surrounding the fed funds rate? o, we track very carefully the unemployment rates and experiences of different demographic groups. we make a very careful assessment about whether or not the economy is meeting the objective of maximum sustainable and climate or not which involves taking account of factors like our particular groups being discouraged from participating in the labor force because of conditions. but it's important to recognize that our powers which involve setting interest rates affecting financial conditions are not targeted and cannot be targeted at the experience of particular groups. i think it always has been true and continues to be true that when the labor market improves, the experience of all groups does in the. roughly now, the unemployment rate in the united states is close to where it was in the fourth quarter of 2007. african-americans and hispanics at that time back in 2007 had higher unemployment rates than the population as a whole. regrettably because of the disadvantages that these gro

we expect the fed's independence, but to ensure that the fed lets us know variables used in monetary policy and the reacti reaction function so families can plan their family economies. i know you are not a fan of the formac because i have a letter dated november 16 you said to the speaker. in that letter you call the act a grave mistake. i have another letter that tribes it as an important reform. your letter mentions or complains that monetary policy would be forced to be strictly adhered to by the prescriptions of a simple rule. my letter says the legislation doesn't chain the fed to any rule and certainly not a mechanicallele rule. your letter says the act would under mine the independence of the fed. my letter says in no way would the legislation compromise the fed's independence. on the contrary publically reporting a strategy helps prevent policy makers from bend ing under pressure and sacrificing independence. your letter states the formac would damage the economy rate to become law. my letter says the new legislation would improve economic performance. your letter is signed

surrounding the fed fund rate? >> so we track very carefully the unemployment rates and experiences of different demographic groups. and we make a very careful assessment about whether or not the economy is meeting the objective of maximum sustainable employment or not. which involves taking account of factors like our particular groups being discouraged from even participating in the labor force because of conditions. but it's important to recognize that our powers, which involve setting interest rates, affecting financial conditions are not targeted and can't be targeted at the experience of particular groups. i think it always has been true and continues to be true that when the labor market improves, the experience of all groups does improve, i mean, roughly now the unemployment rate in the united states is close to where it was in the fourth quarter of 2007. african-americans and hispanics at that time back in 2007 had higher unemployment rates than the population as a whole regrettably because of the disadvan

in other words, the fed did not say they were credible, but the fed did not say they were not credible either. it'smattered a lot because only a joint determination by the agencies that have any legal force. to call thefusal plans not credible meant the agencies could not use statutory tools to push these risky banks in the right direction. i want to start by looking back at that decision by the fed. the fdic stands behind insured deposits, so its main mission is to stop bank failures before they happen so taxpayers won't be on the hook for some kind of bank failure. of all the regulators, the fdic has the most expertise in liquidating failed banks. so, if the fdic found the banks liquidation plans were not credible and the fed agreed with the fdic on the basic problems of each of these plans, why did fdiced refuse to join the and designate these plans as not credible? ms. yellen: looking back to the decision we made last year, we set back in the guidance and pertaining to these living wills that we expected to go through a few rounds of submissions to clarify. it's a completely new pr

surrounding the fed rate? >> so we track very carefully the unemployment rates and experiences of different demographic groups. we make a very careful assessment about whether or not the economy is needy of objective of maximum sustainable employment are not which involves taking in account factors like our particular groups being discouraged from even participating in the labor force because of conditions. it is important to recognize that our powers which involved interest rates affecting financial conditions are not targeted and cannot be targeted at the experience of particular groups. i think it always has been true and continues to be true that when the labor market improves, the experience of all groups does improve. roughly now the unemployment rate in the united states is close to where it was in the fourth quarter of 2007. now african-americans and hispanics at that time back in 2007 had higher unemployment rates than the population as a whole. regrettably because of the disadvantages that these grou

the fed didn't say they were credible. the fed didn't say they weren't credible either. now that mattered a lot. because it's only a joint determination by the actions that has any legal force. the fed's refusal to call the plans not credible meant the agencies couldn't use statutory tools to push these risky banks in the right direction. so i want to start by looking back at that decision by the fed. the fdiv stands behind insured deposits. the main mission is to stop bank failures before they happen. so they won't be on the hook. of all the regulators, the fdic has the most expertise in liquidating fails banks. so if the fdic found the plans were not credible and the fed agreed with the fdic on the basic problems with each of these plans, why did the fed refuse to join the fdic and designate these plans as fought credible? >> well, looking back to the decision we made last year, we had set out in the guidance pertaining to these living wills that we expected to go through a few rounds of submissions to clarify it, it's a completely new process. we felt the banks feed t

you've done good work at the fed. i wish the fed in the past had done more. but generally regulators are trying. but this will undercut your efforts, this cost-benefit analysis bill. and ultimately lead to weakening health and safety rules, which has been the long-time battle in this institution. talk about the battle between the conservators and the innovators. the conservators wanted to preserve their privilege and power and the innovators wanted to move the country forward. cost-benefit analysis just helps the powerful people in this town resist any kind of regulation that makes people's lives better. whether it's health, whether it's safety, whether it's safety and soundness of the banking -- of the financial system. so i want to ask a question about that and about your letter. senator rounds also asked you a question earlier about cost-benefit. how can you be against regulatory reform, how can you be against cost-benefit analysis? but it's obviously, how do you calculate the benefit of a rule that contributes to safety and sound snns it's so much harder

is it counterproductive you've got a fed working on one side to create jobs and you've got a fed on theother side of the building that's doing things that a lot of people think are killing jobs and micromanaging financial markets and decreasing the availability of capital which is it self-defeating? >> i well i think we have to remember that financial crises are immensely costly to well being. and it's important to make sure that we do everything almost everything we can to reduce the odds of another devastating financial crisis. so we are working hard. we have worked hard in the aftermath of the crisis. to make sure that we have a financial system that is safer, sounder, has more capital, higher quality capital. more liquidity, is less crisis-prone than the financial system. that we had that caused this financial crisis. >> i want to -- time is short. you mentioned the word liquidity. i think a lot of people think some of the things that the fed has done and some of the regulations that have actually reduced liquidity in a number of markets. you and i have had a conversation about the

and the fed funds rate traded below it. and when we raised i to 50, the fed funds rate moved up by roughly 25 basis points. the of the increase in ioer but continues to trade below it. >> all right. so your testimony is that those are traditional tools. so let's move then to a different discussion with that as a background. you have in the past, been a proponent, though a reserve proponent of a rules-based system, back in 2012. you gave a speech where you said "why shouldn't the fomc adopt a rule as a guide post"? the answer is by times, by no means normal new and the simple rules to perform well under ordinary circumstances just won't perform well. two years ago, you said something similar. you said in response to a question about rules. you said the conditions facing the economy are extremely unusual. i've tried to argue and believe strongly that while a tailor rule is or something like it provides a sensible approach in more normal times like the moderations under current situations, it is not appropriate. that's your te

the fed would then have to respond.he baseline case is that the fed will hike one or two times more this year. betty: thank you so much. >> you bet. janet yellen will take questions coming up in a few moments. she is still going to pair remarks. this is a fast-moving equity market. we are down 214 points on the dow. let's go to matt miller with a check on the markets. matt: i want to do something different. everyone is highlighting the drops. this is where people are putting money. gold, interesting is above that of hundred dollar mark and we have not seen it there in quite some time. it was there briefly monday but has not closed there in a year. gold is up 4790. and lookingiding for the perceived safety of gold. they are also looking for the perceived safety of government. ist the 10 year yield getting pushed down. it was first down earlier and now it's 1.62. came down.n the uk what incredible strength for the yen this month can it is now trading at one dollar cents. the bank of japan cannot by any yen weakness. there

this isn't the fed district. while the minneapolis fed district includes just 9 million people.., madam chair, do you oppose instituting any type of review of the structure of the fed, outside healthy study? why do you do that? knowing that things are evolving all the time. >> it is of course up to congress to consider what the appropriate structure is of the fed, and i'm well aware of the fact that history plays a great role in deciding what the fed would be public if we were starting from scratch. you would not have the 12th district with 65 million people. i think 20% of the u.s. economy having won federal reserve bank. in congress can't of course reconsider the appropriate structure. i simply mean to say i do not regard the structure as broken in the sense that it is failing to put in place good monetary policies, failing to collect the information we need about what's happening in the economy to craft good policies. we do have come as congress intended, independent-minded people sitting around the table crafting policies. of course, the structure could be something differen

why isn't the fed, given that mandatory spending is 70% of the federal budget, why isn't the fed more aggressively warning congress that it must reform mandatory entitlement spending? >> every fed chair that i can remember has come and told congress that this is a looming problem with serious economic consequences. i know my predecessor has. i have on many occasions. i certainly remember the chairman greenspan discussed with congress the importance of addressing this. >> thank you. >> time of the gentleman has expired. the chair recognizes the gentleman from maryland. >> i want to thank you, chair yellen, for not only your leadership in general but your participation and patience at this hearing. i want to welcome our visitors and guests here today and thank you for bringing your importance message. we do talk about how our unemployment rate has gone down, which is has, below 5% now. but we all know when you get behind those numbers, there's really two types of jobs being created, high skilled, high paid skills. need advance education. and low skill low pays jobs. what we are not crea

the fed raise rates? cut rates? or hinted today, even go negative. what did the smart money decipher from message, we have billionaire wilbur ross to tell us where he's putting money now. less than an hour to the closing bell. the dow is confused at this very moment, so let's start the "countdown." did fed chief janet yellen hint today we too could be turning japanese if the markets and the economy really tank? just as japan caved last week and allowed rates to go below zero in an effort to stimulate disastrous economy. today our markets look to nod zero rates and promise to throw the economy and inflatable pillow as we drown in debt. the dow jones industrials was below the flat line and turning red. up 10 points at the moment. the nasdaq looks extremely healthy, up 52 points, watching the markets for now. all green on the screen. that could change. >>> trouble in the magical world, disney reported earnings after the bell that was yesterday. the company did very well, beat expectations, but it was that re

all. -- fed call.t that oil bounces from $30 per barrel to $37 per barrel is not a great game changer. jon: yesterday, i see your headline come through that there could be a production cut agreement. oil is high and stocks recover. that seems ridiculous, but everyone accepts that is the rule of the game. what do you make of that dynamic? it is still there to that extent. to get risk on, you need oil prices up? what kind of a market is that? >> because we have had oil come so hard, it is the energy sector suffering. what you're talking about is exposure to the energy sector, whether its banks or whatever. i think the inflationary carry through is more important. we spoke about the fed, an even bigger problem for the bank of japan or the ecb. makes their life much tougher. guy: then we get them reacting more strongly. >> i think that we do. we were discussing before on the impact of easing. it is very good to say that we do not think it will have much of an impact. i think these policy makers do not have

the fed got this power in 2008. some feel they could interpret paying interest on reserves as a negative interest is a form of a payment, so it depends on how clever and creative the lawyers want to be. we have seen in the past that they are pretty clever and creative. presumably if they felt this was an insurmountable obstacle, we would not have heard the comments from fisher and dudley that there is an option or possibility, so this is going to be an interesting aspect of tomorrow's testimony. the federalte reserve act. they probably have an opinion on what it means. if it comes up -- one of the biggest difficulties for the fed if we have to go to negative rates is not legal, but the political aspect. it would be very unpopular with a lot of constituents among people who have an interest here. -- precedent is the bank of japan. denmark, anden, switzerland, all adopting negative rates. look at these other countries, other central banks, adopting negative rates, one people -- think people point out a structure their

something the fed and most people who follow the fed have generally rejected in terms of the best wayto make policy. so expect a lot of that from some of the other republicans. i think what democrats will wonder are hey why are you raising rates when the economy is weak. so i expect yellen to get it from both sides. not quite a lot of support or t vitriol we've seen. >>> the director of floor operations at ubs joins us here. good morning. >> good morning. >> dny yellen puts it maintaining the integrity of the last meeting. >> i think shy is trying to do a middle of the road as steve said. a little for both side. >> that itself course she actually has to take. obviously, she can't come in and say things have gotten bad. so we're not going to do anything until june so she's leaving it all open and giving you enough hint that march is likely off the table and you will probably get four more pay rolls before we get any consideration. >> but still a fundamental divergence as to whether or not they will capitulate on interest rates. >> yes. and you know my feeling. i think, well, you didn't

they are not the fed -- the fed has a role to play. job training, educational programs, programs that address other barriers in the labor market, i think this is congress' job to address. productivity growth is very low. i think congress has always had a role in supporting basic research, making sure that the infrastructure of our country is adequate and putting in place programs that make sure that training and education are widely available. >> let me move to a soft spot that i think exists in the economy. you and i have talked about it before. that's on oil and gas. the fact that the saudi arabians are pumping like crazy into what appears to be an oversupplied market causing the price to drop a lot. which in some ways is very good for all of us. it saves us $10, $20 a week or a month in our price at the pump. it also is causing some job losses in the manufacturing sectors, oil and gas obviously, transportation. can you comment on what the fed is doing or reviewing when it comes to oil and gas taking acc fact that the energy sector i

the first, fed ex, a price target of 165, tell me about that. >> i think fed ex is a stock like a lot of the transportation stocks have been hit hard. if you look at cent you've seen a lot of stocks beyond a bear market and down more than 20%. think fed ex has taken a bunch of selling pressure because of the fact that people are worried about the global economy, because of the fact that people are worried about what's going on in the u.s. and outside the u.s. and the transports tend to take a dim view in the economic picture. i think those stocks have taken a pounding. we like where fed ex is sitting. the ground business is stabilizing. they've made an acquisition. if them get through the intergrace we think where it's sitting is in pretty good share. >> be aerospace, a price target in the mid 50s. >> so be aerospace makes the interiors for planes, seats and cabin superiors and things for airplanes. you've got two markets there. you've got the new equipment market and you've got the retrofit market. we think that that stock has been beaten down pretty hard. it's separated from its dis

the fed has that.ve seen the bounce back from the extreme of last week, last wednesday and thursday were everybody was panicking. .e have seen 10 year yields howard extreme were things getting? scarlet: some of the metrics -- guest: some of the metrics were incredible. it was close to the lowest in the history of the data which goes back 55-60 years. that was indicative of extreme stress. if you take the difference between the 10 year premium and the one-year premium, that again is so flat and inverted for the first time in a long time. view that's been this we cannot trust the yield curve, we can't trust the spread between short and long-term deal because of what the fed is doing. that it is distorting and some have put out this notion if you adjust for these things the yield curve in a more natural state would be inverted. to these arguments resonate? guest: there is something to be said that the way it used to work the yield curve inverted. that requires long-term interest rates to fall below short-

do you feel the fed is responsible for this decline? >> the immediate market response and for a number of weeks to the decision was quite tranquil. it was well communicated and expected and very little market reaction. around the turn of the year, we we began to see more volatility in financial markets. some of the precipitating factors seem to be the movement in chinese currency and the downward move in oil prices. i think those things have been the drivers and have been associated with broader fears that have developed in the market about the potential for weakening global growth. it spill overs to inflation. >> you told us last year, here in this meeting, a drop in oil prices was a good thing for the economy and the consumer. that's what you said a year ago. since then we have seen thousands of jobs lost. we see oil companies in bankruptcy and consumers not spending their gas savings. do you still feel the same way about oil prices? >> clearly, declining oil prices have had negative consequences. >> do you think you made a mistake a

where does this by the fed? it is not far for the feds target anymore.he fed be justified or vindicated by a number like this? they willitely think be. this will add to the fire of should they raise rates, should they not raise rates. for a while, everything has been pointing towards we should not raise rates. now we have the hotter inflation numbers in the past week or so, that will keep this debate alive and well. it is a tough spot for the fed it to be and because they have the lagging indicators looking well, and forward stuff not great. joe: thank you. writing down a fascinating day in data. alix: is the continued dollar rally call for foreign currency simulation like in 1985? -- is aent guest says currency stimulation expert. ♪ new jersey governor chris christie endorsed donald trump. he is appearing with jump in texas. says she nikki haley would support mr. trump if he wins the nomination. governor haley, who has endorsed senator marco rubio says rubio can overtake trump. and former transportation hasetary ray lahood endorsed john kasich. a new po

that is above the fed target.eason we are not running at 3% overall is because the other 42%, which is energy and food, commodities versus the dollar is running at 2.5%. that is fading. i think the fed is correct -- we are heading beyond 2%. brendan: sometimes this feels fed forearm shopping -- the pays closer attention to core pce. they say i prefer the cleveland-trimmed mean, but if you look at the measure the fed cares about, the picture is like -- less rosy. mr. schomer: he does not matter. it will all go the same direction. some technicalities about the way the ppi is measured -- there are some missing substitutions going on between the fixed basket cpi and the actual spending. i think it is mostly autos because auto sales are booming. i think that gap will close. if they all had in the same head inn, he nashad -- the same direction, that is what matters to the fed. there is a lot that is being missed, even going back to one week ago when markets were doing the exact opposite of what they are doing now -- the

it seems to me the fed is less likely to be aware of the pain of how many fed regulators really know people who have had their homes foreclosed on and are likely to see that and understand that. >> guest: well, i mean, one feature of the federal reserve system is it has these 12 federal reserve banks around the country. there is one in cleveland, and the president of the cleveland bank, would report what was happening in cleveland with housing and the like. your concern is not wrong at all. but i think what was happening well before the crisis was there was a philosophical perspective that was shared, not just by the feds but others as well, that the financial system should be less regulated so it can be more dynamic. we know there are problems with that. but greenspan's view is if banks have sufficient capital you don't have to box them. the regulations shouldn't be too burdensome. >> host: the efficient capital issue wasn't done right. >> host: why did tarp with bank bailouts work better than what we tried to do with other home programs? your perception and you are pushing through

why isn't the fed, given that mandatory spending is 70% of the federal budget, why isn't the fed more aggressively warning congress that it must reform mandatory entitlement spending? >> every fed chair that i can remember has come and told congress that this is a looming problem, with serious economic consequences. i know my predecessor has -- i have on many occasions, i certainly remember the chairman greenspan discussed with congress the importance of addressing this. >> thank you. >> time of tgentleman has expired. >> thank you for your leadership in general, but also your participation and patience at this hearing. also want to welcome our visitors and guests here today and thank you for bringing your important message. we do talk about how our unemployment rate has gone down substantially, which it has, below 5% now. but we all know when you get behind those numbers, there is really only two types of jobs being created right now in this country, high skilled, high paid jobs, we need very, very specific skills of advanced educations to get those things and low skill low paid jobs

what about the fed? one word i heard about the fed on the floor today, one word they used, useless. they say that the fed is like being in a plane and pilot doesn't know how to land it. also the talk about negative interest rates. they're saying are you kidding me? it doesn't work anywhere else. it is not working in europe right now. why isn't even on the table that janet yellen talked about? you mentioned gold. a massive move into gold. also 10-year treasury down at 1.58 to 1.6. that gives you a sense of fear in the market right now. not one thing in particular but a belief what can the central banks do in this country or elsewhere? they have pretty much done everything they can and we'll have to wait to see how this market can recover. maybe hopefully more than something out of opec, guys. back to you. melissa: ashley, thank you. david: opec giving markets a boost. oil trading higher. crude settled below 27 bucks a barrel hitting a 13-year low. todd horowitz watching it all from the cme. let me read you the headline changed news on oil, changed the news on markets. we went from 40

fed governor jay powell spoke at the conference. he said, "i'm not convinced my own judgment's different in significant respects from those described in the paper." san francisco fed president john williams also said he was not convinced "by this evidence that time-based guidance leads to bad outcomes." fed officials right now are looking for the right language to guide the markets in this era of potential rate hikes, when in fact the market is forecasting none at all. but the early response to this paper says the fed will keep forecasting and talking about when it will hike, but dependant on the data. for nightly business report, i'm steve leishman in new york. >>> a mixed finish on wall street as investors digested the recent economic data and kept a watch on oil, of course. by the closing bell the dow jones industrial average fell 57 points to 16,639. the nasdaq rose 8 and the s&p 500 lost 3. for the week all of the major indexes rose 1.5% or more. >>> china is seeking to restore confidence in its economy. leaders from that count

fed minutes are due out later today. investors have abandoned bets on a hike this year as the question turns to how much volatility is shaping fed thinking. speaking yesterday, the bank of ton president suggested turmoil in the financial market could delay a move. >> gradual monetary policy path is appropriate given the headwinds we are seeing. the depreciation of the dollar is going to mean we are not going to be exporting as much as we were expecting. it has an impact on gdp as well as an effect on our ability to get to our 2% inflation target. anna: for more on what those headwinds might mean for the fed, let's bring in a european head of global markets research at -- mitsubishi usj. i mentioned there that investors are raining back expectations of fed hikes. some people have abandoned those. the markets are pricing in a 2% chance of a hike in march. and something in the mid 30's onto the end of this year but you are still expecting a hike. moment we are expected three this year. certainly march given what has been ha

joe: you talk about the fed and going into 2016, a lot of the view was the fed is tightening, europe is easing, or the ecb is easing, but that trade has not worked. the u.s. stocks have gotten clobbered this year. what went wrong with that basis? it looks like the ecb is not , likely to ease further in march, it does not look like the fed is that much closer to the market's expectations. why is your doing so much worse? one, you know there are central banks and their ability to create market movements, right? in 2014, central banks had a really discrete impact on currencies and the currency therefore, had some impact on exportearnings and growth rate. the ecb was causing the euro to .eaken the last three policy actions by the ecb have resulted in the euro actually strengthening. so, i do think at the end of the day be dollar has been weakening , not only against the euro, but against the yen, and by the way, that is quite bullish for s&p earnings. it is one hand out of the other. alix: what is on your shopping list? rollwe see the leaders over so much, but it would probably take a lo

this is the fed district. the minneapolis fed district includes just 9 million people. chair, do you oppose instituting any type of review of the structure of the fed healthy study? why do you do that? is annoying that things are evolving all the time. course up: it is of to congress to consider what the appropriate structures of the fed. i'm well aware of the fact that history plays a great role deciding what the fed would probably be if we were starting from scratch, you would not have the 12th district with 65 million people, i think 20% of the u.s. economy having one federal reserve bank. and congress can, of course, reconsider the appropriate structure. i simply mean to say i do not regard the structure rogan in the sense that it is failing to put in place good monetary policies, failing to collect the aboutation that we need what is happening in the economy to craft could policies. we do have, as congress intended, independent-minded people sitting around the table, crafting policies. the structure could be something different, and it is up to congress to decide t

if anything, starting with the fed, the fed could sound more dovish as they will be tomorrow.hat could be supportive. at the same time, i think the edb is not out of options. measures to boost the bank capital will be paramount going into the march meeting. if anything, further measures by the boj on top of the already unsuccessful negative rates cannot be excluded. think one potential measure there would be for them to start buying stocks directly. if anything, i think banks are not out of the options yet. from that point of view, ruling out or dismissing any supports from central banks is premature. mark: banks haven't run out of ammo. still ahead on bloomberg television, lots to come. we will big into the big bang story in europe today. germany's biggish lender crashing. did it see a slight top after those exclusive comments from germany's finance minister? >> do you have any concerns? >> i don't have concerns on deutsche bank. ♪ from bloomberg's world headquarters in midtown manhattan and london, you are watching the european close. i'm betty liu with mark barton. europe,

always tends to do poorly when the fed is raising rates. economy to not.to recession, to be on the soft side, the fed not moving, and that could impact em. sadly, that is a narrow path. raised on our forecast, we think on fed risk could be back the scene quickly. that will support our views that em equities do better in the short term. alix: thank you very much. tightened its capital controls, spent almost 300 billion dollars of reserves and the last three months to prop up its exchange rate. next, whether these moves will be enough to stop these slowdown. ♪ alix: i am alix steel. time for the bloomberg business flash, some of the biggest is the stories in the news now. exxon mobil failed to replace all of its oil and natural gas that it pumped last year in new discoveries. the reserve replacement ratio fell to 67%. the for that, exxon had achieved 100% or higher for 21 consecutive years. icahn has been losing value. the company is put on creditwatch negative, triple b minus. elon musk finally owns the domain name, tesla.com. it was unused for 24 years. el

all the guys on the fed said what the fed was going to do. the market didn't react. what it said it would do on that day. the market went up and went up for the next week or so. and then all of a sudden all of these things you're talking about start to happen. so you're saying the market eventually woke up seven days later to this reality? timing doesn't work for me, jim, in the narrative. >> the other thing that doesn't look if you look at fed funds future that has been a more shallow path and so you could argue well why weren't they just looking at fed fund futures. >> right. let's be clear about this. >> people that trade on those things and another broader financial market especially globally, you know, they are just going at what the fed is saying. >> the key is fixed income markets did not price in this 125 but you're saying the stock market did and has been this divergence between stocks and - tightened for you very dramatically over the last six weeks. when you look at spread they have gotten very wide. >> that's true. that's also true. so i just think it had

when can the fed returned to his normal policy? she said the thing you have to keep in mind is the natural federal funds rate is much lower than would have been otherwise. one thing i would love to see iswn out in senate testimony how are you are arriving at this and how long will that the below normal? that gives us a sense of what the policy path is relative to what the natural real rate is. alix: thank you so much. scarlet: tomorrow, we will bring you more coverage of the testimony to congress to the senate starting at 10 ago a.m. eastern time. alix: let's go to the markets task. if you are gone was the hippocratic do no harm, she succeeded when came to the market. not only did she do no harm but we are seeing stocks at the highs of the session. the dow is only up a quarter percent. there is a diversion between that and the 1% or more gains we are seeing in the s&p 500 and the nasdaq. over the course of the session, the s&p is not showing a lot of action during the testimony. climb from thew lows of the session. they reach about

as former fed chairman paul described during the crisis, the fed took and i'll quote him actions that extend the very edge of lawful and implied powers, transcending certain log and vetted principle and prabts. we're all too familiar with a successive round of qawn quantitative easing with no wind down in siewght. ening it begs the question, how will the feds shrink a balance sheet that exceeds 20% of the entire u.s. economy? some may worry that they have responsibilities beyond mandate and should be disclosed and justified. wool i agreed that feds should make independent decisions it should not be completely shielded from explaining its decisions and factors that he uses to guide them. at times it seems that the federal reserve officials resist even sensible reforms to have congressional oversight or public understanding of the federal reverse action. the need to preserve fed independent is real but surely does not object, and should not be viewed as mutually excessive concept. in fact, accountable is more crucial given the federal reserve role as a financial regulator. never before

the fed funds rate was at zero for seven years. and we also have a large balance sheet that is provided a lot of additional accommodation. so we are not talking about tightening monetary policy or a tight monetary policy. we have an economy that now has made substantial progress creating 13 million jobs with the unemployment rate down to 14.9%. we took one small step to to raise short-term interest rates but continue to have an accommodative monetary policy which we see as consistent with further progress in the labor market. so it's not that we're trying to reverse progress. we continue to see even with modest increases and interest rates, further progress and we want to achieve it precisely because we think that although the unemployment rate is at levels that are probably normal in the longer run, they remain slack in the labor market and we want to see more progress. >> not to cut you off, although we could get to 4% unemployment. but, look, while we are pleased to see that new jobs are continuing to be created in our economy a

fed. it's hard to criticize people in the arena. labor markets, financial conditions, and inflationary expectations are what you look at. labor markets are ok but the other two are flashing red. the fed is in the mess and we can talk about whether it should try to normalize rates now or some other time, but it seems to me it's making a bad situation worse. a 300 pointn we see decline on the dow, what is the catalyst for that? is it a fed policy mistake? my own opinion is seeing the rapidity of decline since the start of the year, my own impression is that there is for selling. there is liquidation weather on the part of an operating company or a sovereign wealth fund. people are forced to sell, because i don't think it is really as correlated to the economic news as one might think. we do have a chart that shows the growth we've seen over the last few years. almost $7ts were trillion. if they are not buying anymore but selling, it's some form of quantitative tightening in the market. activ

she said it would not affect fed policy in the long-term.ing system could see a loss of more than four times those suffered by u.s. banks during the global economic crash. is bettingd manager against mortgage the subprime crisis thinks the world second-biggest economy may have to print more than $10 trillion of yuan. that could pressure the currency to devalue in excess of 30% against the dollar. the ceo of france's second-largest bank thinks markets are overreacting. he told bloomberg the current climate is nowhere near as bad ss 2000 and eight's -- 2008' crisis. >> this is nothing to do with what we saw in 2008. where not in this kind of trouble yet. the banking system, and the world, is much stronger. the average capital has been double for all the industry. we cannot compare the current situation with what we had. caroline: twitter fell in extended trade. after the social network announced user growth stalled in the last quarter. sales will miss estimates. was to make the site more accessible, but it has been unable to attract a wider au

the fed hasn't fully studied it. that's really the state of play of negative rates at the federal reserve. >> i'm not aware of anything to prevent us from doing it was her answer yesterday. so we don't need to have that conversation now. >> thank you. >> we're going to talk now about shares of akamai soaring on better than expected quarter cannily results. also unveiled $1 billion share buyback plan. joining us is the tounder and ce of of akamai. i don't know what the stock is doing this morning because it looks like a disaster. but when you look at your business and let's just go around the horn in the globe in terms of the way u you think you're going to invest in your business given what seems to be taking place. >> we're investing around the globe. we're investing heavily in security. we were really delighted to it see our security business grow more than 50% last year. we're now up to $300 million run rate and incredibly bright future for that business. overall, we're highly profitable and rapidly growing. >> bu

the market wants to see a strong economy, and the fed will go on that, or a weaker economy, and the feday dovish. today it is not feel like a rate play. it feels like people selling out stocks that are highly valued. linkedin went down. vonnie: taking an awful hit, losing almost estimates market cap. the stronger dollar is not helping. it is an earnings-rich environment. i am sure investors are reacting to the dollar that is not looking to go anywhere but up versus the major. vonnie: that is true -- oliver: that is true, and overall, the earnings numbers are not good. look at the companies beating expectations. it is fine. overall, seven out of 10 sectors are reporting shrinking earnings, shrieking profits. it is not just energy. it is across the board. the only sector doing well is a materials company keeping the market afloat, and that is not because earnings are good. vonnie: i was looking at gopro because it was up about 7%, regaining some of what it had lost, but even thoughpro is up only 2% now. oliver: look at google. all these companies that are highly valued. essentially, the m

minutes from last month's all-important fed meeting at 2:00 p.m. eastern time. also more fed speak. st. louis fed president speaking about the economy this evening. and we'll get earnings from dr. pepper, snapple, t-mobile, and marriott. i'll be watching the minutes from the last fed meeting to see if there's any indication the fed is going to hold off in march. janet yellen would not say so explicitly in her testimony before the house and senate last week. though, they have to be worried about what's happening in the global markets. >> certain macro events are going to shape a lot of it. >> she did say they're discussing it again. >> it's not off the table. well, moving from the macro side of things, a federal judge is ordering apple to help the fbi break into the cell phone used by one of the san bernardino shooters. court papers show the tech giant declined to provide the assistance voluntarily. investigators need apple's help because too many failed attempts at unlocking the iphone without the proper security code will trigger an apple fail safe feature that will erase all of th

respect the fed's independence, but to ensure that the fed lets the rest of us know the variables thatre used in monetary policy and their reaction function so that working families can plan out their family economies. i know that you are not a fan of the f.o.r.m. act because i have a letter dated november 16th that you sent to the speaker. in that letter you call the act a grave mistake. i have another letter that describes it as an important reform. your letter mentions or complains that monetary policy would be forced to be strictly adhered to by the prescriptions of a simple rule. my letter says the legislation does not chain the fed to any rule and certainly not a mechanical rule. your letter says that the act would undermine the independence of the fed. my letter says in no way would the legislation compromise the fed's independence. on the contrary publicly reporting a strategy helps prevent policymakers from bending under pressure and sacrificing independence. your letter states that the f.o.r.m. act would, quote, severely damage the u.s. economy were it to become law. my lette

fed speak ahead of today's big jobs report. cleveland fed president loretta mester telling a conference yesterday that the u.s. economy remains sound and will overcome recent market turbulence. the policymaker suggesting this will allow tightening to continue as planned. let's bring you up to speed on what happened in the asian markets overnight. the nikkei closing lower for a fifth straight day. chinese markets will be closed for a week starting on monday. preparations for new years celebrations are well under way as the country getting ready to usher in the year of the monkey. then there's apple news this morning. nine to five mac, a pretty solid but speculative website, is reporting that apple is aparentally considering bringing its software services to android devices. the report citing comments tim cook made to some employees at a company-wide town hall meeting. he's said to have mentioned apple music as a way to test its services on non-apple made hardware. other options in the future could include services like i-cloud a

and fed behavior.n economics and financial and more about the politics of the fed. stephanie: what would you ask her? as i look at corporate earnings, down almost 6% during the year, it is corporate america that increases wages and creates jobs, not a good picture. paula: that is a bad sign for her. i would ask her if she made a mistake in december. they are going through that all over again. she will not say they made a mistake and she say that we are talking about gradual, but i audit thepoint about fed and the politics of the fed is important because they dovetail with what i am saying, the reason there is such a push to audit the fed and the reason people want to take power away from the fed is that the fed is a cocoon, trying to be more transparent but not communicating enough about what it is seen any data and why it is acting the way it is. the response to that should be she should do this more than twice a year, she should do it four times a year and do monastery -- monetary policy four times a

the fed will be in focus today. janet yellen will head to capitol hill to deliver part one of her semiannual testimony on the economy. she'll testify before the house financial services committee at 10:00 a.m. eastern time. we'll have full coverage here on cnbc. >> okay. and then the big story of the morning. it's politics again. decisive wins for donald trump and bernie sanders in the new hampshire primaries. the main theme, voters backing anti-establishment candidates on the gop side, trump getting 35% of the vote, followed by john kasich, ted cruz, and jeb bush, who came in stronger than people expected. and marco rubio. >> everyone said, how come they like trump so much? but i have so many friends up here, and they're special, special people. new hampshire, i want to thank you. we love you. we're going to be back a lot. we're not going to forget you. you started it. remember, you started it. >> on the democratic side, sanders taking 60% of the vote to hillary clinton's 38%. >> together, we have sent the message

first the fed really does matter.atters not in terms of monetary policy or the markets are even or the economy or stocks. in terms of our nation's political stability and second the fed seems to be doing a suboptimal job. consider if the fed continues raising their interest rates four times this year then it's very likely that the united states will go into recession. come on. at a time when a global economic super power like china is experiencing a massive deceleration in growth and every other central bank on earth is trying to ease and ease aggressively the fed lead by janet yellen keeps talking about tightening. our policy makers are totally out of sync with the rest of the world and that has serious consequences with any american company that does business overseas and they nominated the strong dollars and at a huge disadvantage to foreign competitors that sell their merchandise in cheap euros or yen or peso. that's how people get fired in this country, because of that. workers get hurt. and a big reason for the

really knows, including the fed. pacing,matter of the how long it takes and how far it goes. >> that has been the question for how many we -- how many years already? but with 4.9% unemployment, the fed and modelss to look at these is saying it is more now the time than it has been in the past. to its credit, the fed is listening to what the markets are same because they could just as easily those economic models onto the market and that would be a policy error if the market is not ready for them. if the fed is willing to delay the cycle, because we have a files it -- policy diversions, as long as the fed is flexible path, i think we are in good shape. there is a more dire scenario that says it is not a question of whether the fed should tighten now or later. it is a question of whether the fed should tighten or ease. the hurdle for the fed to switch around and start easing, not even mentioning it has little ammo to do that, i think that is still very high. i do not think the fed is anywhere near coming to that type o

i do not think the fed will act in march. i think that june is a likely candidate, but we still have to pay attention to what happens, not only in the domestic economy, but the global financial markets. >> there is a growing disconnect between growth and gdp numbers. it's inside there is a disconnect there. what is a significant of that? poor job's very number in the fourth quarter. they have been taking along like clockwork. part of the answer is a potential growth is fallout. we saw that with productivity numbers. ,f the economy grows at 2% which people are conditioned to think is a lousy number, the reality is it's growing significantly above trend. we continue to grow at a pace that is allowed the labor market to time. vonnie: what is your call for this year? >> you talked about the disconnect between the markets and the fed. the markets are going to be stubborn. they are convinced that the economy is falling apart. today's numbers should be a stark reminder that that is not happening. if the fed wants to stay relevant th

still ahead, is the fed on the right path?will ask john taylor next. ♪ brendan: life, i am brendan greeley in for betty liu this week. we will check bloomberg first word news. vonnie quinn has more from the news desk. is warningth korea that north korea is planning terrorist attacks according to south korea's presidential offer, kim jong-un has ordered military and intelligence units to increase their terror capabilities. the government is pushing the national assembly for antiterrorism bills. in the next two days, david cameron announced eight 2 -- to close the deal on union membership terms. to meet with other union leaders would be aet -- it four-month campaign leading to a nationwide referendum. have important work to do. if we could get a good deal, the payback deal, i will not get a deal that does not meet what we need. good deal for hard work we can get on britain. turkey police two separatist groups -- a major ally in the fight against the islamic state. turkey's prime minister says he cannot accuse every -- anyone, in