they don't love real estate so much >> diana, great to see you >> thanks. >> back to you, melissa. coming up, powell changing his tune on inflation at the end of last months warning it is no longer transitory. is it too little, too late we will debate that and look at how to position your portfolio that is next "the exchange" will be right back

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welcome back, everybody, to "the exchange. live today from washington, about 20 minutes away now from the fed's decision many expecting an accelerated taper and sooner than expected rate hikes here with us to discuss how investors should prepare for a faster fed, if that's what we get, jamie cox, managing partner with harris financial group, and ivory johnson, founder of delancey wealth management gentlemen, welcome good to have you here. ivory, i note that you say you think the fed will move because inflation is peaking that seems counterintuitive. if inflation is peaking, why does the fed need to move? >> some of this is window dressing as well, a lot of middle class americans are having an issue going to the grocery store and filling up at the gas pump i do think inflation has peaked. if you look at the two-year yield and the ten-year yield, it is hitting lower highs

look at the move index it is actually going down. so the market is telling us that inflation is kind of peaked. the same thing with the crb index, oil, natural gas. the market is telling us we have hit the peak of inflation. >> i believe i asked someone, maybe it was bob pisani the day before, why does the stock market seem so unimpressed with the high inflation numbers and he said the same thing they're thinking inflation has peaked and that's why they're looking ahead. do you agree >> i do. in the third quarter we had the opposite effect where growth was slowing and inflation was rising as the data has come in and showed hot reads in place in q3, that started to ameliorate if there's inflation and growth, markets can deal with it, and i think that's what we're seeing that's why i think markets -- and the bond yields are saying the same thing >> the consensus here is that the fed is likely to accelerate its taper by doubled, going from 15 billion a month to 30 billion, and that it may signal higher interest rates. if that is what turns out to be

the case, what should i do about my investments how should i change how my portfolio is structured? >> most people shouldn't change their portfolios based on what the fed may or may not do at any one mont's time. i think that's the most important thing. let's talk what 2022 might look like if there's inflation, you want to have portfolio stocks with pricing power, things like broadcom or things like united health care, companies that can pass along the costs to their end users. if you get microsoft, there's a lot of companies that have those characteristics. if there isn't inflation, it is basically the same thing we have done the last couple of years, it is all tech >> so the same question to you, ivory. if we get that consensus view. >> right >> what would you be doing within your portfolio? then i want you to address something that you raised off mic a few moments ago. that is the possibility of what happens to the fed's balance sheet down the road as bonds in their portfolio mature if they don't replace them, that's money coming out of the system

>> exactly so think about what we've been doing over the last 12 months. we have been having inflation hedges inside the portfolios it looks like energy there's been commodities inside the portfolios if we start to see inflation decelerate, you know, the second derivative on a rate of change basis start to go down, then you want to have things that you want to get rid of those energy stocks and the commodities then you might buy some tech because we still will have some growth to your point about the balance sheet, we have a $9 trillion balance sheet on the fed if that starts to decline because they don't replace the bonds as they mature, that brings into play does the gdp start to decelerate as well. that's a completely different setup. then you are not buying tech stocks then you are buying utilities, real estate investment trusts, consumer staples, a much more defensive portfolio when growth and inflation are going down at the same time. >> but that's something to watch for when, 2022, 2023 on the balance sheet? >> that's correct. we wouldn't see that until 2022. >> 2022. all right. so we talked about what the consensus possibility is here, the quicker tapering, the

possibility of sooner and more interest rate. what could be the unexpected tail risk to come out of the fed today? what might it be and how would that change what you just told us your investment thesis would be >> i think that the only thing that could happen, i think the statement isn't going to give you any tailwind problems. i think in the press conference when words are misinterpreted markets could find something to suggest inflation is higher, the fed is going to accelerate the pace of rate increases, for example. that could be misconstrued i think that's the area in which there might be tail risk, but i believe the fed will be much more dovish. i don't think they will be as hawkish as people think because there's no reason for them to be. >> one of our guests at top of the hour said that point the same question to you, afteivory, if there's a surprise in the text, how would you change your thesis >> i think they're walking a tight line if they were to raise interest

rates more often than expected, it could oil markets, but by the same token i think it is baked in i don't think it will have as big an effect. when they raised rates in 2018, the rates went down. i'm not that concerned i don't think they're going to raise them that fast, not when you have 140% debt-to-gdp ratio, $300 trillion in global debt i think the economy is so leveraged they don't have many opportunities to raise them as maybe they would have in the past >> ivory, great to be with you good to see you. ivory johnson, jamie cox, thanks very much. back to you. job market situations and rising prices and an uptick in covid cases, the fed is stuck in a perfect storm. one economist says the fed may ha nwatoin that is next digital transformation has failed to take off. because it hasn't removed the endless mundane work we all hate.

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♪ we are just minutes away, 11 minutes from the fed decision at the top of the hour, but all eyes are on the press conference at bottom of the hour. chair powell's language is important as the fed's dual mandate put the central bank in a tricky situation it comes with trade-offs

our next guest says they can't pull off a, quote, soft landing, growth could slow next year. joining us, bill li with the milken institute thank you for being with us. >> thanks for having me. >> how difficult will it be for the fed to stick the soft landing in your view >> the fed had a hard time doing it, but congress had unreasonably high expectations what the fed can do, they expanded the fed's mission we have gone to expanding full employment to mean inclusive full employment. now we are worried about price stability and on top of that we are putting climate change and addressing income distribution on top of that the fed is being put between a rock and a hard place, and the fear that i have is that up until now chair powell has been very quiet about what the fed's limitations are. it has accepted in the new framework we will have much more inclusive employment goals, but now markets are saying, we're way behind on inflation. my fear is that powell is going

to be much more sensitive to the cries to do something and do something quickly, that we will repeat the mistakes of the past, too much, too soon, too fast >> it sounds like you are worried the fed is going to play the political game in a way with this i mean certainly in recent weeks we have heard more and more people talk about inflation, about the -- you you know, higher prices a the grocery store, at the pump, et cetera, et cetera. it is a real main street issue, obviously, and you think the fed gets pulled into that. >> the fed has resisted the political pressures in the past. now that chair powell has been reappointed i hope he can go back to that stance that has been the hallmark of fed history. i am afraid that the cries from the marketplace and the cries from main street are carrying the fed in two different directions right now, the fed has credibility. the -- five year five years are rock solid stable, 2.2%, since

june that means they are in the game and able to control inflation. what i am not sure of is the overreaction, if they do something, the markets may take it as an overreaction. and that may cause these expectations to be ununanchored if they don't do enough. if they do too much they may crash the economy. >> what is enough, what the right balance. >> i am expecting the chair to say we are accelerating the pace of tapering and are going to start to increase rates, and the number of rate increases and how fast we are doing it will depend on the incoming data the key trick is, will he be able to embrace the dot plots, which surely will show more rate increases or is he going to say the traditional answer, these are individual fed opinions. >> what's your view of the economy next year. i am asking about the view that the yield curve is telling us something different than what the fed is telling us in terms

of ten-year yields coming down in the past month indicating a question mark about future growth and the economy is saying the economy is going to run hot. >> -- inflation is going the run hot. >> shortages, we have clearly messed up in forecasting how quickly the shortages were alleviated but the demand certainly is very strong i think the fed needs to crazy that that's why they are going to accelerate tapering. and the rate up creases going back to normal, as the fed said it is 2.5% when do we get will? in five years? or three years right now the fear is that the fed will accelerate the pace of going to the 2.5% at a faster pace and it could crimp the economy. >> bill, great speak with you. thank you. >> thanks for having me. >> that does it for us here at change change. we are men's away from the fed decision "power lunch" picks up coverage after this quick break

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good afternoon, everybody. and welcome to "power lunch. i'm tyler mathisen on a glorious day outside the federal reserve here in washington, along with melissa lee back at headquarters we are minutes away now from the release of the fed's statement and decision the central bank's taper time line and its outlook for rate hikes in focus today as inflation sets now at multi-decade highs ahead of the decision, let's get a check on the markets we turn to melissa for that. >> tyler, as you can imagine it has been a waiting game or the markets all session long we have a panel of experts standing by to help us dissect the decision let's get to exactly where the markets stand ahead of the decision the dow down by 50 points. the nasdaq down by .7 of a percent. the s&p 500 down .2% the yield on the ten-year is now

standing at 1.45%. ty >> let's go around the horn quickly with our panel of experts before the decision comes out. mopa, john bellos, plus our own rick santelli and bob pisani folks, welcome good to have you with us john, let me start with you. you say the consensus view, a quicker tape, he possible higher interest rates, is all priced into the market, basically, right now. what if that's not what we get what could happen? >> i think they are going to sound more hawkish than they did six weeks ago. i think people expect that we had strong data in the intermediatian period, especially on the inflation today. rhetoric has been hawkish and they have adjusted they may be more hawkish today, showing three dots instead of two. markets got quite a bit of that. i think the market is ahead.

they have. i think that's fine for the head i don't think they are trying to get ahead right now. they are trying to adjust appropriately. they are not really trying to get ahead of things. >> mona, are you going along with the consensus, with a quickening of the taper and the possibility of the signal of rising interest rates in are you expecting any surprises? >> yeah, you know, look, absolutely, we think that the fed will announce accelerated taper, likely to wind down by q1 of 2022. gives them room to start the rate hiking process if needed. we don't see hawkish surprises coming out this meeting. keep in mine even if we get two or three rate hikes in that dot plot that's pretty much in line with what consensus is right now. we might be surprised if chairman powell in his commentary is more dovish than he was last week when he made the hackish pivot. when he talked about how there is uncertainty in the forecast especially given the omicron variant and the growth outlook

generally. he has room for making the case for being more patient, more deliberate in the rate hiking cycle, especially as we get the second half of nextie with the uncertain inflation as well. >> let's go to bob pisani before we get to steve liesman. give us the context of where the market is, why it is where it is today? >> an accelerated tapering is of the no going to surprise anybody at this point. the key question the stock market participants want to answer is how fast are they going to be hiking rates this is very well studied throughout history what kills bull markets is when the fed suddenly and aggressively raises rates, every meeting for several meetings and when you have a weak economy the hope is that the fed is going to be slow raising rates, not every meeting and if we have a strong economy if that happens, we get gradual rate hikes into 2022 and 2023 and the stock market stays

strong, the market will be able to handle that very well the number one question is how aggressive and number two, the omicron variant. >> it sounds like the markets overall would be flat to higher, potentially, i mean as long as we don't get an extremely hawkish surprise we are going to get -- i'm sorry. we are going to get straight to steve liesman. we have the federal reserve's decision on interest rates. >> the federal reserve doubled the size of the taper to $30 billion a month. the federal reserve adjusted -- said it will adjust the taper further if rnted it didly the funds rate unchanged at zero. it said it is prepared to adjust the stance of monetary policy if warranted by the economic outlook and will maintain zero rates until maximum employment is achieved. the fed is no longer using the word transitory, doesn't call inflation transitory more on that for a second.