out. the reason is not related to the banking industry, but more about the growth in the etf industry >> you're going to pass the baton over to "the exchange," as we wait and see if the dow can close positive for the 13th straight session it would be the first time since 1987 if it does so we'll see if it gets there "the exchange" starts now. ♪ ♪ thank you, courtney. i'm melissa lee. we are entering the countdown to the fed's next decision on interest rates a hike is expected today we have team coverage from the stock market to the bond market to the economy and how rising rates impact the consumer. plus, don peebles is back with an update on the health of commercial real estate a month ago, he told us about opportunities he was ready to pull the trigger on this quarter. he did and back to tell us what he bought and is eyeing next

and sean o'brien will join us live that is all ahead as the dow struggles to make it 13 straight days of wins, which would be the longest winning streak since 1987 that's where we begin with the markets. and dom chu joins us >> there's part of me that the fed gets the dow to that 14-day. if it gets to 14, i'm looking beyond that. it would be the first time since 1897 since that happened the dow, the s&p and the nasdaq are all in that typical holding pattern ahead of a big fed rate decision, and a subsequent press conference by jay powell the dow just about flat, up about five points. the s&p is at 4555, down about 12 points, one quarter of 1% it's been a down day generally at the highs, we were still down two points, and the nasdaq

underperforming, down one half of 1%, 69 points on the downside 14,075 more on why that's happening in a moment but let's give you the interest rates. sit a fed rate day let's check out the yield curve. the two-year note yield ticking slightly higher. the ten-year benchmark yield, just a hair below 3.9%, moving a slight tick to the downside. the difference between the ten-year and two-year government bond expanding a bit now, about a full percentage a little bit more kind of inverted so to speak. so watch that dynamic play out as we head toward that fed rate decision and i was speaking about the tale of two tech giants today, google, microsoft moving in opposite directions. both companies reported better than expected profits and revenues but it often comes down to the

growth areas it was cloud computing, growth at alphabet was getting better, microsoft may be slowing down a little bit and by the way, both conference calls for both companies mentioned artificial intelligence a number of times back over to you >> dom, thanks less than an hour until the fed's decision steve liesman has more emily row manland also joins us with mark zandi. steve, we kick it off with you set the scene for us >> thanks, melissa with. a quarter point hike expected, it will be on the guidance that will come in the press conference and whether the statement gives the dovish guidance from may or the hawkish guidance from june in may, the statement said, in determining the extent to which additional policy firming may be appropriate. that signals it was not decided

on whether to hike and set up a pause. then in june, most recent statement it read, in determining the extent of additional policy firming that may be appropriate so the fed pretty much decided to hike, just not sure how much or when. steven stanley believes the fed is in the mode of hiking every other meeting. he wrote -- >> the market has its options open only a 20% rate hike in september. and then in that every other meeting mode, the fed gets back the hiking in november that's el katevated in recent d. forecasters keep predicting the economy. the data keep defying those predictions. that's why the fed will likely hike today and keep the

possibility very much alive that the fed is not done yet. >> i saw that bracket you had the last hour about what happened since the june meeting. expectations for gdp, particularly in the second half are higher at the same time, we have the base effects starting to go away so the inflation sector might be a little more cloudy when it comes to the data the fed will have by the september and november meetings. >> i think that's a good observation, melissa i think the fed is done thinking the trajectory of inflation up or down is a straight line it got into that, got a little burned by that idea in the beginning of this year we had a couple of good inflation reports. not only were the reports bad, but they revised the ones they thought were good. so that's the approach the fed will take here he will be cautious about this one percentage point decline in inflation and it may keep going,

but policy won't change dramatically >> steve liesman, thanks let's start off with my panel. emily, everybody's base case is a 25 basis points, but it almost seems like it is in the fed's interest to send out a very hawkish message to say everything is still on the table. >> yeah, absolutely. the fed probably is going to need to be the adult in the room today and warn market participants that inflationary pressures continue to bounce around, it may pick up there is the chance that more hikes are on the table here. there has certainly been, as steve pointed out, welcome news for the fed as it relates to inflationary pressures subsiding. you see used car prices falling, the prices paid components of the business surveys we look at falling. the labor market remains tight initial jobless claims looked

like they were perking up, now back down to the lower end since early february so i wish we were getting -- [ inaudible >> yeah, particularly coming from a meeting where there was, you know, complete consensus in terms of the decision there. mark, emily mentioned what has come down in price, but what has gone up in price oil, up 14% since the june meeting. we also have grains going higher proving that commodity inflation is sticky and something that the fed has no control over. how does that factor in, in the fed's messaging today? >> well, not much. i think unrelying inflation, core inflation is trending lower. as steve said, it's not a straight line. it's gone up and down, but the trend lines are all pretty good. it's always hard to forecast

anything, but forecastin inflation is particularly difficult. i think we can state with a high degree of confidence it will continue to moderate vehicle price also come in, production is happening overseas and used vehicle prices have rolled over. we know with a high degree of confidence that the growth and the cost of housing services is going to slow. that's tied into rents, and relates have gone flat to down since last year. so i think it's becoming clear that inflation is headed in the right direction. it may take a while to get back to the fed's target. but the fed will remain strident as a result. but i think they're going to get what they want and won't raise rates after today. >> trymeaning hawkish, mark. >> if i was them, i would talk tough, because you want to keep inflation expectations down to 2% if you do, it makes it easier to

get actual inflation back in so they have every incentive to talk hawkishly but at the end of the day, the numbers suggest they won't need to raise rates after today >> what is the best case scenario in terms of somewhat happens today? what's interesting is looking at what happened since the june meeting and the various asset classes. the ten-year yield has gone up ten basis points, the two-year, up 40 points what are you expecting here? >> i think the fed will raise by 25 basis points and maintain a hawkish stance as mark pointed out, inflation is coming down gradually but what we have seen in the last few weeks is a sharp rise in inflation expectations. the data the fed looks at closely has gone from 2%, 2.25% to closer to 2.5%. so the rise in yields as we have seen over the past couple of

weeks has mostly become because of higher inflation expectations that's something the fed is concerned about and the market is starting to price in, you know, a fed policy that is higher for longer. and also what higher inflation expectations means is that the fed is going to keep a hawkish stance, perhaps for a lot longer than what the market is expecting. higher for longer might mean those cuts might have to get pushed out further into the later half of 2024 >> and how do equity markets view that, emily equity markets, in their heart of hearts, are they thinking there will be cuts here? look at where we are in terms of valuation on a historical basis.

so how do we set up here >> yeah, so equity markets have been basically celebrating every whiff of disinflation that we have been talking about here you're seeing that all reflected in the multiple. if you look at the 20% return so far this year on the s&p 500, most of it is coming from multiple expansions. even though earnings have come in better than expected so far 24 quarter, you are seeing analysts saying not to get too excited. they're lowering estimates for 2023 to about flat so what we think is going to happen is companies will have to contend with margin pressure so the inflation comes down, that hurts top line growth mean while, you have the cost of capital double over a 12-month basis. that's going to cause companies to defend their margins, and they have to cut costs and what's the biggest cost most companies have labor. that's when you see the unemployment rate rise and you

see more volatility. we're not there yet, but that's where we're going. >> what do you think the fed's messaging will be in terms of raising rates at what cost, to what cost? costs particularly for the labor market we're going to be talking to the president later on about the big win they had, a great win for workers, but it is a head wind to ups to their earnings this year and going forward how does that factor in? >> well, i think the fed does not need to raise rates to push the economy into recession to get inflation back in. inflation is coming back in with unemployment rate at 3.6%. it's been there for over a year. the so-called sacrifice ratio, the amount of interest in unemployment we need to get in seems very low i think that will continue so i don't know that the fed needs to keep pushing the economy into a recession or close to a recession to get

inflation back in. here's the other thing, i think if you ask fed officials today what target they would have for inflation, you know, they would probably say not two, but that's too low, but something closer to three. so why sacrifice the economy when you think it should be 3% inflation rate so i don't think they will continue to push here strongly because they don't need to >> so you think they'll give up that 2% inflation target narrative? >> no, no, no. they're not going to give up the narrative, they'll stick to that, again, stridently, hawkishly. but, you know, when it comes to push comes to shove, if you are making a choice between do i push the economy into recession when inflation is 3%, and my official target is 2%, the answer is probably not, because

deep down, in the heart of hearts, i mean, why 2% that's not the right number, particularly in the context of the current economy. >> so we're trying to peer into the hearts of the fed officials and see what they really want to believe. we're dissektsdissecting everyt. if they did back down from 2%, and just recently they stood by it i know this is maybe internally what fed officials want. but at some point, don't they have to stay and start getting that message out even a little bit? >> no. >> no, they don't? >> they keep saying 2%, they keep saying 2%, but that doesn't mean they need to push the economy into recession look, we have an election coming up do you really -- does the fed really want to push the economy -- >> is fed is not political mark, come on.

>> they don't want to get politicized. if they were pushing a recession in the middle of a presidential election, you're not going to get politicized by that? everything seems to point to me this is the end of the story you raise rates, everyone expects it today you hang tough and the data will cooperate and if it doesn't, you bide your time >> right, right. so i don't know if you believe the political cycle factors into what the fed does, but it has another midway step at the jackson hole meet bring they could massage the message a little bit i'm wondering if you see any changes happening then >> so i think we get two inflation reports before the september meeting and the jackson hole meeting, so we should have plenty of information by the time the september meeting rolls in whether the fed is going to hike in september or skip and then

keep policy on hold, perhaps for the remainder of the year. but to your question about whether they should change the target, the proof is in the pudding. if you look at the summary of the economic projections, the fed in their own forecast don't expect inflation to get to below 2% or at 2%, even into 2025. so their own forecast suggests that the decline in inflation after we get to 3% perhaps is going to be very gradual and it will probably take a lot longer for inflation to get back down towards the 2% target in that context, for the most part, you know, the fed might have to keep the front end pegged for a lot longer than the market expects >> thank you all for all your thoughts do not miss the interview on jeffrey gundlach on "closing

bell" today at 3:00. coming up, don peebles takes a trillion dollar risk to the real estate market that's next. plus, a labor deal worth $30 billion according to the teamsters. we'll ask the union's general president about the agreement and what it means for workers across the country and now a quick check on the markets. quiet ahead of the fed lots can change in under 60 minutes. stay tuned you're watching "the exchange.

the fed is expected to resume rate hikes today. my next guest says that will put pressure on a beleaguered commercial real estate market.

for more on what he is seeing and buying, let's bring in don peebles. always good to see you last time you were on "the exchange" was the end of june. just looking in terms of sentiment and barometers, we have seen a real rebound it seems like there is a change when it comes to the commercial real estate market you're seeing that, as well? >> a little bit. look, the reits stocks for new york office buildings have been down significantly now it's ticking back up, because people are sensing the financial sector is requiring people to go back to work. so workers are going back, so there's optimism that these buildings won't be as vacant

but there's still an understanding there will be significant vacancies, and they're going to be significant defaults and properties being given back to rememlendors. >> some of these reits, up 14% in one month we were just talking during the break about a loan you have -- you're going forward with a development, and you got a loan >> yes i mean, we're excited. every market is not affected the same some markets are doing very well charlotte, north carolina is one where we are closing on a loan to commence site work for a new development of six buildings we're start with two buildings that will be residential apartment buildings, but there's a strong market for it and private credit is stepping in, providing financing for, you know, worthwhile projects. we had a competitive environment for financing for this project >> and you got this from private

credit, which is all the rage nowadays, especially with regional banks pulling back. in other times, would that -- would you have gone to a regional bank or local lendor for that loan or have gone to private cred snit >> we would have had a more robust competitive environment so the competitors for this were all private credit in the past, it would have been a mixture of a national global bank, a couple of regionals, and one or two private credit lenders. but we have done deals previously with private credit, but the bulk were with global or regional banks >> and the cost to borrow is higher than it has been with other lenders than it has been in the past in general so how does that change how you view the feasibility of a project? i would imagine other things have to fall into place in order for that higher loan payment to make sense >> yes look, the pricing difference

isn't as extreme as people would look at it if you look at a senior loan from a bank, they're levering up to 60% private credit would take you up to 80%, but what's happening is, in places like south florida and other new development markets, the cost of capital along with other factors like say in south florida, insurance for example and labor costs, it's making projects infeasible. so these increases in interest rates have sidelined developers around the nation. >> the fed may hike today, and this may be the last, but rates will remain higher for longer, that's the new thinking. so what does that tell you about the development in certain markets? right now, you are saying expensive places like miami, new york it will be very hard to do new projects if rates stay higher for longer, do we not see as many new developments for that amount of time >> i think we'll see fewer

developments, if rates stay up and if the fed raises rates again by a quarter of a basis point, then that will just slow things down even further but ultimately, we're going to adjust i did business when i started our company in the '80s. real interest rates were 9%, 10%, considered very attractive. real estate was appreciating about 10% a year, right along with interest rates. so we operated in that environment. i think there will be an adjustment and consumers will have to pay the price for it, because prices will go up. rents are going to go up and already have in many cities. and prices of condos and new construction of homes will go up >> you have the benefit of having that experience some other developers do not will there be a major shakeout, in terms of you can pick up the pieces from developers who weren't able to handle this business cycle >> yes developments is an optimistic

business to begin with, but having my experience of starting my career in the '80s, seeing 1,000 banks close in three years, gave me a different perspective. i know the music does stop at times. i think there will be tremendous opportunities, you know, at the expense of other developers who overextended themselves. >> are there markets out there whose demise are greatry exaggerated? san francisco is one i'm thinking of. for all the reports of people pulling out of san francisco, we have the hype of the ai boom, which may be providing new tenants coming into the city >> in general, in real estate, things have to get bad before they get better. i believe san francisco will be one of the first markets to come out, one of the hard-hit markets that will come out of this, because it's been so bad for so long i think san francisco is in a position to rebound. we're beginning to look at that market it is a target market to buy existing office buildings, to convert them into residential

and hospitality. so i like san francisco's future it will continue to be the financial capital of the west, the tech center of the united states and continue to do both of those things. just like new york city will ultimately continue to be the epicenter for finance in the world. this will be the headquarters of a global market indefinitely so ultimately, it will come back the thing about real estate, you want to buy, when fewer people are buy, sell when fewer people are selling. when everybody is running out, you look to go inside and pick up the pieces. >> don, always a pleasure. you're going to stick around and we'll talk to you later on up next, we'll speakwith the teamster's president we have 33 minutes until the fed decision ishe exchange" is backft aer th

th we planned well for retirement, but i wish we had more cash. you think those two have any idea? that they can sell their life insurance policy for cash? so they're basically sitting on a goldmine? i don't think they have a clue. that's crazy! well, not everyone knows coventry's helped thousands of people sell their policies for cash. even term policies. i can't believe they're just sitting up there! sitting on all this cash. if you own a life insurance policy of $100,000 or more, you can sell all or part of it to coventry. even a term policy. for cash, or a combination of cash and coverage, with no future premiums. someone needs to tell them, that they're sitting on a goldmine, and you have no idea! hey, guys! you're sitting on a goldmine! come on, guys! do you hear that? i don't hear anything anymore. find out if you're sitting on a goldmine. call coventry direct today at the

number on your screen, or visit coventrydirect.com. welcome back to "the exchange." ups shares lower after reaching a deal with the teamsters yesterday. the union says it gained $30 billion in new money, while ups says it cannot discuss details until it reports earnings. we are joined by morgan and sean e brian. >> it's great to have you on the air. i want to start with the fact that you and i last spoke a little over two weeks ago. at the time, there was an impasse in negotiations. come back to the table yesterday, negotiate, a deal struck yesterday i guess just walk us through some of the color and some of the dynamics that took place to see this deal come to fruition

so quickly >> i think what happened was, there was a lot of pressure being put on ups from the investors, a lot of pressure being put on ups by their customers. and we've been putting a lot of pressure on ups by demonstrating our solidarity we proved that labor can be a market changer, and i think ups finally realized it needed to reward the members that made them tremendous success and help them earn $100 billion >> yeah, $100 billion in revenue last year. full and part-time workers get raises, $2.75 more per hour effective immediately in 2023, once this gets ratified. you got rid of the two-tier worker system. another paid holiday, ends the mandatory overtime $30 billion in new money ups is not commenting on the total. how do you get to that number?

>> because we cost it out. we have economists that cost out what the agreement is. we know what the economics were. part-timers on average will receive a 44% wage increase over the lifetime of this agreement, which is tremendous. it takes people out of poverty wages, it will change a lot of lives for families full-timers will get $7.50 wage increase over the lifetime of this agreement as full-timers and part-timers deserve. think about what they provided to this country during the pandemic ceos were getting rewarded and they never touched a package >> voting begins august 3rd. any risk here that 340,000 teamster members at ups that this doesn't get voted through >> one thing we would never accept an agreement unless we believed in it and we believed

it was as far as we could go last contract with concessions with the previous administration was a $13 billion deal we got a $30 billion deal, we willfully support it and encourage our members to vote for it >> sean, you mentioned your economist on staff there what does your economist see in terms of the economy overall we're talking about a fed meeting happening today. they will raise rates once again. a lot of analysts on wall street are concerned about the impact of this deal to ups earnings i understand this is a big win for the everyday rank and file at ups, but how do you sort of weigh your gains with the cost pressures that ups may face? >> one thing for certain is everybody is concerned about the economy and interest rates

and that's all relative to what goes on, on wall street. we're concerned about main street we understand there could be tough times ahead, but when a recession hits, we eventually come out we had to capitalize now, what was in the best interest of our members. ups is very smart. they're a successful company i'm sure they can navigate through whatever challenges they have financially supporting this agreement. >> you alerted a strike at yellow, a trucking company on monday whether it's ups or yellow just before it, how does this speak to a broader playbook in terms of key requests or demands that you are hearing from union members and perspective union members, that they want across companies and industries right now? >> we have to look at every situation differently. ups had $100 million earnings. yellow has been struggling since

2009 our members consistently, since 2009, have given concessions back to yellow all in a time where they are getting infusions of cash in private equity and the government and our members have come through, had their pensions cut, and yellow has had a lot of promises on the table. we don't want to see anybody lose their job, but yellow has to be held accountable this is a perfect example of a company that got a lot of money and financing, and they should have managed it a lot better you can't blame the teamsters or workforce. at the end of the way, we'll try to find a reasonable solution to hopefully get yellow back on track. >> yeah. we have talked about this before, are you setting your sights on amazon, is that your next target? >> absolutely we are setting our sights on amazon >> what does that look like, and how do you rally the workforce there? >> i think using this collective bargaining agreement, we drove up that industry standard much higher

it will demonstrate to the amazon workers on what you will get, when you work under a collective bargaining agreement. you'll get opportunities for full-time jobs, and dignity, respect, and an appreciation to fight every time you need a new contract >> all right sean o'brien, general president of the teamsters, thank you for joining us today >> thank you very much >> morgan, thank you people's corporation chairman don peebles is still with us we have had labor having very active across the country, exacting pay increases, et cetera it is the year of the worker how does that impact what you do, because the costs are increasing for businesses across the board. >> i think first of all, i think we do need to have a more equitable society. we have a massive wealth disparity, so people who are especially on the front lines, like the teamsters who helped

save the economy, because what we have done without delivery? do sdid amazon and these other companies. we just did two deals in california with organized labor, the building and trades union in los angeles and the hotel union here in los angeles, as well both deals were hard negotiated, but they were deals that made sense for the workers, gave them good wages, good benefits. and also gave us a good, reliable, professional workforce. so there's a compromise between the two. you get what you say for in this country. so if you want good products, good workers, you want people committed to you, then you have to pay them. so we operate from the perspective that the margins in these these deals, should be cut we do this around the country, in new york city as well, and it's all about a fair balance.

i think ultimately, the unions, while they are being much more active, they are focused on the viability of a business, as well you just heard from the union president we just heard from the teamsters. >> i am just wondering what your outlook is for the economy from where you sit? >> i think we're going to have some tougher times i think inflation has been driven as much by the free money that the government gave out to all of our citizens during covid to protect the economy and the impact of that we saw with all of the rising costs and expenses i think real estate will slow down, it should. what kind of world can we live in where home prices double in three years? that just isn't sustainable. things will slow down, but i don't think we'll have this crash. i think it will be a recession, a softer one i think commercial office buildings are in deep, deep trouble and have been for a while, especially those concentrated in markets like new york city.

that will be where more of the pain is. the real estate industry overall will kind of have a clearing out. but we will recover. some markets will do better than others >> and which market are you the most excited about in terms of opportunities right now? >> i'm most excited about new york city. >> oh. >> i think that people are running out, all the development -- many of my friends and colleagues have moved to florida and other places so there's less competition. i think there will be great opportunities here i believe that new york city will continue to be the financial capital of the world it's an entirely new generation of people, so i'm excited about new york >> as a new yorker, i'm happy to hear that. don, thank you coming up, mastercard is on deck with results. that's next in earnings exchange

[bushes rustling] [door opening] ♪dramatic music♪ yes! hon! the weathertech's here. ♪ weathertech is the ultimate protection for your vehicle. laser-measured floorliners... no drill mudflaps... cargoliner... bumpstep... seat protector... and cupfone. ♪ what about my car? weathertech. the first time your sales reached 100k with godaddy was also the first time your profits left you speechless. at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com

your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire

welcome back to "the exchange." let's turn now to the other big market driver, earnings. we have the trade on three consumer key names set to report, starting off with meta shares are ripping higher this year, up nearly 150% after another disappointing report yesterday. the company basically saying it's unable to gauge future advertising demand updates on modernization will be

in focus jeff, we saw meta get a nice pop. it faded today what is the setup here >> it's interesting, there's two narratives for traders and money makers going into this on meta the fact is, google, we didn't see those ads pop. but microsoft, they peeled back the onion. with the heart of all tech moving in 2023, it's artificial intelligence and what microsoft said, it was a little disturbing microsoft is down 5%, because it's going to cost something, this ai euphoria so that capital ex-penditure isa different thing. if you have apprehension here, because this is the second best leader of the nasdaq 100 year to date, up 145%, you can look at some option overlay or if you just want to sell a call here.

i looked at the 295 call, about $14, and that's going on to august 18. but to put a bow on the box here, you have to realize this is not overbought. we'll have to see if they can hit/miss i do believe in zuckerberg i bought this ipo at $38 a long, long time ago, so i'm a believer in the hoodie, but you have to trade around this name >> let's move on to chipotle, hitting an all-time high last yee wean as the company maintains pricing power. you're a seller though why? >> usually, it's just a little too spicy for me if you look adjust the dramatic move higher in the stock from its ipo, up over 4,000%. but i think, again, when you talk about this potential stock split, always a unique reaction. when you talk about the

projected revenue of $2.35 billion, that's a 14% growth again, i want to use options to protect here, and i think you can collect about $84. but, again, you talk about implied volatility going into this earnings, you see a lot of momentum in the stock above the 50-day moving average. if you don't own the stock, i don't see how you buy it here after being up 50% year-to-date. >> we have a quick programming note the chipotle ceo joins jim cramer tonight on "mad money." mastercard shares are up 15% this year. investors are hoping mastercard will report the same and should benefit from cross border payments as travel remains strong jeff, you like mastercard? >> i do like mastercard. i own visa, but i think you hit the nail on the head you talk about the cross border

revenues, they're just talking about international fees, which are much more lucrative. if it stands in the wake of visa, you'll see the international fees come into play with the ratio of 33 times versus ratio at 27 times, it looks a little more expensive. if it's a one-year, three-year, or five-year, we have seen mastercard outperform. so there's an opportunity here at this earnings to buy it >> jeff, thank you still ahead, the fed's rapid rate hikes have pushed interest rates on credit cards for record highs and with powell expected to stroke a hawkish tone again, we'll look at how rates on cars, mortgages and more could go. that's next.

you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

less than 15 minutes from the fed's rate decision, where a rate hike is likely. another hike could have a big impact on america's wallet, so let's look at where the key rates sit according to data. the average apr on a credit card, still above 20%. that's a record high, forcing consumers have carry higher balances for longer. used car loan rates at 8%. while the 30-year fixed is just below 7%, the rapid rise there has reduced purchasing power by more than 30%. joining us to discuss is the bank rate senior industry

analyst. ted, great to have you with us we know these rate also continue to go higher with more interest rate hikes what are you seeing, though, in terms of potential cracks in the consumer >> subprime auto dlin again sis are the biggest area of worry. we know what's happened with car prices the average new car price is pushing $50,000. a lot of people are having a hard time swinging those payments credit cart dlid late payments t prepandemic levels >> i would imagine when rates were close to zero, people took out bigger mortgages >> the main point is this used to be a low-cost form of borrowing. as recently as last year, we were talking 4% on average

and now we're north of 8.5%. all of a sudden, that's really catching up to people. i think that's a big point about the fed's rate hikes the cumulative effect. month after month of high inflation, higher rates, that takes a toll, especially inflation, higher rates. that takes a total >> so give us an example because you have the example of the notes of the average balance according to transunion. the average balance is $5,733. you may be able to payout that 20% of that for one month, two months but imagine this going for a year for how long long higher for longer means. >> if you make minimum payments in that scenario you outlined at the average rate, 20.5% you'll be in debt for 17 years and pay $8,300 in interest that's the cumulative effect we see more people carrying credit

card debt and for longer periods of time. 65% of credit card people have had for a year. >> did you say $8,700 in interest >> yes talking $14,000 total. >> that's a hefty price for $5,000 of debt what concerns you the most about the consumer unemployment still 3.6%, historically low still they have the jobs, wage increases as well. should we be worried about this right now? >> right now i think things are better than expected the job market can be a lagging indicator rather than a leading one. that's something we worry about in the sense there's one way unemployment can go from here. it has to go up. a lot of the forecasts are pretty benign. maybe goes to four, four and a half not to minimize those job losses but that's small in the grand scheme of things

it wasn't too long ago we saw double digits in covid, back during the great recession we're a far cry from that. what's t that's what's propping up the consumer sector. >> how's the buy now pay later affecting us >> when you talk about the rapid rise of sbris interest rates this is a business predicated on low rates. the consumer demand is there from the investor standpoint the bloom is off the rose. >> ted, thanks for coming by that's does it for us on the fed. to connect data across cloudma "power lunch" after this break then analyze all that data with watson.

okay, but this needs to meet our... security standards? yup. compliance standards? mm-hmm. so they get the insights they need... yup. in real time... check. ...to make quick decisions? check. aaaand check. that's the solution ibm and a global bank created. what will you create? ibm. let's create. i did have hearing aids from another company... i was just frustrated... i almost gave up. with miracle ear it's all about service. they're personable... they're friendly. i'm very happy with them. we provide you with a free lifetime of aftercare. meaning free checkups, cleanings, and adjustments. i see someone new... someone happy... it's really made a difference. call miracle ear at 1-800-miracle and schedule your free, no obligation hearing evaluation today. with gold bond... you can age on your own terms. retinol overnight means... the smoothing benefits of retinol. are now for your whole body. plus, fast-working crepe corrector diminishes wrinkled skin in just two days.

gold bond. champion your skin. (vo) it's time to switch to verizon. sadie did. and now she has myplan. diminishes wrinkled skin in just two days. the first unlimited plan that lets her choose exactly what goes in it. now she gets to pick only the perks she wants and saves on every one. and with an incredible new iphone on us, no wonder sadie is celebrating. introducing myplan. get exactly what you want. only pay for what you need. act now and get iphone 14 pro on us when you switch. it's your verizon. good afternoon, everybody.

welcome to "power lunch" i'm tyler mathisen with melissa lee. minutes away from the fed's decision on interest rates. >> before we get to our panel of experts. here's the market, holding steady the s&p 500 is down by .25% ahead of the decision the nasdaq off by half a percent. the ten year note yielding 3.9 even right now bring in our panel david kelly, stephanie link, and jim karen. david, 25 basis points, a hawkish message, what else are you looking for here >> first of all, i think they'll change their language about subsequent rate hikes instead of talking about the extent they raise rates further they'll talk about whether they need to raise them at all. the only question is will they raise them in november they have to admit inflation has come down, it may be elevated, we've gone from 9.1 to 3.0

when the fed talks about credibility they need to mention that if this is their number one goal to bring inflation down. >> what about that point, david said it's time for the fed to admit we've made progress here why do they seem reluctant to do so >> i've been behind the curving this whole cycle so it's not surprising i think they should be more measured at the press conference, the press release because as david mentioned cpi 9.1 down to 3. core is still elevated but down to 4.8 the big number is core pce because that's still 4, 4.5% that's the number we know they look at. they could be more measured today but that doesn't mean they're done and even when they are done, which i think is one or two more meetings that they still, the rates will remain high and by the way, watch commodity prices because commodity prices have been going higher. so we might see inflation drift a little bit higher from here.

>> oil prices are up 14% since the last fed decision. grain prices are up as well on russia so jim, you know, it seems like a free pass for the fed to be hawkish because base effects go away so it's not as clear that inflation is coming down in the second half of the year. >> yeah. listen, i think that's a good point that's being somewhat overlooked by the markets at this point we talk about headline inflation coming down, it has come down 3% but a lot of that is based on friendly base effects. those go away for the next six months so essentially, the easy part was getting headline inflation down to 3%, getting it down to 2 and keeping it low near target is going to be the key the second point to make is that the fed doesn't focus on headline inflation, they're going to focus on the core, and those core numbers are still somewhat sticky. those numbers are is it still likely to come down but it's a

question will they come down enough and will it be anchored at those low levels? i think the fed is still worried about this so i'm going to say, as stephanie said correctly, they're going to be more measured but i think the door is open for them to be more hawkish and that the markets should be building in additional risks that they could actually go in september, it's not out of the question the fed still has difficult math. >> what do you mean when you say base effect ef, jim? is that the comparables in this effect still >> that's right. it's really the year over year measures the month over month cpi came in at 0.2%, we need 0.1% numbers. that might be harder to get. >> david, back to you. jim said there are places in his view, if i heard him correctly where inflation is sticky. do you agree or disagree with that >> not really sticky we have the equivalent, that's beginning to come down and a lot of stuff in the automotive services area we think that's

coming down too so we don't see much stickiness if you can be patient. i think we'll hit 2% by next april. >> what about that core inflation, david, that do seem to be hanging in more than the top line. >> i think that's about shelter and the way they measure things like auto insurance and auto repairs. people talk about wage costs but the wage gains are compensation for past inflation i don't think they're pushing inflation up they're slowing the pace it comes down but i think we're headed back down to 2. i think the fed should have confidence in that. >> less than a minute be to go we have the s&p 500 up 5% what's the first thing on your screen you look at when that decision crosses? >> the overall reaction. but i don't want to get caught up in the short term because we have hear what he has to say and then digest for 24 hours, 48 hours in terms of what they said but i don't think there's going to be big surprises on this one.

it's well telegraphed 25 it's a matter of the tone in the press conference which i don't think is going to be very hawkish. >> it doesn't sound like there's too much suspense hanging in the air right now. i guess the suspense is whether the dow finishes another day in the green. let's get to steve liesman with the results of the decision. steve? >> reporter: the federal reserve raising interest rates by one quarter of a percentage point in a unanimous vote bringing the rage to 5.5% the highest feds fund rate in 22 years and continues to signal the possibility of future rate hikes. it says it's going to look at quote the extent of additional policy forming that may be appropriate. that's the language it used in june that told us july was on the table. it said as doing so it would take account of the cumulative and lag effects of hikes they're saying it wa