and the fed. the fed did it. they did. they a municipal liquidity facility and they really did they didn't actually end up lending to that many entities. they only lent to illinois and mta in new york. but the fact that they even offered it huge deal compared to what was previously thought possible. so so you write in the introduction that you do not. this is not a diatribe. this is not you're a ron paul in the fed. that's not where you're coming from, but you're also not somebody who would reflexively defend them by a long shot. explain kind of where you're coming at this from and what what your point of view is ultimately. yeah, i was trying to come at it like a journalist you know, i was trying to not have super strong opinions about where this should all end up. but i do think that, you know, as a journalist, part of your role is to say, here's what society should be talking about. here's where we haven't really paid enough attention. here's where we maybe aren't shining enough of a light. and like i said, in 2020, the

it's a problem the fed started it's a problem the fed has now created a big mess with. it's a problem the fed can fix they need to do it before it becomes an even bigger problem than it is. >> one more point before we move on the regional banks are green today. problem solved what do you make of this trading behavior where yesterday we saw declines and today started out that way and the tone changes into a fed decision no less? >> for the past, i don't know, probably three to four weeks you've seen this back and forth, you know, multihigh percentage point gains and losses day by day. that's not normal in banks that's not normal in any i kwaulgts asset that tells me that there's a big problem that needs to be fixed i think we need to deal with it before it becomes a problem. one last thing, $500 billion of banking, you know, problems, it's bigger than the global financial crisis we had three banks represent a bigger hole in the financial system than we had during the financial crisis that is only going to get worse. >> bigger than 2008? >> exactly. >> bill lee, give the

i've come on the show and told you the fed cares less about stocks than you think the fed cares about, overall stocks. when it comes to regional bank stocks or bank stocks in general, i think the fed cares more because the equity of a bank is part of their capital structure. and if that goes down and keeps going down, it makes the banks more difficult to raise money, raise funds and erodes the capital structure. so i think there's a positive reason here for the fed to surprise today in general, jim is absolutely right. today may be an exception. >> and to that point i would suggest to you, jim, let's play semantics a little bit doing nothing is a surprise, okay -- you say -- doing something that the market doesn't want to happen is a shock, right there's a surprise, an upside surprise, a down side shock. >> yeah. >> let me be clear i'm taking everything you're giving me and, steve, from your lips to jay powell's ears. i want you both to be right. i think this is a terrible mistake, to tell you the truth with joe, yes, there will be cuts and then if you're jay powell and the fed you wi

, given fed policy.l aware of brendan boyle? annmarie: i think he is very aware of brenna boyle. besides senator warren, he is the individual in the house who led congressman and congresswoman to sign that letter as well. he was one of the signatories to that letter you are talking about, asking the fed to pause and reevaluate the data. he is concerned about is not just potentially what the fed said when they hiked in march, which is that we can see at some point may be a mild recession. they are right about the potential of job losses. but also, there is still concern about the banking crisis. the underlying fact on all these four banks that have failed is the fact that they were dealing with a higher interest rate environment and they were not prepared for it. these are some of the concerns from individuals like brendan boyle, the congressman who was joining us from mocon. this is the first time he was at that conference. the notable thing he said is he is feeling and seeing the urgency about the debt

the fed, i think, potentially has to raise rates more importantly, the fed -- there's no way the fedy long time. key is that the rates be kept high for a long time unless -- here's the wild card the banking sector if there's problems in the banking sector, that's a whole new ball game. however, the fed has much more information on that than we do they're supervising those banks. they can see whether there's a problem. so far the rhetoric from the fed is things look like they're contained on the banking side. if that's the case, they could have to keep raising rates for a long period of time -- i've been saying this for a while -- the fed had to raise rates and keep them high and not lower them too early that would be a problematic move. >> we know from the senior loan officer survey that credit is tightening loan demand is declining austan goolsbee said he's getting, quote, vibes of a credit crunch. you're not moved by that >> there's some evidence it's slowing. the fact is how much if the banking problems had not occurred, the fed would have to raise rates at least another 50 basis

don't fight the fed. if there's nothing left to fight, are you more positive on where we go from here? >> so i've always felt this year that there's such a wide range of outcomes and a good example today, there was a tremendous amount of short covering finally in the regional banks where you saw companies like pacwest up 80% or 85% i think we have these cracks in the system, and so i definitely think it's positive if they stop i don't think they needed to do the 25 basis points. i also think that he said this banking crisis is over i hope those words don't come back to haunt him later on because we really need this regional bank, the whole sector, the 4,200 or 4,300 banks to be solid. i think i'm still in the camp that there are other little land mines out there, and if the fed stops here, at least everyone can just, like, start doing math equations again about lending, about mortgages and not consistently trying to do resetting their interest rates because the fed is going to overtighten. i also think i

did the fed make a mistake yesterday? >> fed made a mistake in december of 2021 everyone said they made the mistake. let's move on. you can't move on. they raised the interest rates 500 basis points that had a dramatic impact on assets do they have options if we reach a moment where we see there is financial instability? we certainly have a crisis of confidence right now i thought where chairman powell failed miserably yesterday is effectively communicating what those options would be to the market the market needs to hear what the options ultimately are going to be. is there a coordinated effort with the fdic treasury and the federal reserve? i have no confidence after hearing him yesterday that, in fact, is in play. >> the market doesn't believe the fed, in fact, at all let's bring in steve liesman who passed along something that i thought was stunning a 60% probability of a cut by july that's what you see? >> yeah. the market thinks that the move yesterday was wrong to the point that the -- they believe the fed takes i

read the fed from.le, from december, which specifically said their target is to increase unemployment by one full point in less than 12 months a what that means is don't explain it to 2 million people who are going to lose their jobs who are making their payments. sorry. for the good of the overall economy, you have to lose your jobs but also look at the rest of it. how many times out of the last 12 times that unemployment has gone up a full point in the 12-month period have we avoided recession? zero here's the other one how many times when unemployment has gone up by a full point have we been able to stop it at one point? >> never >> once. >> really? when >> i don't remember which. but the point is it almost never happens. this is where the fed is aiming. that's the part that gets me so worried about this first, they do not have all the tools to fix the problem >> they have one sort of blunt instrument quantitative tightening. >> that's their success. >> let's turn to the other aspect of this, trying

financial conditions remain accommodative, and even though the fed has remained, when the fed steppedthe pace at 25 basis points of the meeting, on balance, financial conditions are no tighter than they were then. obviously, short-term rates are higher, but the yield curve is more inverted and the credit spreads have been pretty calm. the equity is higher. so, i think the fed has to be very careful. i agree with megan that the right thing for them to do is to pause at the june meeting, but if i were marking down my own forecast is a better governor or president, i would pencil in another hike in the sep so that the dot plot suggests there is a bias to hike if morning to be done. >> it is so strange. we have the fed behaving calmly in the light of so many recession worries and tightening worldviews and ceiling worries, but then you have this other sense that the bankruptcy is arriving. we have a pace that is unrivaled. do you think there are other things that investors are underappreciated. for example, the regional banks. pac west is trading. does that suggests that there is more pain

fed is stepping up to help liquidity and big buyers. i don't think the fed cares. m2 money supply is high. draining civil as much as they could, inflation is coming down, that issue about the banks to me isn't severe enough yet to cause any concern. one thing you have to be careful of, commercial loans, commercial real estate. keep a close eye on that. if we start to see defaulteds that affects big banks and smaller banks. that is later summer issue. more banks, one to thee, that will not change the fed's course. charles: james grant will go into granular details. phil, thank you. folks we got what wall street was expecting, 25 basis points. the real debate that was going to happen. the real debate would they pivot this year. i want to bring in ubs private wealth managing director alli mccartney. in general what we're seeing everything is according to script. >> according to script. the devil is in the details. the question whether there is a pause, maybe not a pivot, but a pause, really what is out there. you have a market as you pointed out is at a two-year high

dominique: if it links fed policy and historically, the rule has been a great predictor of the fed funds the 1970's, every fed tightening cycle has went to fed funds rate, gotten close to the rule. a few months ago, it was likely the rule was still relevant. currently about 8%, you want to take the models seriously, but not too literally. . i would agree that my view has been vindicated by the data. look at what is happening to core services inflation, excluding housing. it is not going down. look at what is happening to housing costs. they are up again. i think we are not going to get to 8% in the next six months, but i stick to my long-term view and in terms of the next move, i have had to disclose that the fed will hike 25 in june, assuming the crisis is resolved. i have had that since the last fed meeting. i stick to my guns. kailey: on the subject of the debt limit issue, we are just hearing from house speaker kevin mccarthy, speaking to reporters about debt limit negotiations. he says he thinks negotiators made progress last night. but if we bring around the fiscal issue into monet

>> escalator into the year, the fed will not cut -- as we go later into the year, the fed will not cut. there were not a cut their spanking turmoil. >> this fed is hard to predict. >> there is no roadmap for where we are at. katie: joining us now a black rock and wells fargo. let's start with you. was that it? have her reach terminal or do you think today's payroll print changes the calculus a bit? >> i thought the likelihood of additional fed rate hikes this year was in the cars. i do not think the markets have it right that we are going to tip over in the economy and see things slow where we start getting a fed rate cuts. that does not happen and inflation stays above the fed target, which seems likely, i see no reason why they may pause in june but -- in the future they may go further. katie: were going to get to the cuts but you come in on this, you think we would have gone different have you gotten the payrolls print before that a press conference? >> good afternoon. it is great to be here. in terms of your question around would we have gotten a different jerome powell with one da

the real question, is this it for the fed?> yeah, and even if it's not it, are they going to lean in the direction of saying we feel like the policies are restrictive enough, the economy is growing below potential if inflation continues to come down, they'll be able to say short-term rates above 5% are restrictive enough >> we're not going to make it into positive territory for the dow. not a bad day though that disoes it for us. i'll send it to morgan brennan and john fortt >>> monday reversal as the major indexes finish down. the action is just getting started. welcome to "closing bell overtime." i'm morgan brennan with john fortt. we're going to get results from mgm, chegg and many more >> plus, we're going to talk to the ceo of e.

weapon against the fed to try to get the fed to change.onathan: well said. when you listen to some numbers coming out of banks, they are telling you deposits are stable. when you hear senator warren saying we need changes to the limits for deposit insurance, does that change the story this week? chris: not really. it is good she is supporting the changes in the limits, but the rest of the rhetoric is incorrect. lisa: what do you think is the circuit breaker to prevent this temper tantrum from rearing its head as we talk about the otherwise resilient economy? chris: changing the short sale rule would help her it also instituting to some extent going back to the thaad program would be helpful. i would like to see the fed change the stress trust -- stress test program. the results were filed in april. the fed has an army of folks they could stick out to put this out next week. it would be useful to know most of the banks, if not all banks, have passed the stress test. if you look at the next 18 to 24 months of cash flow the banks have, it cov

event, not something the fed can really influence, yet it does impact fed policy, so, that's one thing. as far as banking troubles, to what degree is the fed maybe a little bit responsible, which is some of the tone that came out of the silicon valley assessment, and the huge increase in interest rates contributing to that, it's tough to say so, the fed's not completely a bystander in that case but the fed's got a lot of crosswinds to try to assess. in a full-blown banking crisis with a fed hike, that doesn't make a lot of sense. but if the debt ceiling is becoming more intense or perhaps a lot more, would the fed go one more time? i think it probably would. and perhaps signal, hey, we've done a lot inflation is still out of control. it's coming down, but well above our bounds, we want to see it give a bit more time to the rate increases we already have in place. i think that's probably the messaging the fed would like to get across tomorrow. going to be a tough job. >> we know the fed has said it doesn't care what the stock market does, and i get that point, but at the same time, when

think the fed should cause, why? >> one is, i think we are in early stages, not the late stages of this banking situation this -- there has been a significant change the prospects of small and ms. spinks. they provide of the lending to small and midsize assistance. we have seen the first use of this which is asset liability mismatch. the credit issues are about start. that is what you are seeing reaction in the markets. the other issue, from a risk management point of view, it is more important to sustain the current rate for an extended. of time -- for an extended period of time. and risk having to cut again, that would be troubling. one more comment, if i were at the fed, i would call out that we a whole of government approach. you need physical restraint, look at other policies that are outside the fed. i would pause here. kathleen: right now you have a rate hike on wednesday, 25 basis points. if inflation is still high, why not do one more what i cap all the done and signal that you are still hawkish when it come

oh, yeah it did it for the fed. it did it for the fed. >> okay. nice suit.aking suits. everybody says nice things >> you have a suitmaker? >> well, he's got to take it in because, you know, i got big up here, my belly >> from places where they make it for a lot of people and they have -- >> mine just fixed it up for me like yours does too. you buy a suit in the store, they take it in. >> they don't take it in here. >> howard, great to see you. it is a nice suit. howard lutnick >>> coming up, a read on small business and how they're feeling about the state of the economy and the impact of several regional bank failures lila: before i was diagnosed, there was nothing really to worry about. and then when i was diagnosed, there was just such a big weight put on my shoulders. every night, i felt like maybe i won't wake up tomorrow. but there's no way that this is going to win. i'm winning. announcer: st jude children's research hospital works day after day to find cures and save the lives of children with cancer and other life-threatening diseases. beth stewart:

. >> tomorrow is the big fed day tune in tomorrow for our big cnbc special the exchange will be live from washington starting at 1:00 p.m. thanks for watching. >> "closing bell" starts right now. >>> thanks so much i'm scott walker live from post nine here at the new york stock exchange this make orbreak hour begins with this big day, and the fed countdown decision less than 24 hours away so much riding on that outcome stocks already jittery, whether it's about banks waging on sentiment or data in a weakening u.s. economy here's your scorecard with 60 minutes to go in regulation. dow under some pretty heavy selling pressure as you know by now, so much for the s&p closing in on 4,200. it was just on the doorstep. it's back way off that round number now nasdaq giving back a good amount today as well as technology slides, small caps under pressure russell down by 2% brings us to our top, the cornucopia of concerns, hitting the markets today, and what it might mean for where we go pr here let's bring in senior markets commentator mike santoli it's a launddn't have to go faro find things

. >> there is no way the fed is going to be easing. >> i think this fed will hike. >> this will ratee cut, forget about it. >> probably tried to hold all year. >> the fed is keen on getting inflation down to 2%. >> the fed can't be patient. >> inflation is still too high. >> this is a fed word about its credibility. >> is going to be data dependent. >> the fed has more work ahead of it. >> the fed will have no choice but to rate -- hike rates even more. katie: joining us is peter cheer and barry knapp. let's talk about something other than the debt ceiling. core pce, 4.7% year-over-year and .4% month over month, both above estimates. what happened to disinflation? peter: and not 100% sure. whether companies think they can continue with higher prices, clearly there are still jobs. i see them hiking one more time at this pace. katie: could that be in june? peter: it could be if we get more data like today. i think they are going to be reluctant to pause if they think they have to go again. i'm leaning towards 25 basis points and no cuts this year. katie: assuming we get a deal in the n

i agree with eric, the catalyst will be not just a fed pause but a fed easing. the other reason why we are out of it, if you think it is higher for longer, the absolute vestry whether inflationary or short end trade is big short u.s. two-year bonds. right now, u.s. two-year bonds are for and overnight rates are 5.25%. that is a big tailwind of carrie and roll down. if rates do not do anything. katie: if rates do not do anything, certainly that two yield has been flush going -- what you waiting much higher. you brought up easing. one of the more interesting dynamics in the market, to me, is the magnitude of rate cuts priced into the end of this year and beyond. when we think about what the catalyst would be, a lot of people are saying recession. what is actually going to drive the fed to the first cut? does it have to be a downturn? erik: i think the unfortunate thing is, we rarely see a situation where the fed cuts gradually and in 25 basis point increments. it takes is time getting back to neutral and accommodate us, right. what is more likely is we see banking

kathleen: bill dudley is critical of the fed, former president of the new york fed where you used tofed broadly missed the fact that the interest rate risk they created by the very tight monetary policy, that they created by doing quantitative easing, that they created part of this mess in the banking system that arose when they add to take monetary policy by 5% in over one year. kathleen: does bill dudley have a point? >> the fact that they had to go so quickly after a 10 year, 15 year period of basically incredibly low stable interest rates was small increases and decreases at a time, where the banking industry are prepared? absolutely. however, let me add to what bill said is i think this was, and the fed said so itself, a massive failure of bank supervision. frankly, at least particularly for the three banks, most particularly where we have the most information for svb. they flunked banking 101. liquidity risk management was terrible, i they essentially were not forced to fix it. haidi: does that mean there is a credibility issue in terms of the failures of not just regulation bu

the fed is also quite confused.ot admit that because of credibility, but they have painted themselves into a corner with their forward guidance. it really makes sense right now that the market is range about. even today with a lot of the economic numbers coming up, we have not gotten any move decisively up or down. we will see what jerome powell says at 2:00. alix: do you think the fed should be paying more attention to the sticky inflation or the broken banks? joe: i think the regional banking crisis really bears a lot more attention right now. when the fed looks at inflation, the fed is really fixated on the backward looking indicators. even employment. right now, you have a crisis in real-time with the financials within regional banks i think that bears watching right now. alix: joe -- guy: joe, so would it be a policy mistake for the fed to hike today? joe: i think they should have stopped hiking probably 50 basis points ago. right now, we are at a point that there is longer variable lags than six months. 175 ba

will influence the fed moves.th us. yesterday, mimi, we were hard pressed to find any effect or any -- once we saw the news over the weekend, you would expect someb something to happen in the 2-year or the 10-year. are we immune to this or is that the last one >> rates did sell off a little bit yesterday, but i don't think it had anything to do with the the news over the weekend. i think on the margin, i would say the lack of effect in the markets as a positive. we are seeing market function which is what the fed and other regulators care about, smooth market function. in that regard, it was taken as a positive >> in terms of credit contraction, this is the third big bank, i don't know if it serves mom and pop operations, but are we seeing smaller banks pull in lending horns at this point, mimi? can the fed assume, if it does 25 today, can it assume 50 or 100 in there that is not there that it was planning to do before >> a couple of things. yellen pointed out and we subscribe to this, too, to the extent there are

the fed at the top.er that leadership baton is handed over to the bank of england remains to be seen. matt: back with us to talk more is danny blanchflower, professor of economics at dartmouth college. formerly a member of the boe's monetary policy committee. it is interesting. katie and i were talking with ed from isi yesterday and he said not only have you got the fed raising rates here putting weight on financial conditions, but banks around the world are raising rates and that puts more weight on these variable lags. how do you expect this to turn out? are we going to pause at the same time? danny: probably. i mean, what is really interesting -- you are right. around the world you have seen people pretty much moving together. and on committees you have seen very much unanimity. andy and i wrote something for the imf. a column thinking about that consensus. going back to diane swonk's comment, there is no time period in the last 50 years where it is so unclear where to go and what is coming. historic

the fed has been very specific about that.has been honest to that following the data and stamping on inflation. i don't think you see it cut in 2023. jay powell has signaled in the question and answer session. he really wants to get the u.s. economy out of being a political issue. he wants the fed to be a nonpolitical issue. they are going to try to do as much work as they can to avoid the fed, the ftse, the treasury department, any major issues in the upcoming presidential election cycle. >> this has been very informative. good to see you. here is what is coming up. jerome powell reckons the u.s. economy can't skirt a recession but the odds are shown to be stacked against him. this is bloomberg. ♪ >> the australian treasurer believed economic surge from china's post-cover reopening cannot offset the impact from global economic headwinds. jim, spoke to the budgets released tomorrow. >> this will be a responsible budget which prioritizes australia's doing it tough. it will have three main elements. responsible package of cost-o

>> not with the fed being done. the fed doing another 50 basis points.er two, pce 4 point, beats expectations stuff you pay for every day, super core, things take to run your life costs more year-over-year by 4.7% there is still a problem. charles: great stuff. people you have to look at this stuff. doesn't take a lot. these numbers come out every three months. you owe it to yourself. work hard as hell for your money. protect it doing a little bit of research. thank you, phil. coming up we had the jolts report. we'll switch here. we had the jolts report out this morning i'm not big on it but a lot of people on the street are. it came out much bigger than expected. you started to see the market go down. that's when everyone started to say for a fact we'll see rate hikes. i want to bring in stone x kathryn rooney vera. krv, congratulations on the firm. that is a beast and you're poised to do so well. congratulation. >> you're kind, charles. i'm glad to be at stone x. it is start one. started with five million dollars equity capital, charles. over 20 years

this is exactly what fed policy was supposed to do.s supposed to make things tough in the financial sector so that banks would lend less and consumers would borrow less and businesses would borrow less and a side effect of that would naturally be that consumers will get in trouble and some businesses will get in trouble. goodness gracious, this is what the monetary tightening is all about, we are just looking at it very close. over the lens of history, we will see this is a pretty normal reaction to what a tightening of central-bank policy does. manus: s. in part, not a great number of the fed have been through the last cycle in banking and we are around to live through it and understand what the station of risk looks and feels like. thank you, carl. has lived through a cycle or two. let's get your business flash. >> disney is closing a luxury hotel in florida amid a high-profile right to the governor ron desantis. the company is also ditching plans to relocate 2000 staff from california to a new $800 million amp is. bloomberg has lear

survey, 100% think the fed is going to hike rates but 59% think the fed should not do that because ofcerns with the banking system they're looking for tighter credit, looking for less gdp there's a sense here that maybe the fed is not really listening or paying attention to what's happening in markets here. >> yeah. you wonder what a day like today will do especially if it gets uglier leslie, my question to you is on the discrepancy here first republic bank and svb, what i keep hearing is they were idiosyncratic. they had their own issues. their business models, the management of interest rate risk, and importantly the deposit outlows we saw at first republic that's what really sort of recharged this crisis after first republic reported earnings didn't necessarily see that, even in some of the weaker links like pacwest were on western alliance, which saw good news on deposits i think we should underscore they're different situations, even if the market is on the contagion theme. >> we hear two schools of thought here just yesterday jamie dimon said this phase of the crisis is over i d

she is not done but is the fed done? and if the fed is done, is the ecb done as well? that is one of the questions that we have to ask. she said she is not causing and this is what lagarde had to say. >> everyone agreed that increasing rate was necessary, that second we are not causing -- pausing, that is very clear. third, we have more ground to cover on the basis of the baseline that we had, which is guiding us until we have our next -- projection exercise. guy: president lagarde speaking in today's press concert -- conference. the line that stood out came earlier on in the press conference, future decisions will make rates sufficiently restrictive. she went on to say that the ecb is not done. the question is, is that were more hyper two more hikes? how far away is sufficiently does -- restrictive and how far away are we on that? the dust is settling and we are digesting what was said. do we have clarity on how much road there is to go for the ecb? >> the short answer is no because she would not put a number on it and to me, what is interesting to see, where you see

you said the fed can't have its cake and eat it, too you get the idea from the fed chair that they still think that they can, that they can deal with whatever issues come up, they think the bulk of the flames, if you will, have now subsided i think that jay powell was a lot more confident two press conferences ago than today he seemed tentative to me in terms of his conviction of where things were going. i thought it was, just to repeat, i thought it was interesting he said inflation will not come down maybe as quickless as before. the dot plots have the inflation raid going down to 3% or so. i don't think that's going to happened it sounded like jay powell isn't so surian more, either commodities have been very poor for several consequence ifs look as goods inflation, it's right back down to pre-pandemic level. the services inflation is way up there, and so maybe that's why the declines aren't showing up, because they're showing up on the goods side of things. >> steve, you alluded to this in your question to the chair, the idea they have enough to deal with both. it's one of the reason

chair and the prior fed chair for just a moment. we'll monitor headlines for you. we are getting news to bring you on the debt ceiling. those negotiations which have been ongoing kayla tausche in washington with more. >> negotiators from the republican side and the white house side have been meeting every single day and the meeting between those negotiators just broke down with gop congressman garrett graves leaving that meeting and saying that republicans were going to press pause, that the talks were no longer productive and according to our nbc news colleagues who are outside the room where the negotiators were meeting, he said, until people are willing to have reasonable conversations about how you can actually move forward and do the right thing, we are not going to sit here and talk to ourselves now, it's unclear exactly how long they are going to press pause for, if it means talks are just completed for today and they'll resume tomorrow or if there was a breakdown in substance over the conversation about exactly how much spen

but 59% think the fed should not hike due to banking troubles 77% say by june the fed will be on holdand 7.8 months is what is believed the fed will hold at the high rate. here's what the projected half to go. by december 2023, it's still at 4.87 with that decline reflecting some belief then it goes down in december to 3.91%. barry knapp of ironsides writes a 5% policy for longer will accelerate the bank deposit beta that's the movement in and out of banks with deposits, forcing more banks to shrink their assets 69% of respot dents have lower their forecast by an average of 0.4% because of concerns about tightening lending standards in fact, 96% say banks will tighten their lending standards. 4% think it will remain unchanged. forecasters have lowered their expectations for that and increased their expectations for employment that will begin in september steve liesman, cnbc, business news. >>> regional banks have continued to fall despite jpm jpmorgan's takeover of first republic bank. it's one of the factors driving contagion fears. joumanna, this has been something we've continued t

at what pace does the fed -- the fed used to, by the way -- i know you'll remember this, sarah. the fed used to hike every other meeting by a quarter point all of a sudden, it's decided it has to go ten in a row and i want to quote my friend and our friend, paul mcculley here, who said, once you've had nine beers, what part of doing the tenth beer makes you think that everything is going to be better >> that's a really good quote, and very appropriate in this context. the problem is that chair powell himself said, i would rather do all the tightening and not have to go back and do more he said, he talked about front loading rate hikes he's also talked about not making a mistake, basically, where they pause and then inflation continues to run higher he's pretty sensitive about that >> you're right about that, sarah. let me bring up two counterpoints to that. one is that powell in the last meeting talked quite a bit about credit tightening and the issue there. the second thing is, remember why he was so slow to hike rates, right the reason is pausebecause he ws concerned about the

no reason for the fed to hike and there does not seem to be a reason for the fed to cut. i thought that's where we were. alix: the bond market seems to be pricing ends of the different. guy: definitely, pricing and cuts. the narrative is moving against the bond market. there will be more high-profile strategists out over the next few days, suggesting cuts this year are unlikely. we should have been nothing to see here but we were not that clever. did the inflation print change anything? let's try and answer that. mike mckee is in the studio, liz mccormick joins us on the line. i will start with you. did the print change anything? liz: there is nothing to see here. for the market, i can't tell you how many strategies new -- notes said it was a sigh of relief. it wasn't enough. the markets at you will have to prove to me there is any reason for the fed to hike. this was not that. the economists is higher than the fed wants but we have to call it market speak, a forehead or on inflation, the headline for the first time in two years. i think it was enough for the angst in the

last month 5.6% that is a core number year-over-year, that is what fed looks at we will see.argest contributor here shelter pricing has come down. >> shelter prices it was largest contributor yes to monthly all items increase monthly contributor was the shelter, number. so look, shelter year-over-year is up, 8.1%. now gain i didn't see if i did i am sorry shelter month-over-month increased .4% if i misspoke aippology. maria: you didn't misspeak. cheryl: 8.1% year-over-year shelter, 60% of core, over year-over-year shelter, the biggest driver for entire report, so rents not going down. maria: that is what i was trying to get at you know you said the shelter was biggest contributor, it was actually, better-than-expected 4 -- was that shelter the answer i think i hear you saying no, yes biggest contributor but shelter is still elevated. cheryl: yes, yes not going down. maria: flat to worse with food at home amazing down foodout restaurants were not. cheryl: yeah, absolutely. i i mean if you look through you know, it -- it the services component i haven't got to that section the

the fed eral reserve raises rate again. possibly signaling the end of the fastest tightening cycle in decades. what it means for the economy and markets and investors. >>> and it is not just the fed another major central bank is set to release the policy decision later this morning. we have a live preview from london in a moment. >>> plus, we are turning attention over to washington and it is all about a.i. as the vice president holds a face-to-face with those at the cutting edge of the technology. >>> and later, can johnson & johnson consumer business spinoff reignite the ipo slump it is thursday, may 4th and you are watching "worldwide exchange" on cnbc. >>> good morning welcome to "worldwide exchange." i'm frank holland. let's kickoff with the futures this morning, you see we are green across the board higher right now almost flat. something positive indicators for the start of the market day. this as investors continue to digest the federal reserve tenth interest rate hike and comments from chairman jay powell hinting t

the man who knows the fed very well, people call him the fed whisperer. a little bit like ground hog day you have a shot gun bank, feels like we were there six weeks ago because we were. this does clear the way for the fed to raise rates by 25 basis points, which they had pretty strongly signalled they were going to do. the focus will be on what the fed says in their policy statement on wednesday afternoon. >> so forget about it, there's no way they're looking at this and saying there's too much stress in the banking system, they see this as wrapping up one of the most stressed pieces out there. they are going to raise rates. how hawkish do you think they'll be there was a note out from mike wilson saying they're pretty hawkish. that could be a down side for the equities market, that it could react badly. >> i think you're right. first republic was seen as a bank on weak hands on friday and stronger now because of what the government and jpmorgan did. when it comes to how hawkish, i ask compared to what i don't know what your priers are. i think the quest

the fed meeting is coming up at 2:00 p.m. eastern.hints are you expecting if any and, also, how does he address the regional banking crisis looking at the kre, down 1.5%. down 27% since silicon valley bank exploded. how much does he talk about all that >> i don't think he'll be able to escape talking about the banking situation. we did have the big report that michael barr put out very detailed, very much a mea culpa on the part of the institution, i would say. there is the clear possibility that the developments in the banking system expert more of a drag on the economy than the fed realizes and could be doing some of the slowing of the economy for them on the other hand, inflation is still really, really high. what does he do? the last statement they put out or the last policy statement said that additional increases may be necessary, and so in that sense, they've already left things a little bit vague. and then i think a lot of the questions coming from reporters in the press conference will be about how big a deal is the banking s

fed raises. i believe the fed will pause and they do not need to continue raising rates throughout the year i think most people, you know, markets think the fed will reverse course and cut rates in 2023 they are mistaken. i think it will be mid-2024 before that happens. >> jamie cox, we have to leave the conversation there you gave us picks of a.i. productivity gains and amazon and meta. >>> we have more to come and the one word that you need to know and the dire spending on the biggest players in the space my next guest says his customers are bucking that trend. >>> more on elon musk and pick to run twitter and challenges she could face getting advertisers back on the platform >>> later, treasury secretary janet yellen looks to circle the wagons ahead of the possible u.s. fed default hweave a very busy hour still ahead when "worldwide exchange" returns. work meets bold new thinking. ♪♪ partnering to unlock new ideas, to create new legacies, to transform a company, industry, economy, generation.

that is not what this fed wants to do. charles: sure. >> what is more important than any economist base case, charles, where do they see the risks. we listen to central bankers, the inflation number being uncomfortably high, we have to say the balance of risks to the base cases is more tightening. that is not a come fatherrable environment, but one war central bankers are trying to make us think can we cut rates where inflation is running where it is? probably not even in a recession. charles: frances, one thing i don't hear enough of in my mind, feels like everyone has modeling, back tested, they grew up on it, whatever it is they believe in their own modeling. most is similar. i negative been in a scenario which this kind of cash was cascaded into the economy. do we make, step back, hey, certain things have to be tweaked or nullified based on the fact that this is something we've never seen before so do you use the same approach knowing that it is going to take longer to get inflation down because we never had to try to

what does this mean for the fed's road ahead let's bring in richard clarida he's the former fed vice it's good to see you again welcome. >> thank you >> so powell today said we've come a long way, our stance is restrictive. might not have to take rates as high because of credit tightening from the banks. are they done for the time being? >> i think that they've certainly paused time being, yes. let's agree. i don't think they want to declare victory. it's not mission accomplished. inflation is too high, but this is a very similar message we got out of the press conference a couple of weeks ago. i think that's what the chair wanted to convey, that they're going to pause at the june meeting certainly, and probably in july. >> i chose my words carefully in the way i asked you that question, you know, for a reason for the time being, but what you just said is very interesting to me, and that, you know, june, okay, but you think they may pause in july as well? >> that would be my guess. that would be my guess now they are data-dependent. they've gotten off what some folks have called the

is it another reason why the fed should be pausing now? could the fed hurt banks with more hikes? will disproportionately hurt small midsize banks. they are very sensitive to the fed funds increase and their clients who borrow with the fed funds rate, small businesses are very sensitive. the drama headline making part of this crisis is probably over. there is still a slow bleed going on beneath the surface in that most small midsize banks are trying to shrink their loan portfolios because they have lost some capital. they may have had some asset liability mismatch in their account, so they are trying to accommodate that by shrinking their loan books. it's harder to get a loan for a small midsize business today than it was two months ago. >> we always appreciate your time with us. just recapping, we have just seen the announcement from fitch saying the u.s. aaa rating may be cut. the probability of a default is not a high one, but a lot of criticism when it comes to the governance and the brakeman chip we have seen continuing with these talks. we are saying that when it comes to u.

first, your reaction to the fed the meeting, the fed announcement, the news conference. what jumped out at you, and has anything changed as far as your investment focusesome. >> yeah, i think chair powell did a pretty good job of really setting up a framework for them to pause and without committing themself. in a broad sense, they used the very same language the last time they were in a rate hike cycle where they were pausing, and that was in 2006. so if you compare those statements, they're very similar. and i think that's important, right? i think the market really got what they expected, a 25 basis point rate hike and then that's it for now, and we're going to watch the long and variable lags of monetary policy take place and leaned into the fact that credit tightening has already started. i think they did a real good job. that was our base case that this was going to be it, and i earnly think when you think about -- certainly think when you think about invest anything this new environment where the economic data can now be viewed through the lens of not affecting mo

the fed is done on the survey, they save the fed is done.assets would be resilient as long as we have a soft landing. discombobulated and by pfizer as they shook up the larger end of the curve. hedge your dollar exposure, it is the least preferred currency on the board. they prefer yen, aussie, and a little bit of gold. short-term boost if there is a debacle over the debt ceiling. iea imagines it will be 200,000 barrels higher than anticipated. the probability of consumption is said to be low. room for such action is limited. it is still like a candle in the wind at the moment. dani: this perhaps what we see equities. hong kong tech, also down. the bright spot is japan. continues to see gains at the highest level. will we see the rail bull market come back. in the meantime, the debt ceiling drama to end the day, fear of no deal being reached. s&p 500 futures on high. the cycle of the situation in the u.k. london still rules as a financial hub but the fact is that equity trading has shrunk in recent years. it is a queue in britain. homegrown

not a great environment for stocks if you look at fed fund futures, they don't believe the fed market doesn't really seem to believe the fed, either. in other words, the market right now, i would say, equities, even with a little bull-back today, and it was -- yeah, i was a little surprised at some of that, parsing through the fed statement, there was, you know, some of it could have been a little dovish on the cut here, but anyway, long story short, i just think that the market doesn't believe the fed here and pause does not mean pivot, and i think for equities, that's a problem. >> market doesn't believe the fed, because jay powell went out and spoke to the world and didn't seem to have a lot of conviction or clarity about what's going on. and that seemed very clear it was something that i felt -- >> how could he? >> after listening -- >> nobody does >> okay, but markets don't like uncertainty. so, i'm very surprised the market wasn't down a lot more today. i think it will be tomorrow. and if you think about where some of the readings that we have as it relates to volatility in the

is the fed getting nuanced?it seems that way, you have to have another kind of decision to make. let's start with a fed board governor, philip jefferson who spoke to they. he is leaning towards the pause. inflation is still too high, he says, but he thinks maybe it is time to take a break. >> history shows that monetary policy works in variable lags and your is not long enough to -- a year is not long enough for demand to feel the full effects of higher interest rates. >> he singled out the fact that the fed more time to assess the impact of tighter lending standards at banks, pulling back on credit, businesses not being able to get loans. look what jim bullard said, known as being a policy hawk. he says disinflation is moving slower, then he would have liked. he is calling for more rate hikes as insurance against inflation. he says, our main risk is that inflation doesn't go down, or even turns around and goes higher, as it did in the 1970's, which led to more hiking and another recession. they thought by 1982

>> i was at the fed in 2011.understanding was this plan was never presented to the president and ever approved. annmarie: would you presented now? >> we are working full-time to work with congress to raise the debt ceiling. that's where her focus is. we know the only good outcome is one in which congress acts as it has many times, almost 80 times since 1960, to raise the debt ceiling. what global markets in american households and businesses need to see is that we have a congress that is committed to paying the bills that we have incurred as a consequence of error legislation, that we are not a deadbeat country and of congress fails to do that, it really impairs our credit rating. we would have to default on some obligation whether it's treasuries or payments to social security recipients. that's something america has not done since 1789 and we should not start now. we have not discussed what to do if that doesn't occur with the president. our focus is on getting it done. annmarie: treasuries are the bedrock of t

how does the fed see it impacting the economy?ignificant credit tightening going forward. finally, the debt ceiling. the chairman is likely to try to avoid answering much on that. but as it gets closer, and now we are up to june 1 as a possible date, the fed does commit. treasury is their boss in the situation. they are the fiscal agent for the treasury so they are planning for what they may be asked to do. we will ask about it. it's coming up in about 45 minutes. the market reaction at 2:00 wall street time is often different from what happens when jay powell starts to speak at 2:30. scarlet: there is more nuanced to the decision. it comes out in about 42 minutes. 30 minutes after that jay powell begins speaking. next, we head back to milken in beverly hills where romaine sits down with guggenheim partners executive chair out of shorts. -- alan schwartz. this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing s

if you heard the former fed presidents talk, if you look at our cnbc fed survey, dave, i've never seens that almost always these a guys find a reason to agree with what the the fed is doing they can't find it this time around. >> yeah, a lot of pushback if the fed has a hawkish sort of signal today on the inflation front, which brings us to inflation, steve, with know the problems in the regional banks, we know that there's going to be an economic fallout, the lagging impacts of monetary policy but on inflation the question is, is it coming down fast enough david and i already talking to all these ceos and investors, one common refrain is that inflation is going to be stickier than the market expects, and the fed is going to have to stay more restrictive than the market expects, which is the other way, the other side. >> i think that's right. but you guys remember the financial crisis and i remember i didn't take a vacation during the financial crisis when it finally dawned on me, you know, if i take a week off when i come back it will still be a financial crisis. it will be fine. ther