the fed. i have got to hike. here will bention to meet expectations as much as they possibly can, and to leave the door open for what they need to do going forward. my thought would be that they would want a small market reaction to this first rate hike , small as they possibly can. guy: is the ending of zero interest rate policy from the fed a good thing? >> in some respects i think it is. it suggests that the u.s. economy in the global economy is on stronger footing. the fed believes that the emergency level can be withdrawn. we can argue whether they have buted too long or too soon, given the trajectory of the u.s. economy and the state of the u.s. employment market, it would suggest that it is time and that the market can withstand it. we are starting from a very small amount. jonathan: the headline is hiked rates and then they get the summary of economic predictions going straight toward the dots. when you look at that, you look at projections. in september, we come down again. is that going to come down agai

besides star wars, we get the fed. live up to the hype or is it, as carl suggested, the fed going to get away with making this a bit of a snooze fest? out the answers in an hour, but i think there could be some surprises. there was a lot of talk about a but throught, language and the statement, he tried to convey a dovish message and a lot of that hike is going a be priced in so we have situation today work yellen and the fed announces a very dovish height, but not as much as expected, it will be interested -- it will be interesting to see the market reaction. i'm glad -- i'm glad you bring up dovish height, that oxymoron. what exactly does a dovish height mean? >> the idea is if you're hiking rates, that would create higher bond yields and perhaps selloff emerging markets so the fed is trying to attenuate net -- that by saying the left all caps will be very gradual. it is called the new neutral which rationalized it -- rationalizes a gradual liftoff. the idea is to minimize collateral damage. tom: i want to get out of

how does the fed do it? >> well, that's a very important question, particularly today for financial markets at the front end as we say, the short-term money market rates. the first thing the fed will do will announce a higher level for the interest they pay on excess bank reserves. right now it's 25 basis points. they'll move that up to 50 basis points. that's certainly the expectation. but just as importantly, the fed has a facility called the overnight reverse repo facility in which they take cash, secure it with treasury securities, and then buy back those securities the next day effectively paying interest on cash. they'll raise that rate as well. right now it's 5 basis points. they'll probably announce a 25 basis point level for that. that effectively creates a corridor, 25 basis points at the bottom, 50 basis points at the top, a corridor for the fed funds rate which is their target. now, i think everyone in the market, particularly in the fixed income markets, understands this and knows what's going to

the fed will raise interest rates. the thing that has worked in the fed's favor for raising interest rates is basically the s&p 500, which is up 3% since its close before fed day last time, and also, the inflation break-evens in the bond market aren't as scary as they were september 17th. you have a little bit of clearance for the fed to raise rates, but it's clear to me that they're raising rates for fill sofic rains to deliver on their promise. i mean, we look at the big indicators of the pce deflator, which is not trending higher. it's not heading towards 2%. it's trending gently down perhaps sideways at best. we look at nominal gdp, which i'm very interested in, which is running below 3%. the fed, since 1948, has raised rates 118 times. 112 of those 118 times nominal gdp was above 5.5%. only twice have they raised rates with nominal gdp below 4.5%. one of those times was in 1982 when they had to immediately reverse course virtually. i think that nominal gdp is far too weak for the fed to really raise rates on any ki

he'll have more on the fed move. plus, a big interview with the co-ceos of chipotle as that company continues to deal with the fallout from the e. coli scare. >>> at big bank as we just talked about raising rates. >> jim cramer was just talking about this and now you can add bank of america to the list of banks that have increased their prime rate to 3.5% from 3.25%, which they had been holding the prime rates at since the fed reduced rates to zero back in 2008. these are pretty simple. one-line press releases. all of these rates will be effective immediately or perhaps at the open of business. you won't see it on your bill until a couple billing cycles from now if you do have a variable rate type of credit, be that a credit card or an adjustable rate mortgage. but bank of america, kelly, is raising its prime rate to 3.5%. >> kayla, appreciate it very much. jim grant is here to explain why he thinks janet yellen will reverse course next year and cut interest rates back to zero. you don't want to miss that exclusive in

in general, what we've seen is that the fed overpredicts the market, gets it about right, and the fed has come down to the market. so, the fed, for example, is looking for a 1.4% fed funds rate next year. that's the low end of the curve. it could mean that your ten-year or mortgage rates are up near 4.5% or something like othat, 5%. i think that that's probably overstated. and it depends on how the economy blows out. if there's stronger growth, the fed will go a little faster, weaker growth, it will go a little slower. >> steve liesman, thanks very much. sue? >> let's turn to randall kroszner for his thoughts on the fed and what it means for the economy. he is a former fed governor and a professor for economics at the university of chicago's booth school of business and a frequent guest and welcome guest on this program. randy, it's good to see you again. you were pretty impressed by the feed chief, said she's very straightforward today. >> i think she had a message that she's been delivering for quite some time and then delivered it very well today, and that's why i think we didn't s

it is all about the fed. we get the pivotal fomc rate decision. s are expecting the first hike since 2006. special coverage across bloomberg. anna: next, stocks head for their biggest advance in three weeks ahead of that announcement. decision will mean for emerging markets, up next. ♪ anna: welcome back. 17 minutes past 7:00 in london. let's get the bloomberg business flash. here's caroline. caroline: krohn a record low in hong kong after quarter profit missed estimates. the company says it will increase prices in europe to compensate for slumping sales in asia and the u.s.. rolls-royce's president will leave next year as the new chief executive restructures the company. his duties will be taken over by eric short, who runs the engine business. shares in crown resorts have soared in sydney after talks that australia's third richest man is in talks to return the casino assets to private ownership. noble group shares leapt in singapore after the largest commodity trader says it is an advanced talks to sell its agricultural unit, which would bolster

and i think we're now going to talk more about the fed in the weeks ahead than less about the fed. this is not an end point in the journey. if we get strong economic data, people will start saying the next hike is coming very quickly and they are behind the curve and if the data gets soft people will be talking about the -- jumping the gun and it was a mistake. so the dollar, i think, is not going to rally. i know there is talk about that already on the show here. the dixie has to prove itself. you need two closed above 100.33. and buy the rumor sold the news. i think junk bonds, run of the reasons they are selling off so much since september 21st is the credibility building case by the fed in the junk bond market and dropping, dropping, partially in fear, part of it commodities prices in fear of the fed raising rates. so the junk bond market went up a point today because of a relief rally. and so i think what will happen is much more talk about the fed than actually people expect. and there is a great contradiction right now between the dots and the prices of the two-year treasury.

with time the fed hikes, one exception in 2004. ned the hard think this time will be different. i think this time we are better able to handle this hike then the market anticipates. think about it. the currency is much more flexible, the adjustment mechanism is right there. high, and that gives them a lot of cushion to absorb the shock. liabilityollar is much lower this time around. leverage is high in e.m., but currency debt is much lower. the combination of these things tell me that we are able to handle it. we have other problems, and i don't think the fed is one of them. scarlet: the tough medicine the imf administered during previous crises helped e.m. be better prepared. >> that is the bet. i take a little of that credit. sheet,p your balance show off your indebtedness, let it become more flexible -- that is the kind of thing that allows you to take the kind of shocks. say these daysto given how gloomy the e.m. situation is, but i think we will be better able to handle it. joe: in an edm conversations someone will point out th

joe: they have to be relieved at the fed today. i don't think the market volatility last week will have influence on the decision tomorrow, but still they don't prefer to hike into volatility. day today will let them sleep more comfortable. >> oil rally, that's ok. i was watching the dow transportation average. correction andn able to bounce back today. as transports go, so goes the dow. could this be a harbinger? >> i was looking at the yeaeuro versus the dollar. this is the euro against the dollar. when the line moves up, the euro is strengthening and the dollar is falling. you had shorts coming out of the euro markets. take a look where we are now. the dollar gaining strength in the last day, that crossed breaking below the 50 day moving average. the verges between the dollar strengthening, the euro falling. joe: we also saw a little pop in the two year yield. we have inflation readings today, cpi, lots of signs that prices are still going in the direction the fed wants to see. ex energy,es cpi, rising. headline cpi, rising. ex h

good the fed be more dovish than we think? ger question of the market or the fed right, well the market is still off base, even if you want to use that analysis and it is fair, done theaving analysis, i will reserve judgment, but that would still be three hikes versus the market 's two. even if you have dovish members of the fed highlighting three, the reality is -- i can appreciate that from their perspective, they took down their inflation estimates, went into that meeting expecting 1.7% inflation for next year after the meeting they took it down to 1.6%. i would not be surprised if that did materialize, more dovish of folks saying a less aggressive fed, but all that does is it our view is right that you will see a greater advance in inflation, then all that does is make a hurdle lower to achieving four hikes next year. joe: the big take away is not what the market things, it's the simple fact that there could be a real chance of inflation surprising on the upside in 2016 , employment surprising on the downside, and then the

china being the key example. if fed chair janet yellen indicates rates are on the rise, the dollar could surge which would mean chinese central banks would have to invest more to maintain its exchange rate. hence, why last week the central bank indicated its attention to detag the yuan from the dollar and measure its currency against a basket. bottom line -- the negative implications of a rate hike on emerging market economies have not gone away. >>> the federal reserve has been a popular issue on the campaign trail. rand paul has repeatedly said he wants to audit the central bank, while donald trump has accused fed chief janet yellen of keeping rates low to help president obama. given all the criticism it's getting harder for the fed to keep its non-political reputation intact. eamon javers is in washington with more on the politization of the fed. leaving hillary clinton aside for a moment, if any of the other candidates are elected next fall, how would the relationship between the white house and the fed change in 20

rather than the fed. could be crucial and we have to see what happens to the chinese economy next year. betty: related to that, where do you see the dollar? neil: i don't believe the dollar is in a bull market. the fed's boxed in it can't do much on rates and that translates into a soft dish -- softish dollar. mark: just before he go he said that the bank of england would go in february and since then we have had dovish payday to the boa was in the margin to be more dovish. retail data was strong. are you still going with a fed rate? neil: i am a traditional person. in all seriousness, the markets don't agree with me and -- is dovish. depending on the day of the week. it is a strong case for the fed. the bank's chief economist has told us that you can't signal that. mark: good for him. being brave. neil mackinnon. the market says every 2017, he says february 2016. i can't wait to see if that comes true. [laughter] betty: as we had to break, we have breaking news right now. and brazilian billionaire is bei

will it closely followed the fed? e britishcs: economy is somewhat in the middle of the atlantic, not 23 miles from the continent. yes, the british economy is affected and they will monitor the policy more closely than our european cousins, which is rightly saw positive interest rates. if we were totally european economy, very without negative interest rates like the ecb, so your decoupling is there. you are right. does that mean the bank of england has to follow a small increase in federal funds rate? no, i do not think so. if the fed was going to take off and run, and we would be up to 2% interest rates next year, i think you would see the bank of england move. they do feel some of the heat, i think that is your point. mark: thank you. we will begint special fed coverage at 1:00 p.m. new york time and 6:00 p.m. london time. betty, are you ready? betty: i am ready. it is my turn to get excited about what happened. as we are hitting session highs still u.s. market, but ahead on the european close, it has been a rough c

those banks meeting after the fed decision. ries we are following, thailand, especially telecom after some double-digit gains on tuesday. companies surge more than 10% amid bidding for 4g licenses. the gainshelped across asia. they're looking to gain $1.5 billion from the licensed sales. some say the auction may turn into a lengthy bidding war because the frequencies for sale work in rural areas. hsbc raised its rating to buy, saying that 58.com is set to dominate the advertising market following mergers with rival sites. overnight, and about 56% this year. sources say a bidding war is brewing for the beer labels sold to facilitate the merger of sab miller and abm to have. private equity firms are all said to be interested in two brands. it will smooth the way for the big deal. bids are due in january. is beefing up its presence in china, teaming up with alibaba to stream movies td shows via team all -- mall. what does disney life do? >> it allows customers in china to access disney comment -- content, games, and also supplies s

london time. ♪ ♪ the fed the sides.ashington ahead of friday's is expected to be the in 2006.st hike lifting a 40 year ban on crude .xports oil at 7.5 year lows. rolling to a 2008 low, but wages are slowing. what happened to the phillips curve? good morning

♪ the fed the sides.ll eyes on washington ahead of friday's is expected to be the in 2006.st hike lifting a 40 year ban on crude .xports oil at 7.5 year lows. rolling to a 2008 low, but wages are slowing. what happened to the phillips curve? .ood morning i guy johnson in london with tom keene in new york. big things are happening in the states. something is happening in washington and you are banking the chair. what i learned in dubai is that interest rates matter. that is what i saw from larry summers, which we will hear from, and interest rates are falling in the foreign exchange markets. you mentioned oil. this is what it is all about on this historic a. guy: one fact that we will have to consider inflation. we are getting data crossing the tape. inflation, for the eurozone, you know what? i will come back and get that to you in a moment, my bloomberg terminal will have that momentarily. let's go to vonnie quinn. president xise jinping is looking for broader support for the internet. worldonference he

the fed just as less. u the shameless plug award of the day per you have done very well. after donald trump himself. michael: we will talk a lot more with steve forbes and gary shilling. stay with us tomorrow. whether or not steve forbes agrees with janet yellen, they are expected to raise interest rates. we will have complete coverage of the fed decision. coverage begins at 1:00 p.m. tom keene and i will both be here. 6:00 p.m. in london. you are watching "bloomberg surveillance" on bloomberg television. ♪ francine: this is "bloomberg surveillance." it is time for the forex report. you can see this longer stretch. we had that report showing inflation remaining near zero. the japanese yen synchrony, and then the rea -- and then the rand is pretty much unchanged. coming up shortly, it is "bloomberg " with david westin and stephanie ruhle. david, what do we have to look forward to? david: it is the eve of the fed decision and we will talk about what that all means, where it is likely to go, with, among ot

we await the fed decision. mark: european stocks are registering the biggest two-day gain since october ahead of the fed rate decision. the european close starts right now. let's carry on, let's talk about what happened in the markets today. just a couple of hours since -- hours until the decision. to take youe going from new york to london in the next half an hour of london -- next half an hour. we are waiting this big decision and that has been a dominant focus. seem toes as well, we be taking a bigger and bigger hit here. mark: it has been amazing. oil is down, oil stocks are down, one of the reasons why we saw the highs of the day, off was as the afternoon progressed. the biggesty we had jump, 2.8%. is, will bequestion european stocks rise after the fed raises rates? we look at things going back to 1987 and what we discovered is that yes, in the 2-3 weeks after stopped --ke it hike, stocks fell. it 2-3 months, a begin to rise. we had inflation up in the eurozone. this is big. newer area companies are hiring

the new fed goals are for hiking. what speed? that's yellen's best chance of engineering what she wants, an immaculate rate hike, one that doesn't crash markets and the economy. sara? >> a lot riding on today, steve. i hope you got your question ready. steve liesman in washington. joining us now, we'll dive into this discussion. former federal vef goreserve go, randy kroszner. great to see you. >> great to see you. >> steve was giving us historical dates, 11 years since the last tight ing cycle. seven-year anniversary to the date of when the fed took rates down to the zero bound. how different is today if we do get this rate hike, how different is this tightening cycle going to look? >> it's quite amazing, i was there seven years ago when we brought rates down effectively to zero i don't think anyone around that table thought that it would be seven years before the first rate hike. we did think it would be some time, but not seven years. steve talked about a few different paths. by far, the most likely one is the gradu

the fed doesn't look at oil very much. they look beyond that to things that are less volatile they call the core inflation. that's at 2%, actually at their target now. their guess, they don't know if oil is going to go up or down but their guess is it's going to stabilize, that's not going to have an influence after a while. >> it's important to remember the fed sets its rate, something called the prime rate is about three percentage points higher than the fed is. major banks this evening have set their prime rate as 3.5%. let's use that as a proxy for mortgage rates. the prognosis is that the fed will increase rates at about a quarter of a percentage point each time, maybe four times next year, maybe three or four times the next year. by the time you get to the end of 2018, you'll have a prime rate, a fed rate that's about 3.25%, a regular rate at 6.25, and what does the world look like with mortgages 5 or 6 or 7%? >> i'm not sure they will go up that much because some of the longer term rates are building in. i would expe

the you think the fed is on its way. i know we are only 24 hours/--- 24 hours-plus, but you think they are on the way to achieving the objective here? mr. harris: this is an important mark -- moment. one of the reasons equity wasets reacted favorably the fed saying we are not into the emergency room anymore, so we can take the are stepped into the hallway, and that is what we are doing. i have made it clear there are more hikes to come. it will be slow. the fed will delay hiking if they feel the economy and the markets cannot handle it, but it is an important step. if the fed never hikes rates, we never get back to a normal position where the fed can cut in case of a crisis. so, it is a small, but important milestone. betty: it is, indeed, and we did see yields for the two-year go up above 1%, but it was not a dramatic move. a lot of this has been priced into the market. what i thought was interesting also is that volatility has come down -- you know, those price gyrations -- while we have seen some of them, the volatilit

i still think the fed was asked to do too much. too much of the burden was put on the fed. >> "wall street week" is sponsored in part by hightower, an unobstructed view. >> imagine a business built on the premise that delivering straightforward financial advice is the right thing to do, rising above the discord of an industry compromised by conflicts of hightower is the new blueprint for financial advice. we live by the fiduciary standard, a legal pledge to put our clients first, not because fiduciary is the latest fad, but because it is what we were built to do. >> i used to dread getting up and going to work. >> i was tired. >> i started looking for a business that i believed in. >> they helped me create a business plan. >> they really taught me how to think big. >> they helped me take the unimaginable. >> i' m here because of score. >> we are back with ben bernanke. dr. bernanke: our economy is growing a lot faster than the other economies, because of what the fed did. starting in 2008-2009 in cutting interest rates and providing

here's the path of the fed's funds rate verses the cnbc fed survey. u can see the market as judged by our survey which is not far from the future's market is much lower than the federal vefsh. pick your point. who is right in with the fed and their own forecast be right or the market be right. the market has been lower than the fed. it's tended to be right. that's a question this morning and to the question of how the markets behaved the rest of the day or the rest of the week or into the next the question is is three or four rate hikes something the market can sit on. that's what we're going to be thinking about. >> that's brings up a lot of things. the first goal post is 6.5%. that was at a time when the fed was pretending this unemployment rate was historically like previous unemployment rates which we know it's not. it's a bizarre strange 5%. there's no wage increases and i also think what you disagreed with is there's merit to that. you need to make 13, 15, $18 an hour to leave your home if you have all the benefits. >> i only partially disagree.

the fed would be comfortable. wouldn't you think that inflation should be a lot higher than where it is right now. i think that's probably the main concern. we're still below that 2% fomc target which we have been at for three years. and that might be a bit of concern. >> let's get the fall out from the china angle on the first get rate hike we've seen in close to ten years and checking in on the china currency, heading now on the tenth day and the midpoint range at the weakest level since june 2011. a four year low so this is after the fed's decision to raise rates. saying the lift off will have an impact on its trade. let's bring in eunice with the latest from beijing. it's on shore at least. >> i'm actually just really glad that i get paid in u.s. dollars. it would be inconvenient. but overall, the reaction here has been mainly from the commerce ministry. the commerce ministry said that they do expect to see an impact on trade. they're studying the extent of that impact and they're probably looking at two differ

the fed has never done this before. they have a version on a daily basis that they'll probably have to increase. >> that's correct and the numbers are pretty big. this is something the market has never seen before like quantitative easing so we can still have very fragile type of markets and episodic and it's the new term that we're using. very extremely volatile over a very short period of time. >> thanks guys. >> thank you. steel your face right off your head. >> rip your face-off. >> instead of ripping it off. that's the lyrics which was not on the album. >> it's been since june of 2006 that the fed last raised rates. andrew has been on the show almost 4.5 years. it was december 2005. ten years. because there was a reporter on the show when it was ten years. so andrew has been here almost as long. >> catching up. >> i made it easy. >> you never caudled me. >> time. >> we'll be together for awhile. >> we're going to get you updated on rip your face-off. not so good news. just updating guidance. it's arguably not good.

that is what the fed is doing. said, let the economy overheat a little bit, so that we can ease if we need to. betty: isn't it true that every time we had a rate hiking cycle, that was succeeded by recession. it has led to some. >> and certainly can. i don't think that is the risk right now. the bigger risk is that we will too slowly.ly -- i have a lot of respect for sam zell, but we are talking about a quarter percent rate increase, markets are pricing in very little in the coming year in terms of follow-on rate increases. i think we are more likely to be surprised by a need for more rapid fed action in 2016 than regretting moving at all. if you look at any kind of for which a be the stance of monetary policy, it should be accommodated. i think we could take away one or two percentage points and we would still be very accommodative. company andlen and the whole world will welcome the problem of having to raise rates more aggressively if that does not transpire. betty: carl riccadonna, charles calomiris, thank you.

tony: the fed has a big model, , put together by the 200 phd's at the fed. th was slowed from the 220,000 over the last months to 130,000 per month in 2016. because we are closer to full employment, so it is harder to find workers to fit the jobs that are available and more people are employed. it is simply a function of the aging economic cycle, 6.5 years old. job growth is expected to slow by 97,000 per month in the fourth quarter and not moved back above 100,000 over the next decade -- over the rest of the decade. the fed tried to knock the markets on the head a few months ago after week job reports and said we know you are used to 200,000 a month, but will it be satisfied with 100,000 to 150,000? offered to continue to communicate the idea that we expected the jobs slow down and this is normal. one final point on this, labor force growth, people who enter the job market looking for a job each month has run 70,000 per month the last three years. the fed is happy with anything $70,000, $80,000 a month. that is what janet yellen is communicating. michael: mi

you are fighting the fed. the late marty swy said, when they switch direction, you can't be as bullish. that has always been right for me. marty swy was a legend for a good reason. don't fight the tape and don't fight the fed. these are the things he put in the head. he said, i'm not worried about the fed fighting the fed. >> you have ge which is consistent and giving you that 4% growth on the up side. except for the fact that the value is so great, g.e. used to have the lowest and emerson the highest and ceos figured out and emerson is doing quite poorly and ml&g are doing quite well. we pay up for that stock. is that right? is it right to pay up 77 times earnings for sales force. with oracle trying to come after them. is it right to pay? >> these are the questions investors need to ask themselves. >> if they don't, they are not realizing this is now the time for markup. we have got the last thing in our way. a fund that is doing well in these growth stocks. >> don't have that many more trading days until the

as soon as the fed acted? >> exactly. >> diana, obviously, interest rates, people start thinking about mortgage rates, a home purchase is usually the biggest asset that anyone makes, if you buy a home, if you sell it. if you're doing that right now, if you're in the market for it, what does that mean? >> actually, right now, market rates are lower than they were on wednesday when the fed rates raise. a lot of people don't understand that mortgage rates don't exactly follow the fed funds rate. they follow longer-term bonds and actually have more to do with the federal reserve buying and investing in mortgage-backed bonds. so rates could stay low for a that said, an improving economy will probably mean rates will inch a little bit, but remember, fixed. and that's just a half percentage point away from the lowest on record. message, right? >> absolutely. it's a good time to lock in, if you can, right now. and if you're home buying, it may affect some people on the edges, if rates do rise a little bit, but really,

and of course all eyes are on the fed and the rate rise so many are expecting. check it out -- fed funds futures right now pricing in a 76% probability of a rate hike of at least 25 basis points. that is scheduled for tomorrow and bloomberg will have that coverage. as equities are rising, treasuries are falling and for the second day in a row, the yield is rising and the 10 year is up about five basis points. this is its highest in 11 days. it has been a big day for energy. ramy: it has definitely been a big day for energy. nymex crude has been pretty positive for the entire day. we saw a couple of downward trends but we are up i about 2.6%. of course the coming out as we are still stuck at six-year lows. starts our reigning a bit supreme today. up by 4.4%, the highest since the start of the month. exxon is also the biggest gainer on the dow. second biggest, up by nearly 4%. gas still going the other way, selling at its lowest price since 1999 because of the mild weather hitting us here on the east coast. we are talking about 64 degrees right here in manhattan an

one is that the natural rate could rise faster than the fed funds rate and the other issue is the fed can't tighten that much more quickly because that would mean a huge tightening. , to me, i found to be very interesting. is where the debate goes forward and will dictate the path. we will only know once we begin left off. alix: and to your point on inflation -- let's take a deep dive into the bloomberg terminal here to see what i'm looking at. , core cpe --cpi all the inflation mode -- all the inflation measures you could want to look at. here is this optimal level -- what happened here? try it again. right around here is the optimum level for the fat and you can see we are below it all across the board. this is their big dilemma. they want to see it getting into the range of 2%. i'm looking at euro volatility ahead of the decision tomorrow. theeuro-dollar pair is white line recovering to the 105 thinkingth investors draghi will boost the economy and get inflation going. the yellow line tracks euro volatility. it's not the levels last seen in july. we have to go all the way here to g

this week, all eyes will be on the fed and janet yellen on wednesday in what is the most important fed meeting since the financial crisis. highly expected to raise interest rates for the first time in 9.5 years. you can dive into my bloomberg terminal. let's check out the fed funds futures. you want to see the w.a.r. p function on the terminal. you basically want to take a the fed fund futures happening for december 15 right here. the probability we're looking at of a rise between 25 and 50 basis points right here. looking ahead, that will happen on wednesday and then we will see how investors react to that. the backup is the bond marketing anxiety we have seen. a lot of jitters are reverberating. exactly. concern is growing investors might not feel it to get the money out that investors wanted. most important way, it might be toascade effect according the global cio, who said the cascade could be something even bigger and we do see the meltdown happening in high-yield bond uts today. those are down on the order of 1% here on top of last friday, where they fell about 2%, and that was t

at long last, the fed takes interest rates off. a liftoff reverberates around the world. >> it was not too hot, not too cold, just right. >> it is a tragedy, a complete joke. >> a big week in global business with some big deals going down and some numbers going up. >> we are looking at a recession in the next 12 months. scarlet: it is all next on "bloomberg best." hello, i am scarlet fu. welcome to bloomberg best. a weekly look at the most important business news from around the world. here's a look back at the top headlines. >> just announced, high-yield credit fund lucent is shutting down. he is going to return the $900 million they got under management. just last week we heard about the distressed fund, stone lion, we heard about 3rd avenue, the mutual fund putting the gates up. what is going on in the high-yield market? >> i will start. this is something a lot of folks have predicted for a few years now. you have more of a retail base in high yield than you used to. flows are more volatile. and so you have some price volatility

what happens in the aftermath of the fed? ny out there who think the -- who think yellen will pull the magic out of the hat wednesday. perhaps she will and the short-term, but going into next year, the pressure will return. guy: up next, more from our conversation with the ceo of rbs. find out how the bank is coping. ♪ jonathan: good morning and welcome back to "on the move." by 35 points this morning. >> thank you, john. shall has taken over the bg group. this paves the way for a shareholder vote on the deal ncompletion is expecte -- on the deal and completion is expected next year. the company president confirmed over the weekend that guo has been assisting quiz an investigation. bought the newspaper pledging to maintain editorial freedom. the $260 million deal includes the south china morning post, esquire, elle, and other magazines. for more, go to the bloomberg terminal on bloomberg.com. jonathan: manus cranny spoke exclusively to the rbs chief executive about the sliding oil prices if the bank continues to settle assets.

joe: we will be watching the post-fed action. t: coming up, today is the argentinian president's first day in office. ♪ scarlet: i'm scarlet fu. "what'd you miss?" time for the biggest business stories in the news right now. horizon pharma is buying a company, boosting their exposure to drugs with rare conditions. dropped after they their bid for rival drugmaker. regulators have concerns about friday.s' plans to buy -- rite aid. both companies say they did expect to the request. if you're hoping to land a job at barclays, you could be waiting for a while. the ceo is extending a hiring freeze indefinitely. he has been trying to boost profit at the u.k.'s number two bank and is considering whether whethert another 20% -- to cut another 20% at the investment bank. that is your bloomberg business flash. mauricio macri takes the reins today in argentina as the country's new president. the conservative politican has put economic reforms at the top of his agenda. will this new political era bring in more business, the investment the coun

bonds are slow to adjust to the fed it to. what is parking? we can't talk about 2015 without talking about crude oil. look what that has done to the ruble. a new low for the year. copper is back. is chuck host lieberman. commodities have been the story of the year. you look at copper and you look at what's happened. as commoditiesar drag everything down. growth thand slower expected. which really driving this is china. it's the largest consumer of copper, the largest consumer of steel, iron ore, nickel, industrial metals. over 50% of the conception of cement is china. of this is the infrastructure they are building. far lessely done, demand for commodities in general and weak prices. is that reflective in current prices? chuck: there is still some room to go. the haven't seen the bottom yet. vonnie: is there a way to profit from that? we have avoided all the commodity producers. rages -- ranges from the minors to the companies that produced equipment. we simply avoid that whole area. michael: how much more of the drag is it on emerging architec

the fed has to manage the economy.ion, employment, and behind that, it is not an official mandate, but they have to worry about financial markets. i think the danger for the fed going forward, is if we have excess supply and numerous sectors, you could have corporate office collapsing even when the economy looks ok, so it is tricky. they should have raised a couple of years ago. >> you pointed out that five year real rates, which are nominal rates on treasuries adjusted for inflation, hit their highest level since 2010. what is the big picture? >> i love this chart because this is really just shutting the door on the zero interest rate era. if you look at this, you can't all the way back, but going back to 2010, it was negative, now it is positive again, about .5 of 1%, and this is sort of the rate that matters to the real economy. sort of the rate by consumers borrow at after adjusting for inflation. it is kind of back into that normal territory. you could say the normalization has been accomplished at this point. it

look at what the fed is saying. 1.3%. joining us on the phone now from jacksonville, florida, the former president of the federal reserve bank of philadelphia. for a long time, charles, you argued that that is not the correct forecast. do you still feel that way? they underplaying what will happen next year in the economy still? charles coleman who knows, there is a huge amount of uncertainty. the issue is, as far as i can tell, there were note rises in this statement, so i don't think that they are underestimating. they have a pretty good forecast. the forecast that they made about six months ago hasn't changed that much. and so i think they are probably for what they are expecting. i think it's time to get the show on the road, so to speak. scarlet: what was interesting in this vote is that it was a unanimous vote. you have written about the downside to this consensus vote and how it necessitates vague language. actual progress was the phrase. actual progress is the they language? i'm sorry, i haven't read it that closel

the banking system. even with a higher fed funds rate, that money will stay in the system until the fed decides to decrease its balance sheet, which it could do, for example, by selling some of the assets it bought to help keep interest rates low. but that could be a while. attention now turns to the feds the future rate hikes, which are likely to be slower and more gradual than a previous rate hike cycle. onthat means consumers shouldn't be too worried about soaring interest rates anytime soon. >> so, what does an interest rate increase mean to you and your money? joining us right now, senior sharon epperson, and real estate reporter, diana olick. sharon, the first question people have is trying to figure out what it means for credit cards. how quickly do those rates rise? >> you know, steve talked about the fed funds rate and the prime rate. credit card rates tied to that. so you're definitely going to see an impact. now is the time that you should start opening those bills and actually reading what the rate is on them, and trying to figure out if you can pay that down as quickly as possible. it really o

why did the fed sort of miss this in some sense? y was the government, overall, not cognizant that there were places all over the country. in fact, ohio, ohio was about the middle of this. hadn't more foreclosures every year than it had the year before, all over the state. why did we not see that as a country? why did we not see how serious that was? >> i don't quite accept your characterization. i spoke about foreclosures a a number of times before the crisis. my concern was that, some foreclosures are probably unavoidable, but in some cases it seem like there just wasn't enough effort being made to modify mortgages and find a solution for people to stay in their home. i did speak about that. we were very concerned about the housing market which was beginning to slow as early as 2006 and i talked both about foreclosures in the general problems in mortgages alike in testimonies and speeches. we thought about it partly from a macroeconomic perspective. what was the risk to the economy overall? we did worry about effects on communities

off at nasa or the fed is an extreme event. ld happen and there was a priced in sentiment when she finally launched on the high level of the easing and the unprecedented monetary policy. it showed the maturity. anna: you have the federal gradually, weand, sort of work that out. >> the fed officials have been pointing to this. >> it is good communication from the fed. aat they are expecting is significant deviation. correct? is it the fed? normally, they missed the mark. that i generally rely on between 1-2 rate hikes in the year. more accurate for the federal reserve? >> i guess they will go with a few that they can generate the inflation. ofthere is an extreme amount deflationary pressure and it makes it hard for me to imagine that we see any movement in the inflation in the u.s.. >> how many do you think? >> 2-3 and we think they will be conservative and not aggressively tried to jump in. without the strong wage inflation and the pressure of behtening, it seems to not the best solution with growth being fragile. anna: interest

the fed is at the root of the lot of their challenges.ent in which aig -- of course, if you step back aig has been, after being a massive underperformer for more than a decade now, they have contracted a huge amount of regulatory burden. leading them, of course, is the fed. betty: didn't you say that you believed compliant costs could be up to $1 billion? josh: we don't know for sure their compliance costs. this is when you triangulate around a number of different levels. thinking back to it might be up wea billion in this segment, don't know what actually drives those numbers. the important thing is that by our math, aig probably holds 20 to 30% at -- extra capital. they have hundreds if not thousands of people. a real cost burden. much more important than anything else is that while aig is trying to figure out how to run risk models to satisfy the fed, the competitors not regulated by the fed are moving ahead and focusing on customers. folks like ace. we haven't outperforming on the stock. is run by evan greenberg. he's building the nex

. >> let's talk about the fed countdown to lift off. federal reserve policy makers prepare to announce their rate decision. >> stocks in europe are holding steady after the dow and s&p log their biggest gains in nearly two months while the euro trades higher against the dollar. >> prada has a fashion miss after profits tumble almost 40% on weakness in china and dollar strength in the united states. shares hitting a record low in hong kong. >> and presidential candidates clash over how to keep the u.s. safe through future attacks. donald trump getting most of the heat. >> donald is great at one liners but he is a chaos candidate and he would be a chaos president. he would not be the commander and chief we need to keep our country safe. >> hello and welcome to worldwide exchange. let's get you straight to the data from the euro zone pmi breaking just as we speak. it's a flash figure and they come in at 53.1. that's better than a forecast for 52.8 and the euro zone also better than the previous months at 52.8. if you look at the composite o