this reflects not an easy fed, but a fed that is afraid of the future. it is a move we must consider. tom: right now joining me as a public official who has to deal with the fed each and every day. gets all the press. for years to mature event of the house financial services committee coming in to change the town. from texas joins us. a busy day and washington. these are market moving announcements by the fed today. we see a sense of dovishness and a little bit of the fed from jeff lacher. what would you like to see from too muchhat is doing washington policy? what do you need them chairman yellen? >> i think we would like to see the fed getting my -- but getting back to more sustainable interest rate. as we all know, these are unsustainable interest rates and now we probably have the longest team in interest rate history. there is not much guidance in foreign guidance. there is an entire industry that has risen trying to read the tea leaves. ultimately the challenges our economy faces while we continue, notwithstanding one quarter, last quarter gdp grow

the fed should raise rates.u want to talk about absolutism that the economy isn't that bad, i would agree with you that nominal gdp, while it's not rising at least sideways, and it's 3.7%. it's not great. >> the junk bond market is down. we talked about this back in july when we got together at seeking alpha. the junk bond market is pretty sickly. near its four-year low. emerging market equities are near six-year lows. commodities can't really get much traction near multi-year lows, and all of these things relatively are suggestive of not raising are int rates. i think this if he do raise interest rates -- that's been in the wind now for over a year. i don't think the markets are prepared for fed increase today. >> is the fear in the high yield market, the junk bond market which you've been so focused on that there's a rush to the exits? you've suggested and i think your words were that people should start selling junk bonds "the day of the first hike." that could be today. >> well, if it's today, then junk bond

the fed is going to do.oday, what they would like is something that gives them a clue as to when they will so they can start planning. the uncertainty has caused problems on trading desks. mark: whether a move is made today with a max half hour or what is incumbent upon policymakers to tell people about why they did or did not raise rates? >> the trickiest things to come up with something that is consistent with their prior diagnoses. heard the fed about how the initial basis is not matter, it's the cumulative amount of tightening. that sits uneasily with the idea of keeping away from calendar-based guidance and focusing on databased guidance. the could be one of questions that keys into the decision today is how confident c in his ability to control the expectations. they still want a gradual path. mark: there's the question of data. there are reams of data that policymakers have to go through in order to come to this decision. what is most important for them? needis your janet yellen to convince her one wa

is the fed going to go this week? michael: we thought they were ready to go on the august 11 decision. it did rattle markets and we think it led to a tightening of financial conditions within the u.s. we use that opportunity to say that the fed won't go, partially due to the concerns you just wantoned -- do you really to be tightening rates into that? we think they will skip this meeting and not raise rates. scarlet: when you look at the economic conditions in the u.s., the bloomberg survey found that most in the u.s. leave we are not due for a recession until 2018. having said current expansion would last nine years. give us your take on the linkage between the stock market and recession. if they are steep enough, there is a wealth channel where wealth supports consumption and real estate valuation supports consumption. if you had a sharp decline in equities that led to a large drop in wealth, that could create recessionary conditions. we have in in a long expansion and its reflection of how far we fell. we think equ

here is vonnie quinn on the fed. vonnie: federal reserve policymakers are beginning their two-day meeting today. by tomorrow afternoon they will decide whether to raise interest rates for the first time since 2006. goldman sachs tells bloomberg there would not be as a prize if the fed takes action. >> if things go badly, and things intensify from here, in that case there would be a reason to push it into 2016. futures contracts show there is a 32% chance of a rate hike. ready -- as the leading republican candidates get ready to debate tonight, polls show the tide is turning for donald trump. he is up 13 percentage points in a month. none of the other 15 candidates is close. they will debate tonight on cnn. viewers will see two changes. carly fiorina is taking part, and the candidates will be allowed to challenge one another directly instead of just answering moderators' questions. fiat chrysler has reached a tentative agreement with united auto workers. they revealed little about the deal. they did say it eventually

the fed is going to look for a range for the fed funds rate. that suggests to me they don't control it as correctly as, say, a bank that says our rate is going to be 1.8%. >> okay. >> how do they make that -- how do they make that range come to be? >> through the use of various instruments they v the interest on excess reserves on as a ceiling and reverse repo as a floor. think about if you're on the ocean with the waves going back and forth and ability to keep something level. it's very difficult. what sloshing around underneath you is all of these excess reserves and it's very difficult in the old days there was much less in the way of excess reserves out there. much less money in the fed funds rate. this is a new era with all this trillions of money out there that the fed thooz try to hit a target with all that excess reserves throughout. >> steve, fantastic. we'll see you tomorrow. i know we'll see you on thursday in washington. mandy? >> very interesting. >> yeah, very good. >> i learned a lochlt okay, a rally on the street aheads of the i

what is the fed waiting for? and is there a danger that in waiting for thing to get just perfect, they wait too long? >> so there is always going to be some reason not to act. there is always going to be some piece of data that's not perfect or some volatility somewhere. but i think they were concerned that they are not seeing enough signs yet that they are going to be on a path to reach their 2% inflation goal. inflation has been moving down both in the recent report and in the personal consumption expenditure index, which is the main index that they focus on. and so i think their concern that inflation ant quite coming back as they had expected, so they are going to be cautious. >> randy, what did we learn from the fed today in terms of what their really watching? it seems to me that they are watching china, oil, the drop in commodities, and the global market tur nile we've seen recently. perhaps much more closely than a lot of market participants thought they were. >> i think the market participants should hav

we will be talking fed.nd as the formal chairman of the labour party, we will be discussing jeremy corbyn. ballot boxck to the -- greek voters head to the polls for the third time in less than a year. has election fatigue set in? we will have the latest from athens. i find it is crazy -- alexis tsipras was being called a criminal. -- now he's the favorite. mark: that is the only way you can look at alexis. given the mess greece event, it may turn out to be a good thing. francine: mark gilbert. just a reminder -- you can follow me on twitter. coming back, we will go through what the fed decided. it seems that the only market that moved was the treasuries. we had this debate yesterday. euros,around 500 billion and he is saying that the markets seem to be leading the feds thinking. do you think that is right? do you think the fed has done the right thing? you can tweet us. ♪ francine: welcome back to "the pulse" live from bloomberg's european headquarters in london. i'm francine lacqua. the federal reserve kept

the fed did. that is what we have been watching. rishaad: but, people have been getting upset about this, as though it was going to happen. it was not predicted to happen. december was the month. we are looking at 50% implied there. we were looking at 30% for it to happen this month. so is everybody -- why is everybody getting worked up about it? enda: it indicates that do. if you consider the strong view the fed would ignore china. they were going to hide in september. -- hike in september. china does impact the global economy. and the fed has said. rishaad: i agree. at the same time, we have a federal reserve that mandated to look at the domestic economy. you can't, as you say, china has rest ofn, indeed, the emerging markets has become too big to ignore. enda: u.s. inflation, u.s. consumer, u.s. employment boxes being ticked for a rate hike. this is global to violence -- global development being china where we had currency market turmoil triggered by a change in the yuan exchange rate. and we h

michael: the fed also can mitigates -- the fed also communicates -- the fed can only go if the markets fully priced. the market is fully price for december. one interesting point is the fed's been saying the starting date does not matter. what matters is the shape of the tightening cycle. jonathan: what matters is the journey. are we going to write a headline tomorrow morning that says dovish rate hike from the fed since stocks surging? is that the headline? michael: i hope so. one of the reasons for thinking if the fed goes today, they get rid of all of the uncertainty. if they don't, we're going to be on data watch again. we are going to be thinking a lot about where is the probability for september was near 50% not too long ago. i even get there in december. to remove that doubt. a number of emerging markets saying exactly that. how odd is that? in the middle crisis, that's in the mid--- in the middle of a crisis. up, the fedming impact on emerging markets. will they benefit? or take a beating? we had to hong kong after the break. -- we had to hong kong after the break. ♪ >> i do b

>> it is interesting, it is coming from the fed, research from the st. louis fed. basically saying quantitative easing, which is still going on. they're maintaining portfolio, even if not doing new purchases they're reinvesting money. it doesn't work or meet the goals. that's what we've seen here year after year. they have this belief their low interest rate policy, accommodative qe, drives jobs, drives economic growth. drives inflation. now i don't want inflation either but they want it and they're not getting it even though they keep promising it just as they promised growth. david: something is not working, you stop it and try something else, right? >> i guess the definition of insanity is doing same thing again and again and expecting different result. david: are you saying this is insane? >> i certainly did not say that scott highlight ad very smart man which was you. i don't hate the fed because i can't hate entity i believe, body that saved the global economy. i do think they have made a mistake. i think they're continuing to make a mistake. i disagree with

happy fed a.in the capital city for today's fed meeting and tom keene is in our new york studios. here is where the markets are as we going to the trade today. s&p 500 index teachers down six points, -- futures down six points and also .3 is .2 move for nasdaq, down 10 points right now. lot going on. the stoxx 600 is unchanged and the dax up 25 points, point 201% as bureau prepares for the decision and trading will be over by then when the fed makes its decision. the bond market not moving at all this morning. you would expect that. 10-year note dealed price that two point 8% this morning and the five at 1.6% and at an 80 basis point yield. corporate news, all taste wants to buy cablevision consolidation in the industry continues with a $17.7 billion deal. 22% premium. on the political front, it is all piled on the donald as republicans squared off in their second debate. trump taking shots from challengers and not clear to what effect. or the financial world, it is all about the price of money. w

will the fed hike or stand pat? >> the fed has been swhat irresponsible. >> i think the market is more prepared for this increase. >> investors throughout the world will know the answer in one hour. >> this isn't the time to be moving. >> the impact can't be overstated. it touches every part of the american and global economies. stocks, bonds, commodities, your money, your life. this is a cnbc special report. countdown to the fed with mandy drury at cnbc headquarters and tyler mathisen in washington, d.c. >> good afternoon, everybody, and welcome to a beautiful nation's capital today. i think it's no exaggeration to say that today the biggest, most consequential decision, the one that will affect the most americans in the most immediate way is being made right here today in washington in the building behind me, the headquarters of the federal reserve where the men and women of the open market committee have been meeting. mandy? >> will today bring the first rate hike in nine years? that is the big question. in less

trish: but say the fed does, that gold is dependent on the fed, too.t's the reality, everyone is worried the fed is going to move in september. what do you think the likelihood of that really, is mark? >> i'm on the fence, i think shay shouldn't. i think they want to, if you listen to the fed from this morning, they want to simply because they said they want to. trish: yeah, they want to. >> tonight raise rates, and i'm going to do it! >> whether or not can you actually do it is an entirely different thing. >> right. and yeah it really doesn't -- i don't think the big number, the nonfarm number was a little bit light. i think we're kind of deflationary, that's one of the things about gold. gold is a measure of inflation, and there is none. i don't think we'll see any real inflation, why would the federal reserve move? so that would be the real upside in gold is the fed gets out of the way and gold starts to rally. really, if it does raise rates, it will be a ripped band-aid where gold could threaten the lows and would present a buying opportunity. as i

the fed gets it! the fed recognizes that if

fed's message.f you paid attention to the fed's measure which was to keep rates on hold i think that's good for emerging market currencies, a lot of investors were concerned about the fed hiking and they were bidding up the dollar to the detriment of emerging market currencies over the last few months. any delay would take pressure offer of the dollar from going higher. if you pay attention to the fed's message it was not a very optimistic message, it was a message that highlighted external and global risks to growth and of course emerging markets are highly dependent on global growth and therefore the fed's message was not an enthusiastic one for the emerging markets. >> is it right to think of these emerging markets as a block? you take brazil, turkey and i see i get iran and south africa and those countries have really big political and structural problems and then there's china and india and maybe lumping them all together we don't see what's going on. china is a real issue and india is a separa

time -- it is the fed. jugglingking about the the emerging markets are having to do in interest rates, the world economy is about to be stress tested. are we about see the first tightening of the u.s. monetary policy and was a decade? it was a challenge for a global economy already affected by slowing chinese demand and volatility in financial markets. our chief agent economics correspondent joins us live now from hong kong. given talking about this for months, it seems. the emerging market impact, what is the impact in asia? what is quite mean -- what is this going to mean? debates.e are two on the one side, people say the asian economy is very different now to the last tightening cycle a decade ago. it is decoupled to some extent from the u.s. -- what is happening in china matters more. it is the view that what happens in america is much more important. at least on the same scale a decade ago. there is also the contrarian view that no one will matter, because it will drive up the cost of borrowing asia. i

isn't that enough for the fed to think about hiking eschew mark -- is that enough for the fed to think about hiking? the economy is rather strong, particularly in the labor market. dean: i don't see it in that strong in the labor market because we are down roughly three percentage points. four percentage points if you go back as far as 2000. wage growth continues to be nowhere. in terms of the growth rate, 27 sounds good but it's not a particularly strong rate. one of the things driving in one of the things driving in that second quarter was we had an extremely high rate of inventory accumulation. i don't think we have a story of the economy going full steam. maybe we will get 2% for the rest of the year, but that's not terribly strong. david: i want to put a chart up with potential gdp. first, define what that is, and why is that giving you pause? dean: this is the congressional budget office assessment of where the economy could be if we had full employment and everybody working if they had a job. it's still $400 billion against potential gdp and the estimate is a potential growth of

robert wolfe on the fed next.ared we are with robert wolfe today from 32 advisers. i just asked the head of the federal reserve, sqa one, two, three, for work? >> first we have to applaud with the fed did with liquidity into the system is a weaker than the other central banks didn't do as well and that's why europe is still not where they need to be. q. we want within us. qe2 stabilized the economy. q. e3 was not needed. continuation of divine, not sure what it did. rates will stay low either way. i think today it's unsure how you unwind it. maria: what will it take for you to believe the fed has moved interest rates. what is it going to be for you to make that? >> they could even do it today. it would make a difference. they are going to do it. my recommendation would be wait until after year-round. there's a lot of volatility. the global growth doesn't feel well. the u.s. is the strongest but not that strong. they should start raising rates, they should just wait. going into the budget debates, it just another t

this with the fed. that with the fed. that with the fed. >> let's hook at some of the biggest individual movers here today in europe. green across the screen for various european luxury and retail stocks. we'll kick off with prada up 9.9% after their net income came in ahead of expectations. this despite a 23% drop in first half net profit as the luxury group contend with the slow down in asia. the earnings giving a boost to other luxury stocks. the likes of dior. burberry up 2%. meanwhile, swiss conglomerant is sharply higher after it posted a 4% rise in sales topping forecasts. that is up 6.4%. it's also lifting it's fellow swiss company swatch by about 3%. also with retail, zara owner is in positive territory after it saw first half net profit grow 26%. that's up 3.6%. susan. >> yesterday we also saw august u.s. retail sales rising less than forecast. about .2% and one american brand is trying to make it here in the euro zone. american eagle is hoping to break into the u.k. online sales market be the launch of its new

but please do not forget that the fed nevertheless -- the most important influence of the fed neverthelessemains the u.s. labor market and the prospect for inflation. in the u.s., the labor market is tied to unemployment -- and went down to 5.1%. unless we have huge market turbulence in asia, we will quite likely see the fed to start the rate hike process, i would say, in december. next: so all eyes on the big jobs report coming out of the u.s.. how important will wage growth be here? joerg: this is very important. the unemployed rate, this is really good and strong. wages,sing link is the when you look at the employment cost index. we expected somewhat. but the labor market is tied, and the ratio of unemployed to openings, it is only a question of time before you also see wage growth to pick up somewhat. expect that the an employment rate goes down, and therefore, december is more likely. angie: how does the delay to december, or potentially even after that in 2016, i guess it really depends, how does the delay help emerging market nations -- those nations in asia? joerg: it may give them

if the fed is on hold though as the fed funds futures and the vick seems to suggest, then lange could make a bullish case for the euro. not the dollar but the euro right here and a strong euro is what the industrials need. our drug companies need it, consumer package good companies needs it to name a few groups if the darn dollar were to come down. take a look at this weekly chart of ifxe, the etf that measures the strength of the euro versus the dollar. all we hear about is a strong dollar but this isn't saying that! remember higher on the fxe means the dollar is weaker. lower means stronger. when you zoom out to this weekly view of the euro ux see that the european currency seemed to have bottomed. in other words, fxe, euro getting stroenger. euro getting stronger and it's been climbing slowly but steadily ever since this bottom. some that have is because europe's been improving with good auto registration numbers this week and if the fed doesn't tighten this week or puts the idea of a rate hike on hold you can expect to see the fxe fly. lange likes the relative strength index, or t

if the fed -- with the fed needs to do is to make sure everybody is ready for it.e fed needs to do make sure everybody is ready for it. this was a dovish story being generated by the fed and yet yellen felt it necessary to talk about this idea that rates are not going up. what was she trying to do? laurence: i think she was try to dampen the volatility. everything was dovish. the economic forecasts, look at how they changed. everything is down. the emphasis on inflation and expectations in the bond market, lower. if you look at the overseas development, all worse. why was it she didn't go we still want to keep a rate hike? october is still live. i think part of the reason is this, if she has said the market it hasn't been working out, we going to look at again in march that i think you would've gotten an enormous positive action -- positive reaction. she would've generated volatility by everyone relax for six months and taking that away again. maintaining this pressure that rates to go up at anytime, she stops emerging markets and other risk markets. bhanu: it is t

the fed is offering.usiness conditions for banks are good. jim, what what would you say about all this. >> if we could get better yield spreads maybe more more risk taking in the marketplace. it hasn't helped middle america. isn't there an argument that raising interest rates would help the economy not tighten things? i think if rates were higher not at 9%, if mortgage rights were higher there would be more lending and that would help the housing market. her body language seems it's about jobs and housing. i think that's good fort economy and good for consumption and loan demand, amazon demand and facebook. on the ground is cd rates are raising loan demand is good and you see that in other places as well. >> i wanted to ask you about loan trading. do you expect that to continue now that that big decision will be delayed and so is the uncertainty coming from abroad? >> look, the volume comes from the volatility as well mplts. >> i think that what the fed did today was they are concerned about getting to th

china, other countries, fed, no fed. right now 2.28% growth. seems to be selling off the shelves because of individuals are helping to flop his name on merchandise that people can't seem to get enough of. merchandisers see a surge in the selling of items such as hats, t-shirts, trump for president, make america great again. retailers and bond certificates to collectors of bankrupt businesses when he was listed as chairman for $100 each. what would you pay for donald trump shirts, hats, mugs. is that on your holiday list. let's focus on the issues and less on the merchandise. lauren: you can also buy stuff on his website but it's more expensive. always on the federal reserve. how the market move right now and how today's decision will affect you. plus this. >> you ran a ounce of status post losses using other peoples money and you're forced to file for for bankruptcy not once, not twice, four times, a record four times. lauren: gop presidential candidates clashing in the second debate. the highlights from last night coming up. checking u.s. stoc

to say we don't have fiscal policy, the feds do, runs the feds risk. >> rose: what about unemployment rate. >> the unemployment violate falling rapidly and in the zone the fed said it's looking for. there is no argument for keeping rights at zero. keeping mind, raising a rate at 25 basis points is not going to have a material effect. it's more a matter of putting the economy back on a normal course. >> the problem is basically you're creating a problem in the financial system getting hooked on the idea money doesn't really have a price. i lived in japan in the late 1990s and it's a very insidious, subtle thing that this kind of zero-rate policy does to a system and it begins to breed all kinds of bubbles, it distorts the system quite significantly and we're already seeing that. the longer this continues the more difficult the price of the normalization is going to be and the more the markets go through this weight game each month expecting something that doesn't materialize the more complacent they will become. >> rose: what's been the rationale of other bankers around the world. >> t

the fed gets it! the fed recognizes that if there's no inflation, if there's worldwide uncertainty, if there's no real risk of keeping interest rates low right now, then they should stay low. that's why the stock market initially greeted the stay put decision with such applause. dow rallied 193 points before the averages pulled back late in the day as traders rang the register, dow closing down 65 points, s&p declining .26% and the nasdaq advancing .1%. remember, i told you we were likely to see a post-fed meeting selloff even if they held off on a rate hike. in part because the market had already run up in anticipation of precisely this decision. so the traders who got it right have every reason to take profits, even as long term investors like you should be much relieved that this fed is taking into account more than just seemingly strong employment figures when it makes its deliberations. before i explain why today's decision made so much sense to me let's get some darn things straight. if the fed

the market will tell the fed when they are ready to hike.f communications and being very open about communications. alix what do they need to do? what would you need to see? >> the recognition of the problems out there is a good one for janet yellen. they should continue to recognize them until it is clear the problems have been resolved, inflation, higher wages in the chinaand the model with problem with china. joe: the market is now observing itself from another angle as an observer of the observer of the observer. colleague -- i had to read that a couple of times. fedng the same point, the has to think about its actions in terms of how it affects expectations in the market. at the end of the day, market expectations will determine if the fed can do anything. saying, don'tt is raise rates, without the risk that things are damaging in terms of reaction. you could have had a big selloff if they had raised rates. alix: didn't we see equity prices rise, money come out of the treasury market. it seemed like game on. issue around how the fed fra

i think the fed has tried very hard -- the fed has done things he knows he cannot fail out.ou can always go out and buy mortgage backed securities are treasuries. but the brief effort with the evansville, which was abandoned quickly -- it has not tried hard for the more conceptual shifts. if you are concerns about the financial sector, we know how to solve that come with higher requirements on derivatives, assets,sheets on mortgages, as tom brought up. for a lot of reasons people are nervous of tried to force them through. alix: we have outlined the weakness in the global economy with wages. what is actually good? this there's nothing you can point you to say, yes, the fed did that, it worked out? mike? europe we are to doing fantastic and that is worthwhile to emphasize. we could be in a position where the fed turned to tighten money. turnedd be sweden, which to raise rates really because of the phantom menace of financial instability and had immediately retrench. we had a bit of a star-stop with qe2 starting and stopping and the economy weakening. but we haven't had anywhe

it's fed day.ad yesterday mark carney front of the treasury select committee saying that if interest rates rise, they may come early 2016. we have heard from him before the decision should be made at the turn of the year. are bloomberg's top headlines. the cable operator altice has agreed to buy cablevision. the move accelerates the european company's expansion in the u.s. the d values cablevision ateal $34.90 a share. are at least three people known to have died in the 8.3 magnitude earthquake in chile. authorities evacuated coastal areas as waves triggered by the earthquake washed ashore. says theresident government is assessing the damage and warned of potential for strong aftershocks. hours away from the most closely watched federal reserve decision in years. traders rae pricing in a 30% chance the fed will raise rates as later today, goldman sachs says financial markets are vulnerable because nobody can agree on what the fed will do. lloyd blankfein says that u.s. economic data does not suppor

>> call peter barnes get the last fed statement. they're the ones who say things are getting better. up employment is getting better. housing is picking up. neil: we're seconds away finding out whether that is it. >> i'm not saying they should raise rates. neil: we will sigh. now we know. >> no rate hike, neil. no rate hike. the fed is leaving rates, short-term interest rates unchanged. the fed is saying that it wants to see further improvement in labor market consist and higher inflation before it increases rates and it is worried about foreign economic and financial markets and possible impact on the u.s. economy. so for now, no increase in rates. but it signal ad rate hike could come later this year. let me read from the statement now. quote, information received since the federal open market committee met in july suggests that economic activity is expanding at a moderate pace. household spending and business fixed investment have been increasings moderately and housing sector has improved further. however net exports have been s

five market waiting on the fed.could turn positive in a second. 4.9% led by technology. hang seng, nikkei and cost again today. lauren: euro zone inflation falls unexpectedly last month and that can fuel speculation the european central bank has to expand its the program. ftse up 55 points, the same paris of the german dax up 60 points. nicole: bubble of the fed do? they are done with the stimulus. lauren: gold prices moving to the upside of buy him a $6.11 awaited troy ounce. nicole: the euro weaker all day long. the other basket of currencies, the pound, canadian dollar, mexican peso in japanese yen stronger. a big selling yesterday. a 10 year treasury bond 2.7%. two-year yields story yesterday that the highest level since april 2011. nicole: everything intertwined. welcome to "fbn:am" come your first look at today's markets from the latest breaking news and what to expect the day ahead. in this case the fed is on our radar. lauren: analyst divided over what fed policymakers will do. some say the feds will raise r

we'll ask one fed watcher what he expects the fed to pull the policy trigger. s&p down one and a quarter. nasdaq down seven points. very volatile session yesterday, nicole. nicole: look at asian stocks. shanghai, hang seng, kospi all gaining. nikkei pulling back 2%. nikkei the story. somewhat of a mixed bag this morning. lauren: how are stocks trading in europe? opened to the downside and trading to the downside. dax is down almost 2%. 1 1/2% decline in paris. ftse down 1 1/2%. nicole: chevron the best performer on the dow. crude oil is on the move. seeing it to the downside, down .75% at 46.55, lauren. lauren: show you gold prices. after the fed passed on the rate hike, investors putting their money here. $1133 a troy ounce. nicole: a lot of talk about the euro-dollar. let's see where it is. saw it pull back yesterday, gaining today against the green back. u.k. dollar, peso, all stronger against the dollar. lauren: strength against the yen, one of the reasons the japanese stock market did not do well. yield on treasurys 2.17%. investors clearly buying safety a

the fed might not react to the market but the market reacts to the fed.et's go to su keenan for the roundup. was there an immediate reaction? su:mmediate action: -- immediate action. thats jumped, you can see on the chart, and then during the press conference, you saw a stronger reaction. the rally evaporated. did the fed know something we did not? does it say more about the world economy than they are letting on? they are focusing on the world economy. as a result, the s&p ended with a loss. at one point it was up 1.3% at the start of the speech. it began cleared during the conference that the fed was focused on international risk. it became clear that they were dovish, different than we thought. >> there was a plausible case that the fed would look [ast the volatility -- past the volatility caused by charter and that led them to delay it. su: that was the disconnect. it was not expected that they would raise rates but those who thought that they might or did not have a stronger statement about they are going to do it soon, i am very disappointed. as jan

look, this is shaping up to be a case of the fed giveth, and the fed taketh away.er the fed raises or don't, the fed is between a rock in and a hard lace. for retirees, they'll say what took you so long? why only a quarter of a point? for those in the stock market, they'll say, look, this is going to deflate the sales that have been driving this economy. autos, housing, all benefiting from low rates, and certainly emerging markets. imf saying don't raise, you know, we don't want to see higher rates because it's going to hurt foreign economies. regardless, that blame is misplaced because the blame on the fed is not the right approach. the blame should be on washington for putting the fed in this position in the first place. >> right. >> they're trying to solve a problem that they didn't create. they didn't make people spend $18 trillion in debt, but they're trying to fix it. neil: wait wait. they provided the environment that allowed for that, and i guess now you have to dial that back lizzie. when, liz city, did the market get to be their prime concern? >> i think

i just learned that the fed, the fed's version is not what i thought. so what does matter that the data are building your case for you, and to deliver the message at the right time. so i think that's where i differ from the more kind of standard academic way of looking at timing doesn't matter, it's all about the past. the timing matters privilege to the message and how the market takes it. on the international side, this is a very tricky thing. that that has given us the stuff, qaeda to point about transparency and to have too much and doesn't give us a headache, has given us a summary of economic projections that's all very domestic, and they really rely on that kind of to friend a decision but then there's all this stuff outside. the projections is very much a bill framework. we're going to grow above trend, unemployment will go through the natural rate and will have inflation come back into target as we do so we will gradually normalize rates. it's all a very sensible picture but there are all these things outside of it that actually affect, i think

stocks falling ahead of the fed decision.ight trading overall about 25% , over the 20 day average. nine out of 10 industry groups are down. the exception there were utilities, which, again goes , back to the idea that it has shifted when the fed would shift rates. joe: overall, this was a really quiet day. the market was lower. just not very dramatic. people have been talking about the pre-fed lull in the action and there was nothing you could point to that was particularly exciting. scarlet: it felt like in august trading day. joe: it felt like the days when we are on vacation. scarlet: this is the pe of did -- of big caps. whether or not you believe that high,rward p/e's were too they have started tumbling down. stocks have recovered a little bit but that is not a very nice line. let's get rid of that line and show you what happens if we max it out over the longer term, back to early stocks are not 2008. cheap by historical standards but the debate is still is the secular bull market for stocks still in place? joe: that is

maybe be fairly volatile until we get resolution from the fed. one day we think the fed's easing. the next day they may tighten. tomorrow i wouldn't be surprised to see markets be fairly volatile again. not only because it's the day before a holiday weekend, but friday's employment report is important to making decisions on monetary policies. inle we get that final word what they might do which won't come until september 17th, pick your spots carefully. stick with winners. earnings winners and revenue growth winners in particular. >> where do you think the market is going over the next three months? >> i think for starters, it's going to be fairly volatile. the market will trade sideways, maybe down a little bit more until we get that resolution from the fed. the fed makes a big decision in terms of market direction going forward. over the next 12 months, however, i do think we are going to be surprised as to the extent of an earnings-based economic recovery. generated through improving economic conditions here. that should drive stocks higher. in the short term, it's about fed an

the ecb,old you about but what about the fed? the odds for a september rate hike held study with investors thinking it's more likely time for an increase. anding us is torsten slok dean baker. volatility makes now the right time to raise rates. why? torsten: there are many things that go into the decision of when is the right time. but once they it going, they don't want to tighten financial conditions too much. may be a good time ironically to do it when markets are saying we don't really know if the economy is strong enough. but if the fed has the confidence, this could be the reason to go into september. david: do you think the timing is right? it is an interesting argument. i would have to say that volatility makes it to my mind less likely. on the one hand, how does the market react we haven't seen a rate hike in eight years. what is the immediate reaction? second, what is the underlying state of the economy eschew mark it doesn't look -- state of the economy? the drop in the euro is going to worsen our trade deficit -- that

to say we don't have fiscal policy, let the fed do it, means that the fed is inflaming risks. glen: it is into the zone the fed is arguing for. there is no argument to keep rates at zero. raising the rate is only going to have a material effect. it is more a matter of putting the economy on a normal course. creating au are system that is getting hooked on the idea that money does not have a price. i lived in japan in the late 1990's and it is an insidious, subtle thing, this zero rate policy. .t begins to breed bubbles we are already seeing that. the longer it continues the more difficult the process of normalization will be and the more the markets go through this waiting game, the more complacent it will be. charlie: what has been the reaction of central bankers around the world? can't i don't know but i imagine there was a lot of surprise. the reason there should not have been surprised about this is the fed wants to give for warnings of its actions, hence about whether it is going to move or not going to move to not catch the markets by surprise. we heard nothing, not a wh

the fed news can compete with that tomorrow. much changed to major averages because everyone is waiting for the fed. what will it do? we have a sort of handicapping with the fed. fed funds futures market, take a look at my bloomberg terminal because we calculate this is the implied probability in the futures market. i know this a very busy screen, but the important number is right here -- 28%, the current probability that teachers traders -- futures traders are pricing into a market that we will see an interest rate increase tomorrow. then he goes to 42% of the october meeting and 62% of the december meeting carried this december, in has risen a little bit but it was 30% earlier, so it has come down a little bit from the levels. goldman sachs saying the market is vulnerable. same of market is honorable because really -- saying the market is possible because we don't know if the fed will do. we are seeing oil prices rise after inventories drawn down, that reported by api, american petroleum institute and the u.s. government today

our markets meeting fed policy? concern that we had yesterday -- it turned the world upside down because we are so used to monetary policy being there, that drip feed, that they are now leading the way. jonathan: the other question i would ask is greece. this falls off everyone's radar because we have seen the political crisis, a tragedy for the great people, and people go who cares. but the third election and 12 months? francine: you know what i love? the fact that alexis tsipras was being called a criminal, was for repayment, what is now the favorite by angela merkel to win the election. again, a possible basketcase. i love the fact that he was considered evil six months ago and is now the top guy. jonathan: francine, thank you. 56 minutes into the session, equities right across europe. the ftse is down by a quarter of 1%. ismainland europe, the dax down over one full percentage point. look for the fx market for drivers to move. the euro-dollar has shifted holler yesterday. -- shifted higher yesterday. the dollar-

under the fed funds target.s it pertains to inflation, one has to wonder if, given what is going on right now, keeping his zero interest rate policy has any affect on that at all. as danny blanche flour and a bit have said, this is of pushing on that proverbial string. leaving interest rates at zero has benefits and risks. by leaving zero interest rates for longer, we run the risk of miss allocating capital. we have different and more prolonged kinds of pain in financial markets for longer periods of time. acting now gives a soft desk gets is off the starting point. even ray last night said 25-50 point is not a big deal. it is not going to affect the economy in any meaningful way. matt: his concern is what they have to do at the next downturn. he thinks they will have to go back to qe. becomes,estion then could you do a qe with a fed funds rate. could you leave one of the policy tools alone that monetary policy is not affecting? will we pointed out yesterday int with the fed has done terms of qe is move the mone

since last fed decision.he expiration of futures and options contracts, which can cause an increase in volatility and volume. sector see volume by in the s&p 500 versus the 20 day average. up versus nearly all of them, we see an increase in volume. all of these bars are higher at the moment. this illustrates what's going on as a result. in terms of the measure of volatility, we see that on the rise. on -- vick's 12% up by 12% almost. it tends to be exacerbated at the close of trading. something to consider as you look at the action today closer to the closing bell. i want to point up some of the movements we have seen in various markets. -- two-year drop we have had today dropped we have had in yields over the past two days has been the biggest since spring. over the balance, yields are not much changed. i also want to talk about the u.s. dollar because you would think that the events of this week would have a depressive effect on the dollar and they have but not by much and we see a dollar rebound today beca

he talks about getting rid of the fed. lot of people to have a lot of people thought he was crazy. but they have created a distortion, a market run-up. they have not achieved what they want to do. there is no velocity. and going out there saying things and defensive things that is not correct, it has put people back to work and reduce income inequality when we know from census data is is increased income inequality. >> you make a great point there. in addition to everything you said is the fact that the fed has too much power. listen, the fed has driven the market higher and maybe drive the market lower if they raise rates ever. the election next year is perfect timing, you could argue because these candidates need to convince everyone that politically they can help the economy get back on track and we do not have to just rely upon the fed. >> prices are not arbitrary. they are not picked out of a hat , not for wages or interest rates which is what the interest rate environment in this country has become, a political anima

fed cut rates.s -- >> i think a more interestingly salient point is this -- >> thank you. >> -- is the idea that the market was already reacting to china. joosk. >> and the fed was playing a little bit of catch-up and it may have put a little too much ketchup on in the sense -- this is where we want to focus the deor where investors should. they think it's overstated, it's not possible for china to really have that huge of an impact on the united states, and that this is something ultimately that ends up being transitory and works its way through. it's not a global downdraft that will happen because china is going down -- >> but there are people who fear two things in china. number one, a true hard landing which would disrupt emerging markets and, two, systemic financial risk in china because their banks are in far worth shape than ours were in 2008. >> why do you think the market it's in asia sold off as sharply as they did? is it because of what the fed said about china? >> my take is that we have

my take on the fed.er takes a rate hike off the table for several months in september or it goes and hikes rate. there's little or nothing to be gained by a delay of several months. it needs to be removed if there's any benefit. but there's a major reversal of where the fed chair has said in the past when she last spoke in july that the fed needs to go. back to you guys. >> thanks so much. steve liesman, great analysis of what is a complicated report. let's get more reaction to that jobs number. let's bring in chief economist from mess row financial, and jason kelly. walk us through exactly why august doesn't give us maybe an exactly clear picture of the state of employment here. >> since 2010 we've missed this number on the downside by quite a large margin, and it tends to be one of the most revised months of the year, and so it's a whole flurry of factors. one of them is when do schools start and when they take the survey and they often miss the government employment in the first cut. that's what's unu

dalio nailed the fed call.cally what we learned in eighth grade or ninth grade. + b.x algebra on a friday, how can you go wrong? within bernanke's textbook, it is non-greek english. the bottom line is the fed is working in a model. there is a lot of noise outside the model. do those reaction functions work in 2018? jim: i think that is 100% correct. this is the way we have to think about it, what model is the fed working with. that is how we try to anticipate their reaction function. do we know if it works out of sample in 2018? the answer is we don't fully know. the -- but what we do know is we have a set of conditions that .ave tightened significantly equities have come down. it is going to affect the wealth going forward. we don't know how much this tightening of financial conditions will impact the consumer, the economy in the next quarter. tom: you may not know who jim caron is, but he is a rock star in the treasury business -- strategy business because he has had to go through a cycle where you are a litt