>> okay. >> i like revenue here they've been out performing the market >> nice foreign name >> great stuff, everybody. i'll see you in overtime "the exchange" begins now. >> thank you, scott, hi, everybody. in one hour, we eget the fed's decision on interest rates what will chair powell himself say in the press conference and most importantly, what are markets positioned for those are the questions we'll try to answer this hour. might seem like worse time to get into growth stocks and tell us which head winds he esees abating. are and thinks they'll out

perform. central banks around the world are raising rates. looking for opportunity for long-time investor >> you're not going to expect a heck of a lot of volatility ahead of the press conference. it's 50 basis points that's fairly certain. right now the dow trooel is up 1.5 of 1%. and the nasdaq composite flat on the day. i'll put this in perspect sk usually i'd tell you the interday moves, but the fed is entering the rate hike with dow industrials off 10% from record highs. the s&p 500 is down 13% and 23% off the record highs roughly thereabouts for the nasdaq composite. to give you an idea of with where we eenter.

one other place to watch is the internist rate are picture and how it effects bank stocks overall. bank of america, citi group. pnc financial. generally speaking, the money center banks are out performing the market today so, keep an eye on the big banks. they're a big focus on interest rate sensitive-type days and an earnings tale of two cities, tale of two stocks let's look at it through the lens of marriott international, the biggest hotel company in the world and the parent company of chilly's marriott comes up with better than expected results and a key metric all the way through this year they may even reinstitute stock buyback programs brinker international misses on earnings

comes in with better same store sales and better revenue numbers but points to the bigger effects of labor costs and commodity costs. cuts an outlook for the year brinker is down 16/17% talk about a big divergence in hospitality and leisure. the job and employment dynamic in the eeconomy right now, especially for travel and leisure companies. >> wage pressures showing up everywhere lyft was terrible for that reason now, yields are back on the rise ahead of the fed and rate hike expectations have been climbing hour by hour and let's get to the very latest i don't remember this kind of action on a day of a a fed meeting. >> i do remember the 1994 cycle and everybody wants to use that as a stencil for today and i see why. except there's two issues why i disagree

no euro zone and currency and china wasn't eve indiana the wpo since 2001 but outside of that, this is the most exciting session we've seen in years they lead the excitement marge, clooimbing up every session for new high yields pricing and every mature would have had high yield closing. the need to close above 298 plus to be a new post high yield and it's not quite there but it was there. 30 years, as you see they've been up to 305 but they've eased back a bit so, all the maturities how they behaved after the announcement and going to see a half point increase and more information on the balance sheet. those will tell. if you look at the fed contract, keep it simple, people

if you look at one week of defed futures, it's dropping down every day. the percentages of more aggressive fed tightenings go up it's low today a contract low 97.135 100 minus 97.135 equals a cumulative total basis points of tightening at 286.5. remember, in 2018, we raised the market priced in more tightenings in 2019. be careful here, folks the market's aggressive and the fed's aggressive but it has to be it's got to be verbally aggressive against inflation will they be that aggressive in action only time will tell. >> observation, since this is my last chance with you until we're literally are reacting to the decision feels like there's a lot of coiled energy, in part obecause of the price action. we're going to sdwrump 315 or be

down 280 within the next 90 minutes. are and by the way, and maybe as importantly, there have been huge announcements from the treasury this week about issuing a lot less treasury supply if there were ever a window for the fed to be shrinking thebleance sheet, the treasury, needing less borrowing, would seem like the biggest window ever for the fed to climb through here >> yes, those are great observations one of the reasons is tax receipts are at historic levels. allowing some of the actions my own personal opinion is at the long end may probably not get those big closes above key levels two year, three year, five and seven year are where i think you're going to see the bulk of the action >> thank you very much so, why are markets scrambling to brace themselves for a more

hawkish fed? back in d.c. for the decision one hour from now and it's the first in-person news conference since the pandemic, steve. >> and i haven't been here since january 2020, which was the last one. but i'm back as the fed is set to take another step inwhat markets expect is going to be a fast and furious tightening cycle, one that will rival the effort in the early '80s to sharply slow the economy and combat inflation this as the market, as rick was saying, again raiseing it down to how fast and furious the cycle's going to be. 95 billion that will come off of the balance sheet. that will be the most ever and language people are looking for is where the fed would say something like we're moving expeditiously towards neutral and down two and a quarter to 2

pite 5%. fed futures price in a mere 3% by year and i use the january, rick uses december 348 in august of 2023. these are from 25 to almost 50 basis points higher than they were a week ago and higher than they were this morning the futures market pricing in what would be a 100% chance of four rate hikes built in 50 basis rate hikes and a chance that one of the hikes is 55 basis points the fed is getting to neutral by september. we'll hopefully hear a two whether fed chair agree with such a fast and furious flight of the fed fund rate >> perfect incapsilation it's almost breath taking over the past week. it really has.

thank you and we'll see you soon now, the countdown is on let's bring in our fed panel for more analysis. and head of u.s. rate strategy at society general and chief investment strategy at city global wealth investments and global chief economist and strategist steve, i'm going to start with you. let's respond to what liesman just said. these markets have got a lot more hawkish >> you know, if you think the fed was wrong and they went off course last year, why are you so sure this is the right course now? for one thing, we have to account are for the loss of stimulus spending is down 33% this year spending levels are down that much again, the fed would be shrinking its balance sheet at

the same time it would be giving us rate hikes comparable to 1994 when we thought the rate hikes were large we're not arguing that policy ends at zero, nothing needs to be done to recalibrate towards the higher inflation rate. and we have real supply issues going on but the idea that we can just do all of this and the economies remain in tact and they go on and start doing this, it's off course so, this amount of tightening, it's really getting lost again and how the economy's performing, inclauding a weaker consumer in the second quarter >> let me recap that a little bit. definitely think you're giving us the out of consensus view, which is they could risk an sdnlt on the way out, much like they frankly caused an accident on the way let me turn to you let's talk about the labor market, which powell used the

word "unhealthy" in his last pres conference. since then, the jobs opening data jumped to a new high. there's over 11.5 million openings and the employment cost index showed a 5.5% annualized gain in response to these data points, shouldn't the fed be as hawkish as the fed is scrambling to price in? >> i think the job market is somewhat unhealthy there's a sense you have a very large availability of jobs job openings there's not enough people to take those jobs. you're in a very tight labor market and it's somewhat displaced because you can't source enough people for these so, my concern is ultimately what you're going to beleft with is a situation where, as the fed starts raising rates, you might see that the labor market but not prove to be as robust if people think it is

we do get very strong jobs report unemployment rate on the face of it is very low again, that's not the only metric i think you're are going to see cracks form as the fed starts to raise rates. you look at the dollar starting to strengthen quite dramatically equities are starting to sell off. as well as interest rates so, every component is starting to show that financial finishing are starting to tighten. it's going to be difficult to raise rates under the circumstances. >> in talking about the labor market, do you think it's weakening here >> if you're marking to mark it, it looks like the fed should be hawkish. but if you have any model that looks forward to what the next six to 10 months look like, any leading indicator, including

jobs, looks like the momentum is going to flow. this is a fed turning into a very material weakness, inclouding a recession in europe massive fiscal tightening. so, the issue is not so much today. we know the fed is going to go for basis points and what's their sensitivity as to what strategists are are seeing and that labor market is lagging. it's not the first indicator of sessions or slowdowns ahead. we have to be looking for the leading indicators of pmi, housing, retail sales and every single one of those tells us this is not strengths. this is not a hawkish, booming economy. this is one going to a slowdown. >> and i feel like i'm going to be the hawkish decenter and say no let's raise 75, 100. here's another point to throw at you. curious for your take.

as i mentioned with rick, we are going to see a lot less treasury bond issuance in the coming months because of how strong tax receipts have been in other words, less supply means higher prices means lower yields isn't the risk of a yield spike much diminished because of what we heard from the treasury isn't this an opportune time to shrink the balance sheetd aggressively >> treasury supplies are going to start catching up because they're high now a year down the line, maybe spring of next year, the treasury is going to have to start issuing -- it's going to be 1.5 trillion the treasury needs to finance because the fed is poised quite aggressively i think the supply demand is favorable over the near term over the longer run, you're going to have to find buyers to take down the suis ply as they

take down the market and that's something again to take into consideration when it comes to treasury ecomes from foreign investors. >> we'll are talk about this later on but we offer relatively attractive yields. 3% on our 10 year compared to a percentage or so higher than other developed markets. isn't it >> the other thing to consider is the fed is spent at its maximum policyrate, seven months before cutting it on average in the last 45 years been even shorter in periods when they move rapidly to tighten. so, that's really key here can you have inflation get to a level where you're really comfortable quickly? you can't. periods like this combine one after the other, are not going to get a stable price quickly.

and we have a very strong chance of them easing again we'll worry about inflation once again when we're in an easing cycle. and they have a chance, i think with, again it would be bring that risk down but broadly speaking, the yield curve is always flattened when the federal reserve is tightened. they want to have a hawkish, quick move i think yields will keep in the bond market. >> frances donald, we'll give you thealist word. what are are your parting thoughts ahead of the fed? >> no one is arguing the fed should not normalize policy. the problem is the word expeditiously. i say why does the fed need to go so quickly when rate hikes are not going to solve the true inflation? all they can do is create deflation in other parts of the economy. you're going to end up with

biefricated inflation that doesn't help anybody >> guys, this has been wonderful. frances donald and our fed panel concludes with 44 minutes to go ahead of their big meeting and coming up, we'll talk about what's behind the bear mark at in growth stocks one strategist says it's not powell's fault they've been selling off and a lirs of names that could be a buy. plus, we'll speak with veteran investor about where in the world he's putting money to work and where he's not less than 45 minutes until the fed's decision press conference at 2:30 eastern. we're back after this. (vo) some bonds last a lifetime. some bonds inspire confidence, and some you grow to rely on.

these are the bonds worth investing in. for over 50 years, pimco has reinvented fixed income to create opportunities for investors in every market environment. so, no matter what happens you can build the bonds that mean the most to you. pimco, a global leader in active fixed income. hey businesses! you all deserve something epic! so we're giving every business, our best deals on every iphone - including the iphone 13 pro with 5g. that's the one with the amazing camera? yep! every business deserves it... like one's that re-opened! hi, we have an appointment. and every new business that just opened! like aromatherapy rugs! i'll take one in blue please! it's not complicated. at&t is giving new and existing business customers our best deals on every iphone. ♪ ♪

as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts... saving you up to $500 a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities.™ xfinity mobile runs on america's most reliable 5g network, but for up to half the price of verizon, so you have more money for more stuff.

this phone? fewer groceries. this phone? more groceries! this phone? fewer concert tickets. this phone? more concert tickets. and not just for my shows. get $400 off an eligible samsung device with xfinity mobile. take the savings challenge at xfinitymobile.com/mysavings or visit your xfinity store and talk to our switch squad today. welcome back the fed has embarked on a tightening cycle and is it's not the fed, per se that's hurting the stocks. he says we could be near the end of the process and thinks gregt stocks could out perform and several are becoming attractive

wells fargo to carry there has been a flight from this area. if you look at the hedge fund world, really tough go over the last couple of weeks and months. >> so, it feels like everyone going okay returns are heading the other way. we better leave. so, won't we have to see better returns before they go >> what we think has happened is you really mispriced the -- not you but the fed really mispriced the cost of capitol last year. we brought the rate down fooa nogative 100 basis points. and that is repricing.

a lot of the growth and tech names are longer duration. and what we want to see is what they have. we want to see how rates normalize. they have. and that's a real positive what we're looking for at this point in time is watching breaking evens or expectations to give us a clue about when to go next and what to do next. >> i think this is such an interesting aspect to this piece. tell us five years, 10 year, blah blah blah what you want to see them do and what you want to see with real rates as well. >> we're pretty simple we stick to 10-year break evens and coming back down and we like the break even from a low of 275

somewhere and policy fed action is beginning to work supply and demand. it's a nice way of saying the economy is slowing down. and you see that, we think it's going to be very favorable >> and it's not just valuations. it's a change in the whole macro environment. so what are the names getting on the shopping list? netflix, meta. talk us through it >> don't go too much into individual names but you can see -- what's interesting is of the former gross stocks are like facebook and paypal trading in the midteens. not on revenues but earnings you're not just having both managers looking at the stocks and being interested in them, yourver having managers getting involved and value managers looking at them.

we like a situation where you can see multiple investors get involved and also for valuations and you're seeing some of the high flyers come can back down to reasonable valuation and perhaps the macro is going to be a lot more constructive critically >> parting about the fed meeting? >> i don't think there's a lot there. i think people talked about the fed. i think the mistake was sticking to qe for so long. as far as fed funds, the two year's at 270, 280 i think the fed 's going to follow the market construction this point in time and we have to see funds go higher a lot more normalization on the front end of the curve >> chris, thanks so much chris harvey of wells fargo securities still ahead, the foed fulted th housing boom and mortgage rates surging above 5.5%

and today's mystery chart dropping 30% after reporting a huge miss on earnings and with drew its guidance. one legendary investor called it his top pick three months ago. frrl wale reveal it next with wal green's and 3 drz m leading the wa ne e ty,ikonofhe biggest laggards again

- hiring is step one when it comes to our growth. we can't open a new shop or a new location without the right people in place. i couldn't keep up until i found ziprecruiter. ziprecruiter helps us get out there quickly and get us qualified candidates quickly. they sent us applicants that matched what i was looking for. i've hired for every role, entry-level technicians, service advisors, store managers. ziprecruiter helps me find all the right people, even the most difficult jobs to fill. - [announcer] ziprecruiter, rated the number one hiring site. try it for free at ziprecruiter.com lemons. lemons. lemons. lemons. look how nice they are. the moment you become an expedia member,

you can instantly start saving on your travels. so you can go and see all those, lovely, lemony, lemons. and never wonder if you got a good deal. because you did. yes welcome back to "the exchange." we're about 60 points off session highs. the nasdaq is down eight but much worse on the lows of the session.

pretty decent ahead of the fed utilities and energy up 1% real estate, consumer discretionary are the only two in the red amazon is still down 2%. now, energy prices are moving higher again natural gas persistent bullish trading pattern. now, look at the $8.44 per million btus this as texas says a heat wave is coming. you're going to be feeling the pain and here are some of the earnings movers again. match is lower and announcing the ceo is stepping down unexpectedly for personal reasons. the stock is down 55% from the all-time highs

meanwhile, gen rack is is up 9% after beating estimates and raising the sales growth outlook. this will be familiar for home owners trying to get back-up generators 10% today. so, continuing the theme we saw with with sherwin williams a well our mystery chart was tupper ware and that is going the other way. this is what bill miller called the top value pick in february it's plunging to a 52-week low their profitability was hurt by inflation. and the war in ukraine and covid shutdowns in china again, the stock down 33% to $12 a share. let's get to tyler matheson for a cnbc news update >> the pentagon has released video showing howitzer artillery being loaded on to a plane in california headed for ukraine. a russian official complains the

west is, quote, stuffing ukraine with weapons russia has been targeting railroad stations and supply lines trying to slow the flow. in moscow e, russian air force jets flew over red square in a z-formation. practicing for the country's annual victory day celebration next monday. the kremlin dismisses speculation that putin will use the occasion to expand his, quote, special military operation into a full-out declaration of war new york state's attorney general told her she was face would the decision of whether oernot to have an abortion >> and i chose to have an abrgz. i walked proudly into planned parenthood and i make no apologies to anyone no one no one

>> and tonight on the news with shep smith, senate democrats moving towards a vote in the senate to turn roe v wade into federal law. back to you. >> tyler, i will see you for the fed. still ahead the last time our next guest was on the program, he said you have to be in equities to be in inflation would you still agree? joins us next on the exchange. ♪ ♪ connecting to opportunity is just part of the hustle. ♪ ♪ opportunity is using data to create a competitive advantage. ♪ ♪

it's raising capital that helps companies change the world. it's making complicated financial concepts seem simple. opportunity is making the dream of home ownership a reality... ♪ ♪ ...writing new rules and redefining the game... ...and driving the world forward to a greener energy future. (applause) ♪ ♪ opportunity is setting a goal... ...and charting a course to get there. sometimes the only thing standing between you and opportunity... ...is someone who can make the connection. at ice, we connect people to opportunity.

whether it's the u.s., germany, canada, japan rising rates. it's doubled to rufflely 3% and germany negative 0.1%. and now up at positive 1%. similar picture in the uk, i where yields have doubled and in japan, they've doubled, even though they're low by any measure. where where are the best and worst opportunities with us again.

the founding partner at capital partners broadly speaking, do you agree or not that nothing is working in this environment? >> not really. the are tremendous opportunities. i just came back from skri lanka and their debt is down dramatically i believe eventually they will pay up you can pick up sri lanka bonds at a big, big discount now if you look at southeast asia, you look at malaysia, indonesia, thailand i was just in thailand as well the tour arism's picking up. indonesia and malaysia are big producers of palm oil and other commodities, which are now rising in prices pretty dramatically so, there are opportunities there as well. >> when i hear about sri lanka and places, i think i don't know if they're the best stewards of

capital in the long run? >> in the long run, no the bond's actually not. but in the short run, very pessimistic scenario everybody is selling out at very low prices and there's an opportunity to buy in at an extremely depressed prices >> let's talk developed markets. a couple of things to ask you here it seems obvious i don't know if there's anywhere you're eager to buy bonds right now because you think that would be a great investment. maybe it's the stocks. you said that's the only way to protect yourself against inflation. do you still believe that you can stick with equities? >> no question about it. the environment with rising rates to the bond market is very dicey. okay, you can buy short term bonds and make money but if you go long, you could really be killed with rising rates.

and i believe the right ares of some bonds have been going at an extremely crazy price. and i don't think it's a a good idea to get into that market at this stage and equities, as i said, equities are the way to go because companies in line with inflation and in line with interest rates, they will do very well. >> so, not just any old equities but with pricing power are there any parts of the fwloeglob that worry you, that you would stay away from >> europe is looking dicey with the situation in ukraine i know some people are interested in europe at this stage but i would stay away. the u.s. looks very good in the context of the global scenario then of course, further field in

india, they're doing very good things there market is going to do very well in the future, i believe >> india with a rate hike overnight. do you want to offer a parting word for investors we're about 20 minutes from the fed decision what would your best advice be about the central bank >> don't be afraid of higher in interest rates if you look at the history, there's very little coilation. the market can perform well with high interest rates. don't be afraid. look at the companies individually and buy those with good reeturns and pricing power. >> do not be afraid. sage words thanks for your time >> thank you >> mark mobius of mobius capital partners my next guest says the fed is going to have to hike until it hurts he explains what he means by that

with just about 20 minutes to go until the big decision, press conference less than an hour from now the exchange is back in two.

♪♪ ♪♪ ♪♪

♪♪ welcome back to "the exchange." let's get a check on yields. the three year, 0.97 more or less flirting with a multi-year high. as for toks. the s&p 500 initially rallied after the fed's last meeting in march. only to fall to a new year to date low last week they're here to warn investors it's going to have to hike until it hurts what does he mean by that? the first economist to forecast this tightening of the fed explain. >> well, i mean, the problem is

the fed started the cycle a little too late. and as a result, we've got a labor market that's not just hot, it's record hot and it's not going to slow down anytime soon by the time we get to the end of this year, we're probably looking at an unemployment rate of 3% and other indicators of labor market tightness that's too much to keep it under control. they're going to need to slow the economy down enough to really cool off the lobber market and that's why i say they have to hike until it hurts and depending how serious inflation problem is going to next year. is it running at 3% or 4% or whatever, that will determine how painful this is. >> i don't know eif you caught our panel at the top of the hour, i'd say their concern is the fed is -- they made a mistake by being too dovish at the start and now they're going to make a mistake by being too

hawkish. what would your risponse be? >> they definitely made a mistake by waiting too long. i think the case are for rate hikes was there in october when you saw inflation starting to spread out broadly in the economy. it became clear the labor market was going to seriously over heat so, they waited six months too long but you don't fix nat mistake by not being tough now. they have to push the economy into a weakened state if they're if wing to serious about fighting inflation if you go back the history of serious inflation problems in the u.s. this is what the fed did in the 1970s. they didn't get inflation under control early in the process they kept letting it come back and back until you had voleker absolutely hammer the economy you want to nip it in the bud and they need to do that in the next year or two >> they say food and energy

prices are not caused by excess demand if the fed is trying to amealierate those price hikes, they're using the wrong tool 250 fix the wrong problem. >> inflation -- the fed's have bad luck and some of the price inflation is definitely out of their control. they don't control commodity markets, the food markets. what they do control is whether you have a seriously over heating labor market and whether you have broad inflation a that's effecting other parts of the economy. if you look at the data right now, inflation for the typical product -- forget about used cars, gasoline and all that stuff. the typical inflation rate is 3 to 4% and that's too high. that is the fed's responsibility not their job to get food and energy prices town the typical price increase that's been let out. the genie's come out of the bottle

>> do they have a communication problem. because it strikes me the success you're saying is going to look like failure to a public that might be experiencing a recession at that point? >> they don't have easy choices now. i have a lot of sympathy for the fed. i wish they'd started earlier but now the chiess are pretty stark. unfortunately, i think there's one step in the messaging out of the fed. right now they're saying they think we can normalize without hurting the economy. that seems mighty optimistic to me i don't see how that can be true i think they need to come clean at some point and say listen, we're not trying to kill the economy but ewe need to reverse some of the over heating so, we need to go to a period of very low growth and yes, we could get a recession. that's an honest appraisal of where we are right now >> or maybe to clarify the primary target, which is inflation. to say we're going to hit x

percent no matter what the fall out is >> and the public understand the lessons of history you want to get inflation early, not late it's much easier to get it down. you can do it with a modest slowing in the eeconomy or a very mild recession. if you do it early if you wait until what the fed did in the 1970s and volker 1979 and 1982, you end up killing the economy. they had to raise the funderate to 20% by then you don't want to go down that path let's -- a little bit of medicine now prevention is better than cure so, let's do a little bit of -- take a little bit of medicine now so you don't have to do anything tougher battle 3, 4, 5, 10 years from now. >> i think this was a perfect curtain razor for this decision

and the press conference still ahead, the fed has a big hand in fuelling the pandemic over the last couple of years. now it's trying to do the opposite the question is what does it mean for housing less than 15 minutes left until the fed's decision keep it right here ♪ ♪ wow, we're crunching tons of polygons here! what's going on? where's regina? hi, i'm ladonna. i invest in invesco qqq, a fund that gives me access to the nasdaq-100 innovations, like real time cgi. okay... yeah... oh. don't worry i got it! become an agent of innovation with invesco qqq

when my genetic reports told me about my heart health, i was able to take action. and i got a kit for my mom, too, so she can get her own meaningful health info. this mother's day, start a new health journey together with mom with $50 off every kit.

as a business owner, your bottom line together with mom is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts... saving you up to $500 a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today.

comcast business. powering possibilities.™ welcome back home prices at record highs. at mortgage rate at 5.5%. the fed played a role in getting us to this point it's shifting gears again. diana olick has more on the potential fallout. >> it's all about interest rates. when the pandemic started the 30-year fixed dropped to 2.75. it set more than a dozen record lows in 2020 alone and rates stayed low through the end of last year, why because the fed not only kept its key interest rate at zero and it re-started its large-scale purchases of agency mortgage-backed bonds and now holds 30% of those outstanding bonds. big fed demand kept mortgage rates low. that lit a fire under home prices which are up 34% since the start of the pandemic.

low rates give buyers more spending power, of course, but now the 30-year fixed has spiked up to over 5.5% just in the last few months because the fed stopped buying mbs and is about to start selling off its balance sheet in addition to raising its rate which pushed the ten-year yield since 2009 mortgage rates loosely followed that yield for homebuyers today with higher home prices and higher interest rates, the monthly mortgage payment for the average home is now about $1800 more than it would have been at the start of the pandemic as a result, 95% of the 100 biggest u.s. housing markets are less affordable than their long-term levels that figure was 6% at the start of covid kelly? >> and this could be a big fed meeting to find out whether they will actually sell mortgage-backed securities from their portfolio. >> absolutely. if we see mortgage rates moving

higher and affordability lower, we have seen mortgage sales dropping in the last five months and what effect does it have with home prices generally there's a six-month lag and so little supply >> diana, for now, thank you very much. diana olick. that does it for "the exchange" everybody. we are moments away from the fed's decision interest rates. we'll see you after the break when "power lunch" picks up coverage for a very important hour indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. visit indeed.com/hire and get started today.

♪♪ in the future we'll travel to incredible places with the help of magical technology. but what about today? i want my magical future now. ♪♪ i have places to go. ♪♪ rocks to climb. ♪♪ sights to see. and flights to catch... i can't wait for what tomorrow will bring, but in the meantime, let's enjoy the ride... ♪♪

good day, everybody. welcome to "power lunch. i'm tyler matheson along with ellie evans. the fed decision is imminent, minute away. policymakers expecting to raise interest rates by a half percentage rate. it would be the first half-point hike since may of 2000. >> historic. before we get to the chan panel of experts, here's a check of

the marketses. the dow is up 100 points the s&p is up ten. the nasdaq lower by one point. as for the yield on the ten-year we've seen big moves today it is just a hair below 3% right now, 2.991 >> and of course, that's a good benchmark. it looks like the markets are just waiting to see what happens. david kelley, chief global strategist at j.p. morgan asset management mona mahaji at edward jones and jim carkaran at morgan stanley. we kind of know, don't we, david, what the fed is likely to do a half-point rise in interest rates, but the question to me is what is the level of the fed funds rate, how high does it have to go ultimately to tame inflation? much higher than where it is >> it does need to rise. i do think the federal reserve will continue to increase at a relative lie rapid pace throughout the year, but they don't have to do the whole job

themselves i think it's absolutely key. this economy has a lot of breaking power anyway. if they push the federal funds rate by 2.5% by the end of the year and less fiscal stimulus. this economy will slow anyway. inflation will slow anyway and the key thing is the federal reserve don't be too aggressive here make sure you protect the economy. you don't need to do that because inflation will gradually ease anyway. >> quickly, what are, david, those slowing pressures that you cite is it the high dollar that will make our exports even more expensive than they are today. >> sure. a high dollar, huge fiscal drag b because we have a rebound from covid in the second quarter and then that's kind of done, and so the services rebound will fade as the year goes on and that's a lot of things dragging the economy down and the federal reserve doesn't need to do it all themselves and this economy is losing momentum. >> mona, now we have to ask where the next stop is on the

ten-year and we're kissing 3% today. >> look. the ten-year has moved and it's a double this year and it started around 150 and we're close to 3%. do we think that rate of change annualizes do we keep going at this pace? probably not could we get beyond 3% we think 3, 5% will be likely. the key will be to david's point, if and when we start to see inflation more meaningfully roll over that's when we will see the yields peak and roll over, as well. so we think we're perhaps not quite there, but getting closer to a peak in yields, as well. >> jim, if we want to get to 2% inflation how high do interest rates need to go, and what's the risk of a recession implied by that >> so that's the absolute key question, and i think if the fed is absolutely dead serious about getting inflation to target by 2024 which is the term of their

forecast expectations, then i think the fed funds rate needs to go well above 3%. so it could be that they go to 3.25, 3.5% and it's the question you're asking, tyler where is the breaking point for the economy? where do things start slowing down and i do think above 3% and that's what we're seeing in equity markets and other markets. we're not seeing it too much in the credit markets credit spreads are staying well contained at this point. if i'm looking at this from the fed's view, financial conditions might not be tight enough to control inflation. i agree with what david is saying, i think it will slow down, but will it be enough for the fed's liking. >> financial conditions not tight enough, jim? >> i don't think so. >> credit spreads have been hanging in pretty nicely and it's a question of having a financial market feedback to slow inflation down within the timeframe that the fed wants those inflation pressures to come down.

so that's in the next couple of years. so i would argue right now that, yes, equities have melted down and for sure and rates have gone up, but we're not really seeing enough of a slowdown by my calculations to get to 2% inflation within the timeframe that the fed is specifying without hiking more. >> jim, it is likely knew what time it was because right now we'll go to steve liesman for the news steve? >> federal reserve raising the target range for the federal funds rate by 50 basis points to a new target range of 75 basis points to one percentage point the federal reserve increasing and says ongoingincreases will be appropriate the fed will need to reduce the balance sheet on june 1. it will ramp up the balance sheet reduction over time. it's going to begin with 47.5 billion dollars in balance sheet reduction through august and after that three-month period it's going to reduce the

balance sheet to