the fed's decision today. from new york, this is bloomberg. ♪ ♪ this is "the fed decides congo our special -- the fed decides. rs officer, and michael mckee at the fed. your big takeaways the upgrade language when it comes to economic growth. >> as we look at changes to the statement, there is lots of stuff that you would expect, the hurricanes and the response to gas prices. the fed dismisses the payroll swoon in september. we will see the return of that friday morning. a big pay back. the swoon was, you will get as much back on the other side if not more. they focused on the continued declines of the an appointment -- of the unemployment rates. the are also buying into handle we have seen a gdp of the last couple of quarters. before the fed statement i read some reservations about those 3% numbers. q2 was a response to the q1 swoon and the seasonal adjustment issue we have in the gdp data. in hurricane disruptions inventories and exports. the economy is improving, i just don't think we are at 3% just yet. nonetheless, they said solid, and that waves in the september rate increase and that raises their convic

i agree with you on this. -- we areition thinking of what the fed is saying, what the fed will be doingn the future. the futuree fed, plans will not necessarily be the fed that we have. lisa: there is some speculation one of the first orders of business will be looking at the inflation target. seeing if 2% is actually the right place to be or maybe a little bit higher. that introduce term premium to the curve. a lot of people are positioned and flat mirrors -- flat because they affect the cycle that produces flatteners. vishwanath: in terms of premiums, the significant difference between the term premiums at the long end of the curve and the short end of the curve. negative term premiums the flat of the curve. it makes sense to exploit that by continuing to flatten absent a big change in the direction of the fed. jonathan: guys, you are staying with me. vishwanath tirupattur, lisa hornby, and iain stealey. coming up on the program, the auction block. canada taking advantage of its own flattening yield curve. the tightest's are since 2008. from new york, this is "bloomberg real yield." ♪

that's right it's not like in the united states where the fed the fed is raising interest rates because the economy is going along at such a good clip and the labor market is stronger and getting ever stronger no thanks it is making itself felt in the british isles and above all in terms of inflation everything that's imported is now more expensive since the brics it because the pound the currency has fallen so drastically at the moment it's around fourteen percent below where it was before that back said vote investors worldwide don't just want that confident that the british economy would make it through unscathed and that's basically the case the british economy is weak so this is an interest rate hike out of weakness believing that with higher interest rates the pound becomes stronger and buying power returns at least a little bit inflation goes down leading to a healthier economy but i guess this would also hurt brits. it would hurt those with a mortgage for example anyone with credit on their books and for many people a report said today you know people who took out a mortgage in

the fed. you've been at those press conferences. how she communicates the message of the fed. you think his behavior is going to be when he manages the fed? a think he's going to be confident. even though he's not an economist, he's learned a lot on the job. he has participated in the debates. in the samewed footsteps as janet yellen. he went up and talked after the speech and was looking at some of the labor market issues. you can tell he's a guy that's really doing his homework. chris put out a note this on which depending times and you're in and he's concerned a non-economist will have a tougher time. if you're getting into more technical aspects of monetary policy, that is where powell maybe a little bit off of his footing. what if you need someone that can step up and show the kind of leadership for financial thatts? that is something she had that experience. had he chosen someone else, i i think he-- testifies as he gets out there, how does he conduct himself. he will really be tested by fire . i don't think anything can fully prepare you for that. >> it is really interes

the fed. i do not think the fed will have any choice to raise interest rates. 1987 is a selling experience, becauseyields went to 10%. the market to its tight end the fed eased. let me ask you since we're talking down the road. we will have to talk about what kind of policy monetary regime they will use. suggested-jay powell he likes what they have now. d think that is where the fed is going to end up? what you think of that idea? charles: it sounds in the conversation that is where they are headed. i think that is a very bad idea. i think that puts the risk and dependence. if you did what i did, testify before congress when congress asked you question like we need the fed to pay its fair share. i think those are all signs of an eroding independence of the fed and that the large balance sheet they talked about will at, because it becomes untethered to monetary policy. tom: we do have to wander back to investment at some point. . i wanted to have about apple computer. for a, it can spark in a concentration of success on the market. is that a sign of exuberance? optimistic about our economy because o

he served the fed for five years, but it's a republican to run the fed now. these are the kinds of things he is going to get asked. you anticipated my question, but i have another 1 -- it says the fed must respond decisively if the economy faces new threats. do you expect jerome powell to identify any new threats? kathleen: that is a great question. think a flate yield curve portends concerns about a recession. when it comes to acting decisively, there was a lot of criticism, more from the republican side of the aisle, about purchases, quantitative easing. some people thought it was a bad idea in the first place. they are unwinding the balance sheet now. maybe part of the thought behind that is, if we face another downturn, if there is some kind of shock, interest rates are not that high to re-stimulate the cuts,y with interest rate and in fact, janet yellen and others have said that bond purchases are now a tool in the fed's monetary policy kit. perhaps that is something jay powell is opening the door to an presumably it will be something he, will be asked to

what do you see that the fed isn't seeing right now in terms of the economy's long run prospects? >> i have a respect for the independence of the fedand as a former fed economist, i can say they're an elite bunch, but i think that, you know, if we're talking growth what's it going to be like ten years from now, whatever we do now, it will be less impactful on growth because it will change the level, but not necessarily the growth rate. that's robert solo's prize-winning idea in the long run there are factors like population growth that are determi determineing of gdp growth. we have a tax reform plan looks like it's highly likely to pass and everybody is counting votes, seems to be optimistic, and it's going to repair a badly broken corporate tax system. you in, the oecd is probably a decade ago told us we needed corporate reform in the u.s. because we're chasing the capital off shore and if we fix that we'll get a surge of capital spending in the u.s. and should drive gdp up short-term. i don't know what the fed resumptions are about whether the tax reform costs if you reduce the cost of capitol about 15% which is our estimate of

and of course, this is not necessarily what the fed wants and what the fed wants the market to imply e one of the biggest themes is that the phillips curve is still existing. that is what i'm saying. that is part and parcel to why dots arer fed underestimating. dots ared underestimating. it is as simple as that. matt: what do you expect from the new fed chair? do you expect anything different at all? he has never dissented as long as he has been on the governing board since may of 2012. he seems to be someone who will follow very well with janet yellen's strategy, although yellen herself seems to have turned a bit devilish over the last couple of days. -- dovish over the last couple of days. peter: it is a very good question. if you look over the next three to six months, it is hard to see a significant change in the fed because at the end of the day, there is not only the chairman determining what is going on. it is a committee. for the time being, the committee is not changing. however, going forward, that is obviously different. once yellen steps down, there is another person comin

the fed. he's a member of the shadow group committee, a group normally critical of fed policy. andmark paper in the mid 1980s that upset the status quo by being critical of fed secrecy. then chair paul volcker did not like the paper but it laid the ground work for a big change in fed transparency colleagues say goodfriend will offer essential historical perspective and bring balance sheet expertise to the fed, and that will be headed by noneconomist fed chair jay powell just a couple years ago in jackson hole, he offered a paper arguing in favor of using negative interest rates to combat inflation, and i quote removing zero interest bound is nothing more than the sensible application of monetary economics. credibility against inflation is tied to credible against deflation. goodfriend will also differ with the more rules-based monetary policy change coming to the fed, how it makes policy, and with new personnel, we await the appointment of a vice chair and another fed governor who is usually a person who is a community banker >> if this was the choice for fed chair, we would be

the new fed leadership that the idea of where the forecast of where the fed is going to change very ch there were three rate hikes of the average fed official and that's the general idea bringing up the funds rate to 2.1%, but only one rate hike is sort of baked in for next year and somewhere along the line something's got to give. we're 50 basis points apart there and the fed maybe took a baby step here towards kind of trying to nudge the market notice what it said here this is the most important part of the statement, to my opinion. economic activity has been rising at a solid rate despite hurricane-related disruptions. it kind of asks you to take out the hurricane-related disruptions saying you know what it could have been doing better than that and i think it's true if you'll sustain the 3% growth rates and we'll probably have a different trajectory or certainly the existing trajectory for the fed funds rate and that means the market will be as off-sized as it is right now or off-sized in the future >> what do you think that's pressing of the numbers? >> steve makes an important

chance to look at things with fresh eyes, is it time for the fed chair, the leader, to maybe everything?n this is an opportunity to jay powell as fedhanges >> i think you're putting your finger on an important issue that is going to have an influence on the project three policy for the next year or more . that is the performance of the inflation data. very importantly, the interpretation of the inflation numbers, what kind of economy the inflation data suggests we are in. here's the way i think of it. december,w and committee members are going to be following inflation data very closely. to some extent, it will be influenced by inflation performance in the december decision. continues attion 1.5%, about where we are today, and we see no firming on this will take a real introspection. will how inflation behaves in a modern economy. all, i'mrprise me at out of it now. it wouldn't surprise me that the staff is tasked with putting what we a deep dive on know about inflation. maybe with the idea that there will be some kind of a new synthesis around how inflation really works. inflation and inflation data are very much in the minds of t

some timely insurance this deep into the recovery. >> i want to talk to you a little bit about fed policy. you signed a letter to ben bernanke in 2010 calling on the fed to stop its bond buying programs. what's known in markets as qe or quantitative easing. the fed didn't stop. it kept doing it. who was right, who was wrong? in terms of whether that was an effective program or an ineffective program? you or ben bernanke? >> i wrote the letter in the past before i am in the white house where it's really important that i respect the independence of the fed, and if the fed looked back at that history and decided that they needed to act in a similar way, then i certainly wouldn't want to be engaged in the public debate with them on that. i think at the time, that a few of us thought that forward guidance could probably accomplish a lot of the things that they were trying to acco accomplish with qe and that's what prompted us to write the letter. certainly, the idea that inflation risks were lifted and significant, which was something that some of us believed at the time was incorrect, so the fed thought at the time they could do this and that it wouldn't

he provided leadership to chairman greenspan at the fed, then one of our most eclectic fed presidents, gary stern with first-rate academics. i would suggest out of minneapolis, a really unique, regional aspect, minneapolis economics. >> all of the fed bank presidents take on greater importance, because there are fewer people on the board, which brings me to my question. a lot of people have suggested lotyou were a fed staff, of people say the fed staff runs the fed, especially in the absence of a lot of governors with academic and economic credentials. is the staff going to be pushing jay powell around? should we be looking to the head of the monetary policy division for guidance? >> i think it would be a mistake to try to push him around. he is pretty solid and he's been working hard. he's been around financial markets and policies since the 1990's. he was in part hired for the job because he represents continuity. the destiny that he will be his own person. >> how much can he be his own person in the face of 12 regional bank presidents who as votingon the board members, now there's

the fed as a 2024.or runs until she could stay on. it has been done once before. marion echoes was replaced in fed chair and stayed on the fed until 1951. today, she is making it official. yellen has submitted her letter of writers nation -- letter of resignation. she was writing to president trump, "i am writing to inform you i plan to resign effective on the swearing in of my successor as chair." -- sheme that will be will fill out her term as chair, which ends on february 3. powell, provided, he is confirmed, and everyone expects him to be, will be taking over that day. abigail: with this being largely expected, it does not mean anything most likely for fed policy year. it will change the number of rate hikes expected in 2018. mike: it will not change anything in the way the markets are looking at the fed. the fed will be responding and what we get in terms of economic data in the coming months. what it does do is put pressure on the administration to try to hurry up and name some additional fed governors, because this is just one more opening. -- three already four openings, this will be the f

the fed chair. with us, jeffrey yu. good morning. tomorrow is going to be a huge day. forget the fed today. is all about the fed tomorrow . so much to think about and factor in. plus the we have data coming through on friday. the market is short the dollar coming into all of this. what is the potential for a whippy move around this? all the scenarios out there, depending on who is going to be nominated, he or she will have a short-term impact, but bear in mind it is not a one-person fed. it is a committee and a wide range of factors at play. i think when we take a step back and look at the geforce central well, it isg3 as not about one person. it is about the direction of the economy. we still should have confidence in the fed, no matter who is leading it. the dots are here in the market is here. that will be determined by the person who ends up leaving the institution. the u.s. economy is chugging along quite nicely. inflation data is coming up, you've got a 3% gdp read. that factors in the hurricane as well, so that number could be better. u.s. market is generating these numbers, yet the

economy, should stand on its own, not on whether the fed is printing money and somewhat devaluing the currency in that respect. you know, should the fed be the person, an entity that dictates whether you should buy stocks or bonds, remember, when you print money, keep interest rates low, that forces people to buy riskier investments, including stocks. should the fed be in the business of doing that or should normalization occur where the stock market reflects not the fed interest rate policy of rates being very low but reflects the real economy and earnings. there's a debate here, and one other thing the debate is in terms of the currency, you know, if you have a accommodative fed, it's not the gold standard anymore. liz: not good for the u.s. dollar. >> is the fed going to protect the currency? these are all what's playing out? that's why a lot of conservatives wanted john taylor as chairman. pushing for kevin warsh, john taylor is great economist, there is something called a taylor rule, it's about inflation and the gauge of inflation and kevin warsh is more along powell, he was a banker, he played a role in treasury. liz: let me ju

the fed chair, which some thought would be hawkish, the other was tax reform. now that we have the fed chair known, everyone will realize, this is not going to boost the dollar. fed are predicting rate hikes next year, the new fed chair is not going to change that soon enough. has been removed. on tax reform, investors are finally realizing it is unlikely to come through and it probably won't boost the dollar that much when it comes through. it is likely to increase the deficit and unlikely to have an incentive for foreign companies their money to dollars. the background fundamentals remain negative for the dollar. negative real yield, growth remains subdued and at the margins, the u.s. is losing its relevance. it will remain the world's reserve currency, but its power is being slowly eroded at the margin all the time. we are seeing saudi arabia look to follow others in receiving china's yuan for oil. interesting to see how that has affected the russia story. we will talk about tax in a moment in more detail, but flat curve by stocks. is that the trade? mark: definitely. the flattening

the fed. what about the ever-changing face of the fed under a new fed chair, a number of other positions need to be filled? could that have an influence? should it have an influence on how the fed will look at inflation? eugenio: yeah, i always comment on if we follow every single explanation by any governor of the federal reserve on how they are looking at inflation, interest rates should be 20% today. and they are not. every time they look at the data, and they see what is happening, you know, they make the right decision. i think that even with the changes at the fed, the same positions will come through, because they will look at the data and they will take the measures that the economy needs. julie: all right, i data-dependent said no matter who is in charge. thank you so much, eugenio aleman, for talking inflation in the fed with us. let's check on "first word" is with us. emma chandra has more. emma: senate republican leaders may have made tech support a little more complicated. they've decided to add a repeal of the obamacare individual mandate to the tax cut package. that will help th

to markets so why is trump breaking with tradition and replacing the fed chair after only one term experts agree that yellen led the fed with a clear vision and concrete results but the president wants to get rid of an appointee brought in by barack obama although trump needs a yellen style fed he needs it without janet yellen which makes powell the perfect choice for the job let's check how markets have reacted to the news as a financial correspondent standing by in frankfurt for us we have investors taking the nomination of paul. they've taken they've taken it positively i know most people would have liked to see janet yellen be able to continue but this is the next best thing he supported her policies as we've just heard he's a relative moderate and people also see him as being able to build consensus around the table and that's also important especially if unexpected events happen and the fed has to react to them and most people are sure unexpected events will happen they always do during the term of a fed chair something i think a lot of people here in europe and in germany are uneasy about is the prospect of his

fed. the new york fed announcing bill dudley will resign in 2018. the e.c.b. onomist defending the approach to removing stimulus. let's bring in mark ashworth. if janet yellen leaves the fed, there will be four fed board positions to fill. that is quite a lot. >> there is quite a lot. there is the possibility she could stay. that is happened before. -- that has happened before. a lot of people need to come on board. mark: if he is neutral, the other three might not be. fisher might be more market moving if it is john taylor. threeto have the top leave in such a short time? >> why are they all going? saw the writing on the wall. janet yellen will probably not stay on. he could have stayed on for another year. he decided six months is enough. he is moving on. boardwho else comes on and what the makeup of the fed will be. vonnie: the new york fed is in charge of the market operations which has become more significant. i guess we are going to have another study pair of hands in the new york fed office? >> we hope. that would clearly be right angle for the markets.

the fed. we have had a collegial fed under greenspan, bernanke, and janet yellen's term. e significantly hawkish on monetary policy, then you are setting up for some discord at the fed. i don't think financial markets would like that. financial markets like predictability and stability. scarlet: when president trump makes this announcement, what happens at the december fed meeting? does janet yellen start to hand over the duties to jerome powell? out her termerve and be there in january as well. ,ou can call her a lame-duck but she will fulfill her term. i don't think she will be a lame-duck in that regard, especially as jerome powell is a continuation. she may provide coaching and insights and those sorts of things to the incoming chair. joe: you mentioned that jerome powell has a solid grounding in economics and there have then fed chairs in the past two were not trained academic economists. that being said, in a crisis, if it helped that-- ben bernanke was a student of the depression -- have the credibility to do what he needed to do in 2009-2010 taking the fed and dire

do you think that the fed -- in terms of the market action, is the fed the biggest risk that's the areat causes more impact the fed is -- they're well entrenched here. you don't hit 1.7, 1.8% and not even close to their target yet, they have the window open reason because of where asset prices are, but not where price pressures are. >> could we see a speak in yields that the markets are not prepared for given the hike in december, plus that. >> i don't think the markets are prepared for anything on the yield side that spikes very aggressively and sharply what they're prepared for is still this gradual movement or drawing higher on rates. to your point, melissa, i think the markets would have a small correction if the yields would sharply increase like that, and that would be the reset that everyone is looking for in my opinion. >> are you encouraged we haven't had a correction based on the rate hikes that weave alrea've had? >> it has been encouraging you have to think back, though, to the october 2015 meeting when the fed was saying we're going to hike at the next meeting. they were ex

some of the other tightening discussed really sent the feds back six months or so had that been finesse without that kind of market reaction or maybe the fedsbe further along. i don't think the consensus is different from where the fed is now, michelle. >> it is a committee and powell challenges is not so much of what he thinks, bringing the committee along is what he thinks >> steve liesman lets bring in rebecca patterson and dennis garment, welcome to you all. rebecca, i will pick up with you saying it is not just one person and not going to be jay powell that's going to be the fed chair. there is going to be a vice chair appointed as well as some governors. in total, the market seems to be accepting the notion that if jay powell's name fed chair, things will go as plan by janet yellen, pretty much. >> yes, agreeing with that we got the fed over the next 12 or 10 months, you have the vice chair position which we'll get a nomination over the coming weeks and the end of next year considering number three, the new york fed president, william dudley permissive going to retire at some point where is the cumulative fed take policy one thing tha

we are awaiting the fed and the next fed chair nominee. at could happen maybe we are hearing in the next day or two. we will see if that the two realizes. let's -- shares were lower and recovered most of their losses and now they are up .3% today. expect earnings growth to remain at the same paste. -- same pace. fighting to insulate newer therapies for the -- from the pressures that hit the u.s. market. by thekely to intense pressure of the chief executive grappling with lower prices in the u.s. and increasing competition since he took the reins at the start of 2017. shares are up today. house prices in the u.k., house price growth remaining stuck in a relatively slow gear at the start of the fourth quarter according to the nationwide building society. values increased .2% from september and up on the year, that's the white line. about half the pace since -- seen in 2016. stretched valuations dealt a blow to the housing market. nationwide is lagging. london is the blue line. this is a great chart. managers are betting an interest rate hike

fed decision. not the typical fed decision we get aftder the fomc meetings, bu who is the next head of the fed. anticipating that it's going to be powell we don't know for sure that's why this morning we'll watch the president's twitter handle closely we'll find out what he will do anticipation is he will name jerome powell. we have guests on to talk about those issues we'll find out what it means for the fed decision, fed policy and the markets. the other round of news is we're going to get a look at the tax plan, see some details we have several congressmen on to talk about this including jeb hen hensarling and we will talk about the details are, whether they have the votes for this where the push back may be and when they think if something might actually get passed. we'll talk about all of those issues today we also have the head of the fda on this morning. we will talk about that war on opioids, try to find out what the fda can do to help with that also talk about drug prices. is that something that he thinks the fda can play into. and our guest host is mike jackson who is the ceo of auto m

i asked dennis lockhart, former president of the atlanta fed, who came to the fed with a long career anking and became a voter policymaker and did well at his time at the atlanta fed, i asked him if he will follow in janet yellen's footsteps even with inflation so far from target. here is what dennis lockhart said. dataflation and inflation are very much i think in the minds of the policymakers. time, i think jerome powell and the fomc for the most part would like to continue with the removal of stimulus and monetary accommodation. faces thatome powell senate banking committee, he will get questions about that. janet yellen's term is up february three. the senate banking committee has to get this done in the next couple of months. heare meantime, we will what the white house has to say about the next fed vice chairman. haidi: the boe raising its key rate for the first time in a decade. they did it and sterling fell. i guess the statement was responsible for that. why? >> the most dovish rate hike in history is what people are saying. they kept the key rate on a seven-to vote, raising

the fed has a dual mandate looks at employment and inflation. isn the fede job half done, the ecb will think it hasn't even started. by keeping softer for longer, draghi will be successful in raising inflation. anna: could that mandate change? the fed and side push for radical policy review. paul mortimer-lee stays with us for the rest of this half-hour. the german chancellor is set to be wary of pushing theresa may too high into for stocks --in divorce talks. is the most since may result. what does it say about markets? ♪ ♪ good morning. it's 20 past 8:00 in the german capital of the lynn -- of berlin. you are looking at a live shot of what i believe is st. paul's cathedral. let's get a market check right now. take a look at where futures are trading. just about 40 minutes to go. the 10 year chairman bond yield -- is up 1/10 of a basis point. higherures are trading as the global stocks rally may have been stopped. we will see in about 40 minutes stocksw your -- european -- stocks trade. we go to have a low. -- we go to add blood low. low ed:.to bed blood t

the fed is likely on track to hike rates in december, another quarter point. but the minutes also showed a broad inflation debate with a few participants saying the fed shouldn't hike until the data show that continued low u.s. inflation is convincingly on track. while most still think the fed will ultimately hit its inflation target, many are concerned that the forces behind low inflation could prove to be persistent, not temporary as they've said most of this year. fed chair janet yellen in a speech tuesday night provided a curtain raiser on those broad ba based concer my colleag and i a not certain that it is transito monitoring inflation very clo go back to what i said earlier about keeping an open mind and not assuming you have a monopoly on truth. it may be that there is something more endemic or long lasting here that we need to pay attention to. >> reporter: but from the other side, arguing for higher rates, many fed officials think the economy is operating at or above the employment rate, that could spark inflation. they believe the connection between low unemployment and high inflation will begin to work in the u.s. economy. after the meeting, market

the fed legislation, or more recently the choice act. because those acts would essentially bring short-term political pressure onto the fed that could affect our monetary policy decisions by mandating real-time gao policy reviews of recent decisions that would second-guess the decisions made by the fed and call into question their legitimacy and credibility. >> i understand that that is your position, and at the same time while we're talking about independent, the fact that these reviews are undertaken in the first place suggest to me that making them subject to a transparent review process would just about the public to have input. it's the desire, the impulsive any policymaker anywhere to insulate him or herself from any public review but we do live in a republic, and a republic where the people are the sovereigns, what ultimately the government is accountable to the people. and you at the fit exercise a significant amount of government policymaking authority and that's why think these things are appropriate. my time is short. i want to get a a couple of otr issues quickly. a joint tax committee analysis of the tax plan pending before co

the fed is just not been sufficiently concerned about that. mark: if you had carte blanche to do what you wanted to do with the fed, you say the fed needs to go . spell it out for us. what direction would you like the fed to go in? edmund: i would like them to reverse what they have done in recent years. the $20like to selloff trillion of debt. fedi think most of all, the has got to realize that there are lots of forces acting on the economy. and the money supply and the interest rate that those things it has control over, those are peas in the pod. just part of the action. by littlen struck calculation that i did recently in which i asked myself, to what the speediness of recovery in the 15 or 20 countries that i was looking at, to what extent are the , therences in countries result of something entirely different that the fed never thinks about. namely the dynamism of the economy. so i ran a little regression as statisticians call it, showing how the speediness of recovery the, onon the come on the dynamism of the economy as evidenced by the growth rate of productivity in earlier periods. and i was astonished at the result i got. wereour cou

the details. >> reporter: fed officials continue to grapple with the conflict of inflation that's too low and asset prices that to some on the fed worrisomely high minutes of the october meeting show the fed is on track to hike rates in december an additional quarter point but also showed a broad inflation debate with a few showing the fed should not hike until u.s. inflation is convincingly on track to the 2% target fed chair janet yellen earlier this week provided a curtain raiser on the broad-based concerns at the fed. >> we expect it to move back up over the next year or two. but i will say, i'm very uncertain about this my colleagues and i are not certain that it is transitory and that we are monitoring inflation very closely and i'll go back to what i said earlier about keeping an open mind and not assuming you have a monopoly on truth. there may be something more endemic or long lasting here >> from the other side, arguing for higher rates, the minutes show many fed officials think the economy is operating at or above the employment rate that could spark inflation. they think the connection between low unemployment and hi

fed. the fed feels like it is in flux. if you take a step academic at the data, the u.s. omy is ticking along. >> u.s. data is running at highs. we think the terminal rate, a couple more hikes, in december into next year. cycle, if you have his change of the guard at the fed, perhaps that is the risk. unless we have an oil rally like we spoke of, unless u.s. growth continues to be blockbusters, inflation is not going to reach the target. 4% is reallyree or unlikely. patterns.out cyclical this is good news. in terms of u.s. and u.s. interest rates, you are using the treasury market where tax reforms are not going to be a big deal. it will have a small impact on growth. the curve hit a record low today as far as his flatness. jordan: people say that is a signal of recession. theynk it's more about don't believe we will have a high inflation for very long. that is the view in the treasury markets. yieldsd higher real before you start it right about guy: let's shift gears. that is significant up from the previous estimate. that speak to the cfo. thank you for joining us this m

the fed. it is very much continuity. someone who will be inclined to trust the staff feedback at the fed. the first half of the fed minutes, which a lot of people skip over, the staff forecast and staff commentary is in it. that has tended to a more dovish side than what we have necessarily gotten. david: chief u.s. economist joining us here in new york. our special coverage beginning in just a moment. we will have analysis and reaction. janice anderson, bill gross and black rock's chief jeffrey rosenberg coming up right now. tom keene and scarlet fu are waiting in the wings. julie: sign up for the balance of power newsletter at bloomberg.com. from new york, this is bloomberg. ♪ ♪ scarlet: live from bloomberg world headquarters, this is the fed decides. ♪ scarlet: in just under five minutes the federal reserve will release its monetary policy statement. see you in december. the fed is certain to keep rates on hold today. no press conference, no projections will be upgraded or updated. it is unlikely this will tip the markets one way or the other. today's announcement comes 24 hours before

composition that that -- the competition -- we are thinking about what the fed is paying, what they are doing in the future based on the fedthat might not be the future point. that is not the fed we would have. lisa: there is some speculation one of the first orders of business of the powell set will be looking at the inflation target. seeing 2% is actually the right place to be or should it be a little higher? that introduce term premium to the curve. a lot of people are positioned in flats nurse -- flatteners because they affect the cycle that produces flatteners. but that changes the whole dynamic. vishwanath: in terms of premiums, the significant difference at the long end of the curve and the short end of the curve, negative term premiums at the flat of the curve. it is perfectly rational and makes sense to exploit that by continuing to flatten, absent a big change in the direction of the fed. jonathan: vishwanath tirupattur, lisa hornby, and iain stealey. coming up on the program, the auction block. canada taking advantage of its own flattening curve. the two/30 spread the tightest since 2008. from new york to our au

the fed. you had ankles, martin, paul volcker, alan greenspan, they the fed. ntials, people have to make it a committee decision and corral everybody. russ: exactly why the market has been so calm, the market assumes the policy and an early powell fed will be the same as a late yellen fed. exciting is an historic day. we will show the white house, maybe they will be in the rose garden, but an informed discussion. smart discussion only on bloomberg. ♪ tom: good morning to our international audience, with us for this historic day of the federal reserve system. perspective.ve us is a historic day. we were talking about the idea of a non-phd economist. new saidto what the will be. new said will be. how will that meeting go? carl: consistent with the has persistedthat under chairman bernanke and chair yellen. we will see the same of that where there is deference to the in-house staff forecast. about jayore i read powell, the more i like the guy. georgetown prep to princeton, then back to georgetown law. the collegiality drifts away win the treasury goes out for stan

powell will remains janet yellen the first woman to lead the fed and the first fed chair in decades, not offered a second term. has been a beneficial since 2012, and previously spent years in the private sector, he's expected to keep raising interest rates at gradual pace , also seen as someone more inclined for financial regulations, powell's reelection no surprise, and blue chips moved higher, dow hid record gaining 81 points. >> promising sign for the job market, the number of americans signing up for unemployment tapped near historic lows last week, the government says fell by 5,000 to 229,000. classic is getting a make over , llb says it is planning to broaden its scope beyond its familiar catalogue. many other retail remembers shutting down stores, ll bean planning to focus monday on its bribing and mortar, making push to expands in urban market and widen its audience, by a new ad campaign. and mcdonald's is bringing back the mc rib. sandwich made of bonn less pork in the mc rib sauce brief ly made return last year limited number of locations making come back this year for its

we have a lot more coverage about the latest of the fed powell is and jerome president trump's pick for the leadership at the fednd will be passing through the fomc them meeting for applications. plenty more to come. betty: this is "bloomberg daybreak: asia." haidi: we continue our coverage with a leadership at the fed, three sources are telling us that the said governor jerome powell is the pick for president trump that is inspected to be announced on thursday before trump heads off on the asia trip . we will be talking to the locations for policy for markets and investors but in the meantime, implications are coming through from earning season. big tech. ahead of apple, facebook earnings. the company enjoyed another record quarter with sales beating estimates expectations. and that help to offset a few tough weeks for social media on capitol hill. basement shares currently record before the earnings report but they turned around and extended trading. let's get through the numbers with the senate testimony with --omberg intelligence joining us. let's go to the earnings. ais was the bright spot in tough week for

fed? the fed is going to release -- release the minutes of the meeting. e was no rate hike but there is a chance to look at the minutes and see just how strong a consensus was, the convention for the rate hike december 13, where the markets ernest seeing -- markets are seeing 100% chance the fed will move. the question is now, not just at the end of the year, where does the fed go next year? if you look quickly with me, here is the cluster for the majority seeing three hikes in 2017. interesting now. this cluster, less concentrated, still looking for three hikes, but then late last week, i think the story got some new life into it over the weekend as people put the water context, goldman sachs looking for for rate hikes. goldman sachs is one of the top dots. you think inflation will be 1.8%. they think unemployment will be 3.7%. we can, flattening yield curve, could the fed move that many times next year? let's look at another chart. inflation and unemployment, is the phillips curve broken? why we ask this question. unemployment is already down to 4.1%. 2%

has considerable buy into what the fed has done in recent years. so for a lot of the things the fed is doing, it will be winding back some of the support it provided for the economy, quantitative easing, which basically the fed bought one -- trillions of dollars in bonds. and the process for that is set in motion. powell would be expected to continue that. how aggressively he might raise rates in the future, that depends on what the economy does , but like i said. for host: what the fed has been doing. kenny -- for what the fed is been doing. host: as the press is a and confirmation goes through? guest: the fed's's top policymaking body, the open market committee just met this week and they announced yesterday, they are keeping the main borrowing rate which affects interest rates the same. it is currently between one and one and one quarter percent. but they are expected to raise rates by another quarter percent in december. the statement yesterday gave no indication that the plans have changed. islooks like a december hike still on track and that will depend on what happens with in

the fed is doing. the long end is the fed an ecb. a points flatten to that it forces the fed to stop hiking? , i think the starting point is the argument about quantitative tightening that the fed is doing in addition to rate hikes. the conventional wisdom was the thee was to steepen because reduction of central bank balance sheet expansion or the reduction of purchases would reduce the demand for treasuries and yields would go higher. now the curve is actually flattening with the long end well anchored and the front end moving higher. what is this telling us? the market is saying that by the time the fed is done reducing its balance sheet that it will be time to start cutting rates as well, so essentially the market is making a judgment and the yield curve is telling us that we are very late in the cycle recovery and while short-term rates might go higher, the path of long-term rates from here are lower. yousef: has we look ahead to this event where we will hear central bankers speak, apart from the yield curve, i have a theoretical question. can we hear something new on communication and co

what are the restrictions the fed put on this? the fed can only do this with the approval of the secretary of treasury, definitely limiting fed independence. part of amight be program, which implements that it must wait for five institutions to be in trouble. third, collaterals required for all loans -- loans had to be collateralized to the satisfaction, which allowed them to buy unsecure, highly rated commercial paper. that can only lend to a solvent borrower, a sound principle, but difficult to determine in a crisis, where acid values are uncertain -- asset values are uncertain. loans must be disclosed to the chairman of the senate banking committee's and has financial services -- houe finan -- house financial services. banks can no longer freely pass on to the dealer loans obtained from the discount window. they are subject to 23a of the federal reserve act. fdic authority to raise deposit insurance limits in a crisis were taken away, only to be restored by fdic to a joint resolution of congress, making it impractical in a timely way.

the new fed president will also be speaking. this is at the new york fed. snapshot of the 12 regions, the district banks. a meeting on the 12th and the 13th. expect it to raise that key rate almost 100%. as ahas been mentioned possible member of the board of governors is going to be speaking here on trumps economic agenda. 3.0, and we have the fed's key inflation gauge. >> central banks around the world are also on the tightening path. it looks like the bank of korea maybe next when they meet this week. >> people have been holding their breath to see what happens. they meet thursday according to a survey done over the weekend. key will be raising that rate for the first time in six and half years. let's take a look at what they are looking at now. it has been coming down for six years. up 3.6% driven, by exports. has been aive months big driver. you do have inflation below the 2% target. numbers come out thursday. they could -- they kick off the global release looking at manufacturing. the u.s. will follow through on friday. inflation, housing, writing -- mo

jurrien: the fed is doing what many people thought was unthinkable, which is just to normalize policy. we thought the feditself into a corner. the fed is doing exactly that and under the current leadership, they really paved the way forward and as was mentioned, the real question is what happens if and when investment goes above the fed target? how preemptive will they be? policy will they push and will that trigger a yield curve inversion? we are still a fair way away from there. before we think about and overshoot, let's talk about the here and now. how are we going to reconcile? ashish: i think data is going to become more important. one of the key issues for the coming year is that the fed has become quite predictable and the market has become a low volatility market which is a challenge for the fed because the fed is raising rates. they want conditions to be tighter and they have not gotten tighter. yields are still below where we started the year. i think you're going to be seeing the fed increase volatility, uncertainty in the market and that is going to be healthy. if you look at the change in no

the fed chair is. the market has been underpricing the fed for quite some time. that's not going to change. until the fed actually start to make moves. we think that's going to happen because we think the economy is strong. very little imbalances. eventually inflation will come back so all these things are likely to happen. about where the market is pricing and how the economy is evolving. jonathan: we await the tax bill. it stay tuned for bloomberg for complete coverage of the president's announcement of the new fed chair. special programming starting at 2:00 p.m. eastern time and we will bring you the president's rose garden announcement at 3:00 p.m. eastern. another decision we're waiting for. the first rate hike on debt potentially in over a decade. coming up a little bit later from new york. this is bloomberg. ♪ david: today, gop leaders will unveil the details of the tax plan or at least their first drafts. we welcome kevin cirilli for a report on what to expect and i did say first draft because as i read it we have speaker ryan saying they will change it over the weekend. kevin: we ar

yellen and the fed saying one thing, the fed trying to tighten policy. ket not playing. along -- not playing along. if you look at the yield line, it is flattening, typically a sign of recession. what is going on with that curve and why has the fed been unable to push it up? mark: if you saw the curve invert that would be a sign of recession. that is something we are watching for, we do not anticipate that happening. the long end of the is responding to some of the comments you just showed by janet yellen. a lot of the recent commentary from fed presidents, that they are simply no longer sure that inflation will necessarily pick up again, i think we are seeing that in the 10 year. that is a very interesting phenomenon. at the same time they have been tightening and preparing themselves for future financial crises, they are also concerned that inflation just is not been responding the way they anticipated. tracy: when a da vinci hinting sold for $450 million earlier this month, it broke all the our world records and triggered warning bells for a senior mar