later today. you'll be with me, as well, on the backside of powell -- chair powell. >> yes, i will. >> give me the reaction to what he says. so what is your final trade? >> i believe usually say don't trade on a fed day, but i think the consumer is getting weaker. >> i'll see you on "closing bell." "the exchange" is now. ♪ ♪ >> thank you, scott. welcome to our special two-hour fed coverage. i'm kelly evans with tyler mathisen. coming to you live from washington, d.c., as we enter the final 60-minute countdown to the central bank's decision on interest rates. a pause expected today, but where we go from here is less certain, and adding to that uncertainty are labor strikes, rising energy prices, and a looming government shutdown. >> we have team coverage from the stock market to the bond market, to the economy, and how

rising rates affect the consumer. and how much a government shutdown could complicate things for the fed and the markets. that's ahead. we begin with steve liesman across town. steve, it is all about the forecast today. >> that's right, tyler. the focus is going to be on show jay powell thinks about recent economic challenges. you have the autoworker strike, higher oil prices, higher long-term yields and a potential government shutdown. beyond, that the focus is on what the fed signals for the rates and economy next year. no chance of a hike built in for today. but a 30% probability for november. 40% -- sorry, right, and 40% for september. meanwhile, there's a 43% chance probability of a rate cut priced in for june. but when you look at the actual yields, the ek xpectations for

next year are higher than they were in may. so all that has convinced the markets that the fed is going to be higher for longer than previously expected. given that success so far, it's unlikely the fed is going to give markets a reason to think the fed also be easier next year, especially since it's fighting the inflation battle. the reckoning whether the fed is too high next year can wait, guys, for next year. >> i promised myself coming into this that i wasn't going to use that phrase, but i'm going to violate that promise now. >> you will notice i did not. >> you're much more artful than this. >> it was a dot plot free report i gave. >> but what we are talking about are the projections of the fed members. >> yes. >> what are those projections likely to show, that the economy is hotter than they expected the last time they did this? that inflationis lower than they expected? that they expect one more interest rate cut? what? >> you know, we have a chart on

that, tyler. i don't think you can call it up on the wall, but we did look at it. first of all, their gdp outlook is way off base. they're looking for 1% this year. you have averaged 2% so far, and it's probably going to be higher. you would have to have a really lousy fourth quarter. so they have to upgrade their outlook for gdp this year. you wonder if they do it again for 2024, where it was 1%. they had the inflation thing about right. they have had the funds rate forecast about right. and that 0.3% increasein unemployment rate helped them out, getting closer to that unemployment rate for next year. so they may have to swtweak arod the edges. the big question is what they do, tyler, for the funds rate forecast, which they had at 4.6. could go a little higher. >> i think the line of the day goes to peter, who said it's not a dot plot, it's a dart board, something to that effect. steve, thank you very much. we appreciate it for now. our steve liesman.

let's get straight to our first panel now. opinions are mixed on whether a recession is still in the cards but they are united on a rate pause today. here is jamie cox, managing partner at harris financial group. good to have you with us. also joining us is sue, head of u.s. rate strategy. and mark zandi, moody's analytic chief economist. mark, in this panel, i think you are alone in believing, with some degree of certainty, that the fed is likely finished raising interest rates for this cycle. why are you persuaded that that is the case, and how does banking and a possible banking crisis and a possible concern about breaks in commercial real estate figuring in to that hypothesis that the fed is done? >> yeah, indeed. i'm confident. you've had a lot of forecasting, and some things i'm confident

in, some not. but here i'm confident that the fed is done. lots of reasons. most importantly, inflation is coming in. it's moving in the right direction. all the trend lines look really good here. the runup in oil prices could be a risk. but i think inflation will be on target this time next year, and that doesn't require more rate hikes. second, the economy is throttling back. businesses are cutting back hours, job growth is sloeg,wing and the labor market is easing up. and finally, as you point out, the banking system is still very fragile. i mean, it's -- you know, it's stable because of all the policy responses back in march. but it's shaking the operating environment for the banking system is very poor. and if the fed keeps on raising rates, that would do the banking

system in and harm the economy. so everything points to no more rate hikes. >> sue, it seems for markets it comes down to that dot plot tyler and steve were just talking about. specifically right now, there's about four quarter point cuts priced in for next year. a lot of people are saying if we get fewer cuts, expect bond yields to shoot higher. if it stays where it is, maybe people keep buying the ten-years, which they've been doing. >> yeah, that's how i view it, as well. i agree with mark's views on the fed being done for this cycle. the rates market is really priced to perfection. you're looking at the market pricing in of a 50% probability of a hike at the end of the year. and maybe three, four cuts for next year. so given the fact that the market is priced to perfection to the fed's dot plot, any

surprise you get is due perhaps more -- i mean, more cuts for next year or less cuts for next year. i think the market is positioned to move in either direction. so we're watching the dots closely in the reits market. we think that the fed is done. if you keep policy restrictive and at these kind of levels, i really don't see the bond market and bond yields rising meaningfully from here. so we'll be looking to get a first read on what the fed is thinking for next year. >> sue, you called a hawkish pause, but i noted when mark was chatting there, you were nodding your head. i'm not sure if that was for agreement or a cat ready to pounce. >> i thought the last time i was here with you guys that the fed should have paused earlier than

they did. not characterize it as a skip and say full-on, we're done. i think it's safer for the fed to be finished now and not have to pivot next year and go into rate cuts. that's the last thing they want to do. they don't want to have the communication problem, where they say there's no inflation, and it turns out there is lots of inflation, where they have to chase it with rate hikes. they finally have gotten the market on board with their communication strategy and where they need to keep the markets. if they do anything to mess it up, it's going to make more complicated. >> in the three months or so since we last saw you, and you were clear back then that they should pause. we had better than expected economic data, more inflation overseas. so i think it's great to hear that you are still firmy in the pause camp. what about the fact that, you know, a lot of the koins den co

numbers have come in, credit markets have been doing quite well. what do you make of those developments? >> i think we have not yet even the effects of the banking system issues earlier in the year. markets are sort of saying gosh, there's going to be some problems, we just don't know what they are. it's impossible to think that you can have interest rates rise as quickly as they did and not have impact. and you're starting to' the consumer slowing down. this has kept inflation a little bit higher than the supply side that is cooperating a little bit more. so the problem is, when inflation stops in this cycle, it's likely to go down quickly. >> you're not in the catch of the last mile will be the hardest mile. >> the markets have come to the conclusion that there is going to be higher for longer. when you get to consensus, markets are typically wrong. so in my view, you're looking at

rate cuts sooner than later as a result. >> let me ask one quick question. if the possibility of a government shutdown in a peculiar way, something that could help the federal reserve in that the economy will be shaved and potentially slowed a little bit because of that? >> no. the economy doesn't need to be shaved. the economy is right on track. the fed has it right where it wants it. so we don't need a government shutdown. if it's two, three weeks, no big deal. but if it extends on to a month, six weeks, that becomes a problem and weighs on soet unnecessarily so. and you have a bunch of other head winds to think about, too. student loan payments, the uaw strike, higher oil prices. so we don't want a government shutdown. >> well, let's turn to rick santelli, out at the cme watching needs for us today. rick, we had some big headlines on 437.

are they celebrating the rumor or buying it? >> reporter: i'm not sure if they're selling the rumor, buying the fact. but what i can tell you is, just because rates are down a it will today, i wouldn't draw any significant conclusions. if you look at a chart since the 13th, which was cpi data. it was 4.3, before that it was 4.8. you get the picture. it's coming down, all the way to the 4s. where's the fed at? in the 2s. yet everything is okay. nothing to see here. look at the charts of 2s and 10s, climbing steadily, taking a breather today. that's not shocking. a lot of trains aren't going to book their work today necessarily. here's the important ning, in my opinion. yesterday was a key day. two year, three year, five year, seven year, ten year, all made

new high yield closes for the cycle. look at them on that chart. all of them but 7s. yesterday's close, the highest yields going back to 2007. so we think the market has an opinion here, and you can't include seven years because they were brought back in '089. so 20s and 30s haven't done it, but they probably have. the markets can look at guidance, but the markets were the action takes place, and that action has not been in the same frequency as the fed. it was moving lower when the fed was aggressive. it's moving higher now that the fed is saying, cross our heards, we're done. but the issue is, the market senses there is a stickiness to inflation. the fed can strip out food and energy all day long, but the average american can't. back to you. >> absolutely. rick santelli, thank you very much. you say you expect the ten-year

yield at the end of this year to be about 3.25%. by the end of next year, to bottom. why do you say that? that's quite a decline of where we are today at 4.3%. >> that's right. i think for all the reasons that mark was talking about, we are expecting a meaningful slowdown in the fourth quarter after a tremendous summer splurge and consumer spending and retail sales being strong. you do have a bunch of headwinds. student loan moratoriums ending, delinquency rates are rising. the consumer is coming under pressure because of higher gas prices. so you are seeing a lot of head winds that in the fourth quarter, you should start seeing a meaningful decline in yields in the fourth quarter. we also have a recession penciled in for the middle of next year. so we should start seeing yields

garage lay decline and perhaps bottom out in the -- somewhere in the second quarter of next year at around 3.25%. but we don't have yields going down dramatically. much more of a gradual decline, and then start to decline again in the fourth quarter. when we get passed a modest recession. >> and because you share this view, you think that means that cash may no longer be king. what are the ramifications oh of that >> that's a good thing. there's been money parked on the sidelines just enjoy ing 5%. money then will go back to where it came from. >> we heard people talking object this program saying financial conditions will ease and support the mega caps, the high-valued tech stocks and he also likes energy. is that the kind of easing of financial can bes or the return

of risks into the market that would be supportive of that kind of stock move into the end of the year? >> typically, when you have an end of a rate cycle, it usually propels stockstocks. after the rate pauses, the s&p 500 is usually up 16, 17%. there's been such a lag in returns of most asset classes outside of technology. so you see health care, industrialing. i think those are solid places where people can put money to now. and not just wait until the fed says, all clear. >> the fact that we have 88 basis points of cuts, is that why stocks in the first half, was that the reason for the rally? have we seen that move? >> i don't think it was the reason. it's predominant because of information technology stocks being beaten down so much. then you had the ai opportunity,

specific to that sector. but the rest of the sectors didn't play along. so you will see this broadening effect where everyone else will catch up. >> jamie cox, good to see you. mark, always great to be with you. we're just getting started on our cnbc special of "the exchange" and power lunch. >> coming up, a loot at the rising shutdown m. and plus, rising ratesrocking main street. the fallout for consumer spending, the mortgage market and perspective home buyers. we are tracking the negotiations between the au and the big three automakers. one of their sticking points shows that inflation worries aren't going away. and let's get a look at the markets. the dow is up 229.

the s&p is up 8 points. the ten-year yield has backed f nserly. back after this. people are excited about what ai will do for them. we're excited about what ai will do for business. introducing watsonx a platform designed to multiply output by training ai with your data. when you watsonx your business, you can build ai to help coders code faster, customer service respond quicker, and employees handle repetitive tasks in less time. let's create ai that transforms business with watsonx. ibm. let's create.

welcome book "the exchange," live from the nation's capitol on a beautiful, almost fall-like afternoon. today's fed decision is front and center for investors, but don't forget, we are only about ten days away from a potential government shutdown. and that looks increasingly unlikely. so what's on the table? emily will kins is on capitol hill with the latest. hi, emily. >> reporter: good afternoon, tyler. well, yes, over 11 days away from a government shutdown, and still no compromise on the table for house things are going to be moving forward. look, lawmakers were supposed to depart yesterday -- or sorry, tomorrow on thursday. kevin mccarthy, the speaker of the house said no, they have to say on friday and saturday and they have to get this done. they are still currently negotiating over that potential stop-gap republican plan that will have the government funded from the end of september until

october 31st, including some republican priorities. things like building the wall at the border and limiting asylum while cutting spending. kevin mccarthy said this afternoon, he's open to any other ideas that members of his party have for what should be in the stop gap bill. republicans will be meeting later this afternoon at 4:00. we expect to hear a little bit more about what they're thinking. but really, there's only so much mccarthy can do here. there are some members of his party that do not want to pass any sort of stop-gap at this point. even if there is a way forward on this republican backed temporary funding bill, there's no chance that it will go forward in the senate. so a lot of gridlock here in congress. but we are seeing some progress on legislation that passed a year ago. the chips bill. today, the department of defense came out with an announcement. it's the first funding that's really been allocated from the bill. and it's going to go to eight regional hubs across the country. $238 million there, and it's

kind of the first sort of signs of this bill that passed so long ago getting out into the economy and beginning to influence things. tyler? >> emily, if i may, i'm glad that you just mentioned that. because on a day when the federal reserve is -- part of its campaign to tame inflation by taking liquidity out of the economy, you're telling us there's the spigot from washington that is consistently heading down the pike here with all of this funding about to be doled out. >> reporter: yeah, remember, it's not just the chips bill. you have the bipartisan infrastructure bill. you have the tax plus environmental plus health care package. so a lot of things that congress is doing are really now starting to be seen, and democrats are hoping that's going to make a political difference for them. of course, this rollout is going to take a number of years and will be quite a while before we start seeing the finished product from these bills. >> emily, thank you very much. we appreciate that. our next guest warns that a

shutdown could trigger an economic data blackout ahead of the fed's november rate decision and impact two of the most important data points for the fed, the jobs report and the cpi. let's bring in alex phillips from goldman sachs. good to see you. >> thanks for having me. >> can i just bounce off what emily is saying with the government shutdown. small, overall economic risk, it seems. but is there anything from -- we'll get into this in a moment, but anything else you're watching from a big picture gdp economy interest rate point of view? >> so we wrote something recently about what we call the q4 pothole. so you have student loans restarting. you have the auto strike, and then the shutdown. those three things together, we think, takes growth from probably a little bit more than 3% in q3 to around 1% in q4.

it's going to be a substantial slowdown with. that said, as long as the shutdown lasts for a couple of weeks, which is our base case, then it should be manageable. if the shutdown lasts for a long time, then maybe not quite as manageable. but, of course, it's temporary, no matter what, the government will eventually reopen if it does shut down. and it's also fairly predictable. we know it's worth about 0.2 of a point off of growth in a week. >> so whatever comes out of near-term gdp gets added in the long run. so, again, maybe the most impactful part of this is the data d data blackout. if it's a partial shutdown, like in 2018, 2019 i think it was, we still did get those reports. >> we got some of them. >> is there any chance that they would deem these essential work

and let them still put out these key reports do you think? >> so right now, the bls has already said on the labor said has said they will not be able to put out the reports. so the answer seems clear enough. if the shutdown went on and on and on, eventually they would have to revisit that. of course, the challenge is, it's all based on surveys. so if you shut down the government, do you have the surveys on which that data report is based? so, you know, i think the short answer is, a brief shutdown means that we get the september reports on employment and on inflation delayed for, you know, probably a couple of weeks. but still in time for the november meeting. a longer shutdown means that in november, the fomc is maybe flying blind. >> let's talk about what is at the heart of this disagreement between the gop in the house, basically, and the rest of congress, the senate. i thought that -- tell me i'm

crazy here, but i thought when they hit the debt ceiling agreement, that the spending disputes were settled. but it seems like they are anything but settled. >> you're not crazy. >> it should have been settled, but now they are $120 billion apart, or roughly so. and the gop wants to cut domestic spending, or discretionary spending, not military or veterans affairs, and they want to move forward on the building of a border wall. these feel like things that are outside of that earlier agreement. >> yeah. so i think -- >> what happened? >> when we saw the debt limit deal put together, i think there was a general understanding that was going to be more or less the spending level that we would end up getting for the coming fiscal year. frankly, i think that is still basically the spending level we'll get for the coming fiscal year. but republicans in the house have decided that they still want to aim for something lower than that, and they will point

out that, in fact, the debt limit deal on a cap on spending. >> i recall when mccarthy kind of agreed to this deal, that those on the further right of his party were quite upset at the time. it seems as though from that moment they have been plotting to say, you know, we want to cut spending or add this funding, and this is now our chance to do it. >> to be clear, this is basically what happens every time. the difference is that right now, the folks who are not getting what they want, and nobody gets everything they want in congress, usually. they are in a position, maybe, to stop a spending bill from passing. as long as republican leaders want to pass it in the house with only republican votes, because the majority is -- >> do you think they'll pass it with the democrats on the contours of what was already agreed to? >> i think it's unlikely that the shutdown, if it happens,

will last forever. and i think it's unlikely that they will be able to get joe biden to sign a bill into law that has unanimous republican support. therefore, i think it's likely that ultimately, there is a bipartisan deal to probably reopen the government after it shuts down. at something similar to the spending level agreed to earlier. >> will it be most democrats voting for it and a few republicans, or most republicans and a few democrats? >> i think if speaker mccarthy were to get what he probably wants, it would be, you know, a little bit more on the republican side. but it's going to have to be -- >> how endangered is speaker mccarthy as a factor of this? >> all of the celebratory articles written just a few short months ago, let's remember. >> that's a good question. there's a chance we'll never find out the answer, because ultimately, the answer is, can

he survive a so-called motion to vacate? that motion may come. i am personally a little skeptical that he would be removed through that kind of a motion. but i'm also a little skeptical that we'll get to that point. i think the way this gets resolved is we have a shutdown, we probably don't see that motion come ultimately. and then the government reopens, maybe with a small, you know, sort of token gesture so that republicans in the house can feel like they got something out of the process. >> all right. >> thank you very much. great to see you. >> thank you. coming up, a government shutdown isn't the only looming risk to the economy, as the uaw strike enters its sixth day. a key wrinkle in the negotiations shows the fight against inflation still has a long way to go. d'de over 30 minutes until the fes cision. we will be back in 2:00. setting.

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♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines. welcome back. we've got some breaking news on the uaw strike. phil? >> reporter: kelly, as expected, general motors has idled its plants in fairfax, kansas, where they make the cadillac ct-4 and the chevy malibu. so they will be laying off approximately 2,000 workers there. as you take a look at the latest developments regarding the uaw strike, we will likely see more of these types of layoffs.

stellantis announcing it has begun layoffs, the most notable in toledo, where they are laying off 68 people, expect to lay off another 300 at facilities in indiana. automakers are pushing back on messaging. we are hearing from them that the messaging coming from the uaw is misguided and wrong. remember, there's a deadline friday at noon eastern, where the uaw wants to see serious progress towards resolving these issues and getting a contract in place, or where else they could announce more layoffs. stellantis, it's going to be laying off 68 employees in toledo. they expect to lay off 300 more at their facilities in kokomo, indiana. as for general motors, as you look at share there is. i talked about the layoffs happening in kansas. the gm president, mark royce, out with an op-ed today in the detroit news say thing is a flow of misinformation coming from the uaw. remember, gm is offering a 20% wage hike to the union.

and finally, you have ford. it has reached a tentative agreement, ford of canada reached a tentative agreement with the union up north of the border. now we see what happens with gm and stellantis. bottom line is this, guys, we are nowhere close to seeing a resolution to this disagreement over a contract between the uaw and the big three automakers. >> is there a scenario, phil, and how likely is it, oh of a nationwide strike against -- by the uaw against the automakers? right now, they seem to be targeted shutdowns of factories. >> reporter: it is possible, but they have already said that they plan on these strategic strikes. and the strategy here, tyler, is essentially them saying we want to keep the automakers guessing. we're not going to shut them all down at one time. we are, theoretically on friday at noon, we will hear about

another two or three plants, where they have decided we're going to walk off the job there. doesn't shut down the entire company if you are gm or ford or stellantis, but it adds pressure. and that is what the uaw is looking to do here. >> economic point, i think these workers would be able to get unemployment benefits and be accounted as unemployed versus striking workers. phil, thank you very much. >> correct. >> awesome. good, good. always looking for that impact. if we get the reports for october in particular, which will show the fuller effect. now to contessa brewer for a cnbc news update. >> joe biden is expected to announce tomorrow a $325 million military aid package for ukraine. the announcement coincides with president volodymyr zelenskyy's visit to washington. the weapons package reportedly would include more short-range air defense systems and a second round of those controversial cluster munitions. south korean police are accusing american soldiers of

smuggling and distributing synthetic marijuana in the country. 17 soldiers imported 12 ounces of the drug through the u.s. military's postal service. a detective in the case said all the soldiers were allowed to return to the military base after questioning, but one is being detained within the base. companies on facebook and instagram soon will be able to buy a blue check to get exclusive features of support. businesses can buy verification for $22 a month on one platform. $35 for both. they'll get added account security features and troubleshooting, and also reportedly would get increased visibility into searches and have ability to chat with multiple customers. that's what is happening on the social network platform. >> thank you very much, contessa brewer. still ahead, it's no secret that mortgage rates have skyrocketed, but if you are still looking to buy a home, you will not believe how badly that has hurt your buying power.

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welcome back to our special fed coverage for this historic data. the historic pace of rate hikes certainly pressuring the consumer from credit card interest, the cost of living has gotten more expensive. the current rate on a 30-year fixed mortgage at 7.3%. two years ago, that number was

3.03%. to talk about what that means, let's bring in todd rossen. welcome. so that jump from 3% to above 7%, what does it do to purchasing power for a home buyer, how much does it cut it? >> it cuts your purchasing power by about 40%. so in other words -- >> wow! >> if you could have afford a $375,000 at 3%, now with rates over 7%, you're looking at a $225,000 house. and there respearen't that many those. low inventory plus high rates, we're talking high prices, high rates. it's a tough situation. >> so i guess if i were in the market to buy, what i would be doing, if i were faced with that dilemma, would be looking at adjustable rate mortgages, where i can buy some time at a lower

rate, and maybe get into that $375,000 house even though i would not have the certainty of a 30-year fixed. is that what is happening? >> some people are talking about dating the rate and marrying the house as if you are betting on refinancing down the road. i still think, though, that the 30-year fixed is the best gauge of affordability. it may not always be the best product for everybody, but it's just a slippery slope. if you're going to refinance, what if that doesn't work out, rates don't move as expected or you lose your job or you have to move and sell the house. i think that's some risk here. another thing we're seeing is that home builders and sellers are sometimes offering incentives. like rate buydowns for example, to cushion the blow for buyers. >> uh-huh. >> so ted, we have been focusing on the impact to the housing market. the auto market is different, but it's still massive.

the second biggest in terms of outstanding debt and we're seeing many more cracks than we are on the housing side of it. what's going on with autos? >> subprime auto tldelinquencie are worse now than they were during the recession. the average new car price is approaching $50,000. for a lot of people, that means a monthly payment around $800. with people getting squeezed by inflation in other areas of their lives, not to mention car-related categories like car insurance, which is way up, gas prices have started to tick up. this is why people are falling behind. it's tough to swing that $ 800 a month payment. >> can i come back to housing and ask a question? i remember a time, which shows my age, when mortgages, fixed mortgages, were often assumable by the person who is buying the house. why is that no longer the case? did the banking business just decide hey, this is a bad deal

for us, we're not going to let people assume mortgages? >> it's actually prohibited on conventional, federally backed mortgages. it is allowed in some isolated instances withcertain fha loans. but this is a much smaller slice of the market. it would be nice, though, to take over somebody's 3% mortgage. that's a key point, 80% of current homeowners have a mortgage rate of below 5%. that's why people don't want to move or trade up right now. that 3%, 4% is going to become 7%, 8%. >> tyler, you should head out to -- there is a company called roams that was just profiled that is trying to get people the ability to do that, to assume mortgages. >> a rather antique thought, but there it is. they're joining us on the show tomorrow. ted, thank you for your time today. that's the consequences of what

happens with the fed in a couple of minutes. we are used to big market swings on these decision days, but chris murphy says the implied move for the s&p today is less than 1%, the lowest in nearly two years, which takes us back before the hiking regime began. let's ask dom chu what to make of it. >> all right. so what we have right now is a market that is very much in tune with this idea that rates are going to stay fairly steady here and the fed will take a pause. if you look at the dow industrials, the s&p and nasdaq, this is the wait and see that we are getting ahead of that announcement, certainly from jay powell. at the highs, we were up 18 points in the s&p 500, up five points. so trying to bounce back from yesterday. 4448 on the s&p. the dow up one half of 1%. and the nasdaq down about 0.2 of 1%. places we'll keep a close eye on with regard to the broader market and what's happening rite now, take a look at the treasury

sides of things. you see the yields drifting to 4.32%. if you look at some of the industry specific moves that we are seeing, take a look at some of those moves we were looking at with regard to sectors and what not. if you look at those, check out what's happening with crude oil on the energy side of things. still near cycle highs, going back to november of last year. and then watch some of those stocks and sectors on the move. we always talk about real estate, utilities being more rate specific here. financials also kind of rate sensitive. communication services the laggard here. and we'll get a quick check on the ipo. arm holdings, $53.08 a share. instacart right now, also down. remember, instacart priced at just around $30. so, again, a little bit of a

takeback here in some of the profits we have seen. >> dom, thank you very much. from student loans to striking autoworkers, consumers are being pressured on multiple fronts. david wesle will tell us what that means for the fed's next move after this quick break. 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.

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save hundreds a year over t-mobile, at&t and verizon. now i can buy that electric scooter. i'm starting a private equity fund that specializes in midcap. you do you. switch to xfinity mobile today. welcome back to cnbc's special fed tday show. just minutes away from the decision on interest rates.

our next guest is not expecting a surprise today, but it's what the fed plans to do moving forward is key. here with us is david wessle. we mentioned it off the top, but we should drill down on it. right now, the market is pricing in at 88 basis points of cuts. we're talking about the cuts next year, because for the long end for rates it will come down to, do they confirm that? what if they dial it back to two cuts? and there's the massive shorting of rates, which regulators are taking notice. so a lot is hinging on this. >> you're right. there's not much suspense about what they will do at 2:00. it takes all the fun out of covering the fed. it's like covering the world series when they tell you the score before the game. last time, there were a number of people seeing rate cuts in the middle of 2024. i'm not sure whether they're

going to do that again. they have to be careful not to get the markets too giddy, because if the markets start to expect rate cuts, then they they get more juice for the economy than they would like to see. so it's a tough call for them. a lot has to do with what their forecast is for he said once they know the rate hike cycle is over you start to see yields decline. you start to see -- cash no longer became. people are going to piled back into stocks.>> one of the things that makes this interesting for us there is always been this question about how long are the legs and monetary policy? i'm sympathetic to the view the legs are shorter because they tell you so much all this forward guidance. the bond market reacts quickly. they have to be careful about how they calibrate that when they put their -- sep together. >> inflation is cooperating with the fed.

how much? really? a lot or a little? >> i think it is cooperating a lot and that is coming down. that is what they want to see. people seem to have looked at the last number and if you thought inflation was coming down you pointed to the half of the indicators that said it was. if you didn't you pointed to the other one. it was one of those mixed reports. so i think it is cooperating a lot and that all they want to see is it is coming down. but they don't want is unhappy surprises of the going up>> people don't seem to feel it coming down. >> that is a different question. the fed is trying to steer -- particularly politically. i don't think people are convinced inflation is coming down. and also people look at the level of prices. they don't recognize if it is going up at a slower rate that is victory. what makes jay powell happy may not make joe or jill six pack happy.

that is a political problem. from the fed's point of view if inflation continues the come down gradually the pace of the labor market slowed little bit they can afford to be patient. but they have to worry about that doesn't happen. there is this other recall investment if oil prices are up headline inflation is going to go up. the fed wants to look through this but they can't seem like they are not paying attention. i have to buy gas. i don't by corporate >> not to get super wonky about this. if only we really focused on nominal gdp that would help clear up the confusion. the difference between the way energy and food -- maybe to supply. the point being nominal gbg was growing and 14% at the end of 2021. 14%. astronomical number. we are down to like 4%. that just tells you how much potential we get really half a inflation the rest of it going forward. >> the are economists that advocate the fed should have a nominal gdp target.

the counter it has been it may be harder to explain to people. because gdp gets revised and all of that. but i think part of this is what do you use the steer the economy and you want to look at things like nominal gdp. how do you communicate with people and the markets? where the fed has been successful in holding down inflation expectations is by suggesting -- to keep inflation coming down. we in a since we are in an inflation targeting regime. that is what they are doing. >> haven't we always been? >> when you and i started covering the stuff people want so sophisticated about inflation expectations. there was a lot of -- maybe not when you started.>> the people who still want -- to come back.>> i think they are high. one of the rare times. but i think things are breaking the right way. i'm not sure. i'm not confident. if i were the fed i would not

bet on it. compared to 6 to 9 months ago it is much more likely. >> always great to see you. david -- we are about six minutes away from the fed decision and about 40 minutes nfen. e chair's press coerce our team coverage picks back up after this quick break. i'm so glad we did this. i'm so glad we did this. life is for living. let's partner for all of it. i'm so glad we did this. edward jones every day, businesses everywhere are asking: i'm so glad we did this. is it possible? with comcast business... it is. is it possible to use predictive monitoring to address operations issues? we can help with that. can we provide health care virtually anywhere? we can help with that, too. is it possible to survey foot traffic across all of our locations? yeah! absolutely. with the advanced connectivity and intelligence of global secure networking from comcast business. it's not just possible. it's happening.

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especial fed decision power lunch from washington dc. kelly evans with me in washington. if you minutes away from the release of the fed's decision on interest rates top of the hour. we will see what our panel is predicting. let's check on the markets and where they stand. the dow jones is about 3/5 of a percentage point higher. the s&p higher by 1/5 of a percentage point. nasdaq roughly flat. the 10 year note yield at 4.319. this gets our panel. stephanie of hightower. john -- welcome to all of you.

stephanie let me begin with you. how close is this fed to being done raising interest rates and could this be it? >> i've been saying for a while we are in the ninth inning in terms of this rate cycle. height. and i still believe that to be the case. whether they go probably not today whether they go in november or not i think we are close to the end. that being said tyler the economy continues to have a lot of momentum. with the above trend gdp growth led by the consumer. led by pockets of manufacturing and that is leading to continue persistent inflation. we've made progress. we went from number 9.1% cpi to 3.7 in a years time. but it is not close to where the fed wants to go. we know that core pce number is

what they pay attention to. and 4.2% it is too high. rates stay higher for longer and that is what we have to live with. >> john do you buy that argument rates stay higher for longer but the fed stays right where it is right now chris makes me i think we are a little bit closer. smith if you look at the inflation numbers>> they are actually much better than on the one year basis. what that signals is the more recent progress on inflation has been substantial. similarly for growth we've had a good growth year. but more recently where we started to see some cracks in that. housing starts this week was noticeable for having a big turn. i think we are much closer in terms of inflation being closer to target. i think we are closer to seeing some slower growth. as a consequence i don't think the fed needs to make make much change. i think you can read interest rates unchanged leave the forecast unchanged because progress has been made. that is proceeding carefully today. >> in the old days when i started covering the fed in a statement they had the bias of the balance of risk.

what this was saying was even though we may not have change rates today what we are telling you is where we think the likelihood is moving in the future. that was talking about whether they were more worried about inflation being a problem or unemployment. essentially for the last three years the balance of risk has been to tighten that all else equal it was more likely they would go again they would not go. in the last few weeks i think starting with chair powells speaks speech we've seen the needle suddenly move back towards not quite but almost to a neutral balance of risks. i think that what i'm especially looking forward to a press conference for us to hear whether he ratifies the view that rather than being in a position of we are going to raise rates unless the data says otherwise. i'm looking for a comment that says we are going to keep rates where they are unless the data says otherwise. david kelly a quick 22nd thought. do you expect the fed to sound hawkish but act more dovish? >> i don't expect them to raise rates today. i think you will see -- will

still say one more hike this year. the messaging will still be cautiously hawkish. they should be done. they probably are done because i see some softening of the economy. >> so you think they are done but they will sound leave open the possibility of a move up later. we are ready to go for the fed decision.>> the federal reserve maintaining his interest rate at 5 1/4 to 5 1/2%. the committee continues trying to determine the extent of additional policy affirming that may be appropriate. there is this bias in the statement suggesting there is still looking to raise rates. and indeed the average fed forecast does continue to look for one more hike this year with an average forecast of 5.6%. importantly i will come back to that. there are two fewer cuts 25 base point cuts built in for next year on the economy -- to solid from moderate. job growth was said to have slowed