is the fed behind the curve?ly not yet, but they could bp or we are worried about the wrong policy mistake. some are worried about the fed tightening to quickly. level, not tightening at all could have bigger implications going forward. michael: you are confident monetary policy can react quickly enough with whatever inflation threat the market is seeing? ira: fighting inflation is much easier than fighting deflation. withed saying they are ok inflation running above trend for a while, because we know how to stop that. we know we can hike by 50 basis points, we know how to deal with high inflation. but the fear is still inflation being too low. headline inflation will be low for a while because you still reasons oil, a lot of that headline inflation is not the problem. even in places like europe, prices are relatively stable, even though they are at levels that nobody really likes. scarlet: but we cannot vanquish those inflation peers, richard. no, and certainly not a threat in the u.s., in large part due to effe

is the fed boxed in? >> the fed is boxed in at this point. peter put out a note earlier saying the last six months we have seen 235,000 in job gains and this morning's core cpi report, up 2.3% year over year. >> do you think they'll raise rates or is it too late but this put aprils on the table? >> they're not in the business of surprising markets. they won't surprise the markets today, absolutely not. >> when will they react, do you think? >> they're not going to do anything without a press release. so i think -- i would agree with -- >> you mean a press conference? >> i agree with where the markets are now, a june rate hike. >> in case they don't know, they only do a press conference every other meeting. >> i don't get it. >> if they're going to make any moves, they need to communicate it. you'll recall after last september's meeting, jeffrey lacquer dacame out the next day calling on a press conference after every fed meeting to give them more flexibility in their decision-making. >> that's really interesting. you lock it into four or five

plot from the fed. dot plot from the fed. you can see how dovish the fed has continually gotten. at the end of the december meeting, the median expectation for rates was 1.3%. .9%, two raten to hikes. this speaks to the velocity of this move. that red line is the market expectation and the green line is the median dot. the market was right. this goes back to the argument we have been having for many years, is the fed beholding to the markets or the market beholding to the fed. >> in terms of the market action, i'll switch over here, this is wirp on the function. we are looking at a probability of a rate cut. that moved up today. i rate cut expectation for april and june, not very high, but reflects that dovish sentiment in the market. does not dovetail with inflation data, cpi better than anticipated. breakeven rates, with the market believes inflation will be in one year, that take up and inflation expectations over the short term. you have the 10 year and the 30 ,ear, and that has drifted up but not as much as the short-term inflation outlook. this is market-based grid this is n

i think it is blinder and clarida suggesting the fed will adjust. ira jersey is down here in the market. .his is the march data what you said, professor clarida , and professor blinder alluded to, december the fed is heading, 2%. between 2% and 3% nominal him yes. , theytice in the dot plot do not get to the longer run until after 2018, which by my calculation will be your 10 of the economic expansion, it still in place. it is not your mother or grandmother -- the british like short-term, medium-term, longer-term. you are teaching and economic course, what is long-term? alan: to me, it means after cyclical aspects of the current economic situation have worked themselves out and we are back to equilibrium. for the fed, as they use those terms, i think richard said this -- it sort of means two to three years down the road. those two are often the same but not always. for example, they were not the same at the bottom in 2009. more often than not, very close. clarify,hould longer-term for ira jersey is the end of year when they look at his portfolio. mic

i think the fed is struggling with that. articularly hard, when you have a full complement of officials on the open market committee, sometimes it's hard for them to express a single view because they don't really agree, making it even more complicated. i'm looking at a bloomberg terminal chart. probably the most requested chart i have ever had on this program. it shows the different times of quantitative easing graphed against the s&p 500. a lot of people are concerned that the fed is more concerned with markets that anything else. that they have used qe2 drive up the value of assets like stock in which only the wealthy are really invested. is this the kind of concern that congress has? i don't biggest their main concern, but it is a concern. look, when they got to zero, the fed had to do something else. they spent trillions to buy bonds. it was a game to get people to take more risk and they wanted the stock market to go up. the question now is that now they are trying to build a -- now that they are trying to pull back, ho

same with the fed. toring policy to be run by referendum, you do not need the federal reserve. every month you have a referendum of the population of where you want the rate to raise. i will tell you. zero. discussion of entitlements, there has been a lot of discussion about globalization. not popular with either democrats or republicans. what happened in the country that a lot of old do not feel the benefits that the leaves say, straight. alan: the growth rate is very slow. in the first quarter, it looks as though we will get a 2% annual rate in more than likely, less than that. it means real incomes are staggering, people getting poorly compensated and they are very dissatisfied, for good reason. and you get consequences. difficult to deal with. david: there are two front runners. what difference would it make if -- doesn't have any effect on the federal reserve? alan: i do not know. all i can say is bill clinton never once argued in public second-guessing the actions of the fed. it has not always been

pete, has the fed lost it's kred? >> the reason i would answer the question yes is because they have given us data that we're supposed to be looking at. we're supposed to interpret that data and figure out if they're going to raise or not. they told us we're going to raise at least three or four times. you don't see the three or four rate hikes. it doesn't seem like a possibility right now and is the data changing in front of us right now because we have no idea. it seems like they hit the various data points. >> job gains, joe continue, unemployment rate at 4.9% and yet we're still near zero interest rate policy. >> they have a dual mandate and part of the dual mandate is financial market stability. i do think they look at the s&p and where global marks are and when everyone went to jackson hole and position themselves to the federal reserve not to taper further, you know, the federal reser reserve. so to pete's point there's too much unknown or too much lack of clarity and positions seem to shift. >> the fed doesn't

i don't think the fed knows this. , you will get some reaction from the market, especially as you get improvement in income. the last remaining piece for the fed that they can give any credence to, except for foreign interest is wages. so if we've got a good personal income number, i would say yes. >> what about earnings season, it's not imminent but we're getting closer. is that crucial for equities for the last couple of weeks, are they waiting for some catalyst and might earnings be there? >> earnings of course is very important for equity. but, again, they trapped between what the earnings might show. the earnings that came out in the gdp number on friday were not very good, they were not making anybody happy. the market didn't crash on it. didn't do anything. so even if the earnings prove not to be as hopeful as people expect, you still have what's the fed going to do. if the fed is going to remain -- for whatever reason, let's say we don't have any reasons. for whatever reason if the fed is going to remain accomm

the fed decision is at 2 p.m. and then janet yellen host her news conference at 2:30 right here on bloomberg. adisappearing -- alix: disappearing medical implants will get a new look at from the fda this week. clear fating to clogged arteries, legislators are questioning the safety and effectiveness of the device. playstation view has only been available in cities like new york and san francisco. the package now starts at $30 per month but you won't get over the air channels with that. they hope to cash in on the trend where viewers drop traditional tv services sign up with providers like netflix and hbo. that is your business flash for this hour. a big week for central banks. there are three key monetary meetings in the focus. federal reserve on wednesday but the bank of england on thursday. for more perspective on those decisions we are joined by toian jessup, former adviser the u.k. treasury, with me of course here in london. who has the easiest job out of the big for? [laughter] >> i think the fed is in the mos

we will get a take on the fed dovish moves, negative rates and the real reason to worry about china. scarlet: fed dovish this may increase volatility. tracy: and it's not your typical credit cycle. we speak to one professional who says they are in a bubble for corporate bonds and a crisis could be on the way. scarlet: we begin with our market minute -- the dow gaining more than 150 and turning positive for the year. of 10 industry groups rising led by commodities companies. it is worth pointing out msci is close to positive for the year as well. alix: i was looking at what stocks helped the dow go positive for the year. you have verizon, caterpillar and walmart leading the dow higher. there was no theme with the winter -- with the winners. losers definitely had a theme -- goldman sachs, american express and jpmorgan -- the continued pummeling of the banks we have seen. financials do not like low interest rates. if there is one thing we have learned is that. we've got so much more to talk about. we had the fomc meeting yesterday. a little bit mixed, which is interesting. exposedyear is

the fed is still looking at a hundred. so the fed is way above the market. and to the extent that the market is lower to a certain extent, treasuries are fully priced at the lows. scarlet: the fed sounded very dovish in today's statement, even the fundamentals improve. the lifetime track of the domestic economy shows a sub 2% growth rate right now, which is where it was at the december fomc meeting. certainly an improvement from --uary 27 when the fed had without the news conference. it is interesting that the -- economy views have turned more dovish. mike: we can see the december dots plot and the ois curve below that. the big argument was the fed was out of step with the markets. then let's go ahead now to the the ois curve.nd they are chasing their tail. is the fed at all connected to what is going on in your world? extent.think to some i mean, they are connected to the stock market. put or perhaps the yellen put is still in effect. don't think they are fully responsive to the effects of interest rates that are zero bound or interest-rate in negative terr

is the fed effect going to continue? far this morning it is in currencies. >> also, see what that's doing on european equities because the euro is hurting. that's all we have time for today on world world. squawk wa "squawk box" is coming next. born with a hunger to fly and a passion to build something better. and what an amazing time it's been, decade after decade of innovation, inspiration and wonder. so, we say thank you america for a century of trust, for the privilege of flying higher and higher, together. ♪ >>> morning. we are still watching the fed after all those comments. taking another look at janet yellen's message. futures were moving higher. maybe they're lower now. although, oil is surging. wti creeping up on the $40 level at this point. and quite a disaster at pershing square. bill ackman's hedge fund taking an $800 million visit on valeant this week alone. now he's selling shares of mondelez. millions of shares. how much more pain is still to come for ackman and his investors? >>> and trump's warning. the

the fed has changed the narrative. i do not want to beat up too much on them because they have tried. people have to get comfortable with the notion that this is not a tightening cycle, it is a removal of accommodations cycle. there is a genuine difference. we are below what neutral is, get to neutral and pass neutral, that is when you start tightening policy. for the time being, the fed is removing accommodation. francine: you could argue that they are tightening because of the rest of the world moving into negative territory. i know it is semantics. tom: i disagree with that. because the rest of the world's tightening, the fed is also tightening policy? that is not how the transfer mechanism works. i would highlight that in a backdrop where you are taking the apple back, in the context of unemployment rate that continues to drift down 4%, itch is hardly heroic -- only takes 75,000 jobs to keep the employment rate steady. let's be clear on this point. i might be the first economist to say i have no idea what china's g

the fed has made a lot of mistakes. look at disaster that happened in the housing market because of the fed and there were people who made a lot of money bet being against the fed. >> are you talking about '08? >> yeah, the housing bubble inflated over a number of years and if you bet against the fed and bought gold, look where gold was in 1999-2000. it was under $300 an ounce. the fed one of the main reasons it's now above $1,200 so buying gold is a bet against the fed and that bet has paid off more than stocks. >> i just don't agree with that. first of all, stocks went from 650 or 666. >> straight up. >> went up three and a half times. gold went from a peek and is down. you're in a place where everything the fed has done. you may not like fed policy from a pure economic perspective and it may be something that's a road to ruin. who knows. i don't like the fact that we can't normalize interest rates either but the reality is that has worked for asset prices. >> so what. it hasn't worked for the overall economy. why do y

the answer again and again was the fed. s so much uncertainty that you are going to see light volumes today. alix: i'm looking at the s&p and volume is down versus the 10 day average. wanting to take a lot of positions into the fed. guest: another artifact of that is the vix. the vix looks calm right now, definitely below historic averages. when my colleagues looks at these other securities that you can trade the vix on, making a bet on whether you think volatility is going to go up or down. the demand is really high which would lend itself to people saying don't get used to it. we have jobless numbers, who knows what the reaction is going to be but ac volatility in the future. alix: in terms of what is moving today, it seems like you have apple which was supporting the dow and on the other hand, you had valiant really bringing down itself. it felt like health care got a bruise from that. health care was the worst performing sector. when you look at that end say what is grabbing headlines, you'd be hard pressed to find someo

the fed gave a fairly upbeat assessment of the u.s. economy and jobs but was clearly concerned about recent global economic weakness. >> you have seen a shift this time in most participants' assessments of the appropriate path for policy. and as i tried to indicate, i think that largely reflects a somewhat slower projected path for global growth. >> reporter: yellen did not rule the chance of future rate hikes underscoring fed officials forecast two more rate rises this year and said every meeting including the one in april is locked. >> most participants do continue to envision that if economic developments unfold as they expect, that further increases in the federal funds rate will prove appropriate over time and that the pace will be gradual. >> of course, yellen could not escape a question on the heated presidential election and whether it had any influence on the fed and federal reserve interest rate policy. >> we are a nonpartisan independent institution devoted to pursuing our congressionally mandated objectives and i have never

is the fed on the right track? tim reid discusses his career beginnings and where it all went wrong in malaysia. we are one hour away from the close of trading this wednesday. let's head to the markets desk where julie hyman have the latest. we had a big rally and now we have lost some of it. >> look slick we are hanging onto these gains and are relatively steady. a two of janet yellen reaction in what were right -- widely reviewed before the economic club of new york, which she emphasized would be cautious and measured in raising interest rates. especially in large cast, we are taking a look at 3m, ubs raised $190 based ont, what analysts see as product innovation. shares are rising as well trading on a record today. a big year thus far. after they were upgraded, they say apple is undervalued in a large cap tech peers. financials, one of the few groups to not perform well yesterday. they are bouncing back. shares are rising and contributing to gains. energy, a top performer today. that was a laggard. >> it has bee

we can always read what the fed is thinking. at is the number one question you have for janet yellen tomorrow? isday comes back to what giving them confidence on the inflation outlook. they have been saying it is about labor markets improving. is that still the case or are inflation expectations coming down and they need to see something more than just that? alix: thank you very much. you can catch our special coverage of the fed decision at 1:00 p.m. new york time tomorrow, coverage across all platforms. with miss our interview the former fed president on thursday. scarlet: the races on for the gop candidates and five state primaries. next, we dig into their tax plans. ♪ scarlet: i am scarlet fu. it is time for the bloomberg business flash. oracle reporting earnings that topped estimates, more cloud-based services. , to since better than estimates. oracle says sales of cloud products group 57 percent. sales,nspecified asset les moonves says cbs plans to hone its portfolio. cbs will explore options for its radio division. scarlet

what are the growth prospects? uk fed could cause recession around the world. >> they have enough resources to stave off a crisis. their growth rates will continue to slow down. is like aowth ping-pong ball bouncing down the stairs. ands basically going down you keep these in stimulus efforts in the middle which provide some relief. maybe daytraders. the question people ask me, has china had a hard landing? i find it a silly question because the fact that the chinese economy was growing at 11% in 2010, cutting the growth to 4% or so, that is already a hard landing. this economy has already had a hard landing. nominal gdp growth has slowed down from 15% in 2010 to 5% now. the growth trajectory will continue to slow down because is itsing as population -- working population is aging. you, head of emerging markets and global macro at morgan stanley investment management. let's get a quick check of the news now. as we've been talking about, president obama on a collision course with senate republicans later this morning, anno

it's decision day for the fed. no policy change expected, but that doesn't mean there won't be plenty of market drama. the big question, what will janet yellen say about the future? >>> decision 2016, hillary clinton and donald trump add to their win columns, but new this morning, a victory by john kasich in ohio raising all kinds of questions about the possibility of a contested convention. >>> and a stunning blow to investors. well-known hedge funds lose more than $5 billion in one day as valeant suffers another stock rout. it's wednesday, march 16th, 2016. "worldwide exchange" begins right now. >>> good morning and welcome to "worldwide exchange" on cnbc. i'm sara eisen. >> and i'm wilfred frost. a packed agenda this morning, from markets to election season mayhem. we have it all covered for you over the next hour. let's start with a quick check of the futures board. our u.s. futures, of course. yesterday we had the slight negativity, low volumes. we've had the two lowest volumes of the year to start off this wee

why does this matter for the fed? y as the yield suppresses it could point to a weakening global economy. that may be a recessionary risk. the reason that we care about this today -- why is this happening? there are two particular options. one, it's foreign. the fed can go ahead and raise rates because of other reasons. if it is domestic, if it is because of global slowing in the u.s., the fed is going to have a very difficult time raising rates when this spread is at 99 basis points. potentiality in those charts. mark, i'm giving it to you today. alix: nooo. david: keeping the game interesting. done, you can't win forever. i love this chart. maybe you will win tomorrow. alix: you're dead to me. [laughter] well done, mark. you: i think i'm leaving now. finishing the session little changed today. stay with us. ♪ alix: -- julie: this is "bloomberg markets." taking one last check out bloomberg stocks heading into the fed meeting. taking a look at the overall for what we are's in today, a mixed picture of the movers. -- fo

the speech heard around the world. fed chair janet yellen with remarks that could very well move the markets this hour. we're going to take you there live when it begins in a few moments. with us for the hour today, joe and pete. so much at stake today in midtown where yellen will speak and take questions from the audience. it is a speech that comes amid growing questions over whether the economy is once again weakening and whether the fed itself is behind the curve when it comes to its own policy. it's hard to overstate the importance of what is on the table today. >> it is and i think we're going to hear a lot from janet yellen that possibly suggests to us the reasoning behind the pause in march but i think looking forward this is beginning to come down to an inflation question. tomorrow morning charles evans will be on this network and talk about inflation. he cited it as one of the reasons in the past that the federal reserve did not move. black rock puts out a great note advising clients to seek protection and do it t

market reaction to the fed is the big story.: going to show you the bloomberg dollar index because it spells -- it fell the most in a month after the fed decided to keep the rates unchanged. it fell to its lowest level since october. what i want to show you is the bloomberg dollar index versus u.s. two-year treasury yields. we talked about this the other day, the fact whether he you should have been following the yield. manus talked about the yellow brick road. the u.s. two-year treasury yields. it shows you that dollar traders got it right, because they were investing on a lower dollar as well. hedge fund cut future bets. the least since july 2014. we did get a weaker dollar on the back of that decision. yields came down and the dollar came down. the message here is if you are watching these two, you should've been watching what currency traders were doing rather than bond traders. i want to show you what happens with gold. that decision really sent gold surging. this is after the metal cap its longest slump since november. thi

fed comes down the market or the fed gives off more hawkish signals. as come down. i wouldn't be surprised to see that today. the fed forecast come down. at the same time it confirms the market's suspicion that fed rate hikes are still on. >> can we just go back to one points you brought up. >> sure. >> what's your idea of fun again? >> having fun asking people the fisher and yellen dot projection. >> that's fun. >> i know you're more fun than that. >> for my day job that's fun. for my night job it's not. >> fishing and guitar are his real fun. steve knows i'm not a dot fan, but i do concede, steve, that they are very important. >> you know, it's interesting. the market has just really basically given the fed the back of its hand on this stuff. and really ignored -- if you look where the market is, these projections these dots have not led the market. the market says you think that? i don't think that matters at all. i'll tell you what will happen. the market has won these fights with fed. >> there's steve's idea of a good time. >> housing starts up a l

the fed calls it deflation. nt clair in our letter, and the new york policymaking. >> yeah, but inflation perhaps being still the theme we come back to, whether it's how many times you're going to raise interest rates this year, it sounds like they're trying to get out of the way, so to pell. >> i think they're pulling back certainly from the muted four times this year, to -- they don't know -- i don't know -- what i will observe is sometimes inflation comes on little cats' feet. it doesn't ring a bell, it doesn't issue a press release. it is there are and the fed will have to deal. more than once in our recent economic past the fed has been behind the times. in fake it makes a -- >> it's a delightful image. you always have a way with words. thank you for joining us. >> you're welcome. >>> precision laser weapons? it's new technology out of the defense giant lockheed martin. our jane wells is here. there she is, making some trades. she's going to bring us all the details about this new -- what are they calling? a

the fed is part of the process.global inter-linkages in their statements now. tom: that is the heart of the debate. 10ncine: it is, but again, le months ago we were saying we will mobilize.how scary will that be ? we got into negative territory as central banks around the world cut and cut. the normalization process is being pushed away and will be much more different when it comes. steven: it was the 28th of january what effect stress tests -- when the fed stress tests were published. minorenario included the 40 basis points. a 6% treasury yield. that is the result of stress testing the system in america taking on all kinds of scenarios with the global economy, global markets, all kinds of things. i struggle with the fact that it has taken people so long to realize the fed has been analyzing thing in a different framework and only now is everyone realizing that in fact everything is connected. tom: you see that awfully bloomberg screen there on television. eight of 13 economists, that shows you how surprising these

the fed calls qe. ou buy long-term bonds and increase the demand that pushes up price which is the same thing as driving down the yield. you drive yield on long-term securities and hopefully then that stimulates the economy. so you can ask if there's still capacity to do that and there's various ways you could look at the capacity question. you could say if there's still a quantity stock to buy and there's only so many securities out there, there's only so many security governments out there and so there are limits there but there's still plenty capacity in that sense. in another sense, it's not clear that the capacity is quite as large and it's the same point of interest rates that we have been talking about. qe, so qe2, the famous qe2 program was adopted at the end of 2010, rates were around 3 and a half. then a sequence of programs including the maturity extension program and qe3 and some people called it qe infinity, those were adopted in rapid succession and pushed rates down to one and a half wher

the fed created? are they afraid of their own monster? >> i don't know. that's for the whole world. >> yeah. >> since the credit crisis -- since the crisis 60 trillion, since the crisis. >> that's what it's grown by. >> no. >> hang on. >> right, since the crisis. >> you've got -- you've got to be careful with that, because there was a big drop. >> don't want to talk about the debt. >> some of that expansion -- >> all i hear from anybody i talk to is global debt, global debt. and suddenly we're saying global debt is not a problem. >> talking to the wrong people. austan goalsby, back me up on there. when economic growth is sub par for many years as it has been, what happens? budget deficits go up everywhere around the world. >> right. >> and that's -- >> why is it sub par? why? why? why? that's the only question that matters. >> different countries. >> it's the policy! it's obamacare. they are the enemy. >> i agree. the policies are terrible. >> let me applaud rick for giving the c-minus. you saw the rep

is the fed leading the markets anymore? fouor are the markets raising te fed? they can talk about raising rates. >> the markets have certainly been leading the fed, haven't they? if you go back one year ago when it looked like there are going to begin the normalization process, they didn't. they did not do it in june because the dollar had appreciated and that was a big head went to corporate earnings. they did not do it in september because of the august volatility. they backed away from raising rates this march because of the volatility we saw in the capital markets. they talk about foreign financial conditions a lot. i think they are responding to what is going on in the markets. it makes sense to me. what head of the fed once a crisis on their watch? >> they can't ignore it because of the impact it can have domestically. ,t can't be this old reason moving or not moving. what about the stronger dollar and trade? how much will the fed be taking that into account in march? be taking they will into consideration a considerable amount because they are looking at

the that is going to wait. -- fed is going to wait. it is going to see inflation come and then start hiking. how do i invest with that? we e are saying that the -- are seeing that the terminal rate is being brought down. we are in a soft interest rate environment. of course, it means the risk as that has another sucker in the sense they will be held up for longer. really, it is a question of where can you find value in such a vulnerable market. youe will be found where can find credit recycling or where you can see the corporate earning's momentum still quite positive. guy: where are they, what are they? ashok: we still have the employment cycle, very positive. cycle is still positive, reason by 1%. the savings return has been very slowly spent. all this year we will get that spending coming through. it means the consumption cycle will be well supported and that will hold up the global growth. guy: the global consumer that is going to make this work -- are we going to see inflation come back? it is incredibly low at the moment and price

the fed will want to see? thing is about control here. an fed wants to see that equity investor is not exerting a controlling interest over the bank. they will be looking for assurances along those lines. investors can go a long way to make that just by pledging and actually having a legal agreement to say that they are going to be passive. vonnie: does he come close with any other stocks? any other financials at the moment? noah: he still owns quite a bit of goldman sachs. he owns u.s. bank. e owns m&t bank corp. historically has had insurance holdings as well. really none of them are financial institutions quite as large as wells fargo. the positions are not quite as big. betty: thank you so much, noah. from -- something of him as a superhero, warren buffett. also superheroes on the screen this weekend. warner bros. posting its biggest domestic opening weekend ever raking in $170 million with its new movie "batman versus superman: dawn of justice o." this is despite the majority of negative reviews from crit

i think the fed is oblivious to the fed that the u.s. economy is book in recession. maybe the fed does know this but they don't want to be accused by president obama of pedaling fiction. the u.s. economy is talking about is in horrible shape. why do you think donald trump is getting so many votes. number one concern of the polls is they are worried about the economy. consumers are voting for trump. liz: andy you say two, possibly three rate hikes, why? >> first i will limit it to two. if you look at unemployment numbers, 242,000 jobs added this past month. you had 500 odd thousand household employment increase. got lowest weekly jobless claims in 40 years. the economy is not doing great. in that respect peter is right. but gdp is stumbling along. i got atlanta fed gdp update today, 1.9. no question that the economy is stumbling along. what you saw today with the fed backing off, you saw massive steepening of the yield curve. you saw a weakening of the dollar. you saw increase in polled. that's all supposed to, that is all supposed to happen just like that. right. as

and then there was the stress test put in by the fed. it was incredibly effective, incredibly cost-effective. together points as to the source of the problem driving the economy down. and then there are other things. we have the targeted fiscal is beingwhich i think discussed now. i'm not going to talk about monetary policy, it is on the next panel. there is broad agreement that infrastructure spending should be part of the next fiscal response. i'm not sure if that, is the highest quality infrastructure spending, but i think there is the agreement. president obama can take credit for the consensus in our society. i think it is important in a discussion of infrastructure, which should be part of the response to the next recession, to think about the quality of fiscal stimulus. my joke is that if you talk to administration staffers, they turn into teenagers and their eyes start rolling. theunderstand administration's position on high-speed rail. it is just preposterous, right? it is hard to have a discussion about infrastructure until we a

the fed has filed back the rate expectations.you look at the united states them janet yellen, she basically told the world that she is going to be turning very cautious. another change this from china. the chinese government is making a good time for the right reason towards more stimulus, towards more demand management, because it you are caught the beginning of the year, the chinese government told the world they will do supply-side restructuring and that spooks -- i'm now they realize that the problem with the chinese economy is inadequate demand. from request to reserve requirement reductions and physical stimulus. i think these changes gave the way for the return of the reflation trade, probably the next couple months. it seems to be the u.s. dollar and maybe if the fed is forced to react to inflation and then we get the interest-rate cut and that brings down the rally, is that right? so.: i think the fed is basically just the concern that the rest of the a weakerreally needed dollar. if the fed started to turn dovish, that

the fed tipping to the fact. it would be a mistake. >> jay, what about you. >> what janet yellen has to say in about a half an hour. >> i am interested to see what happens in the presser. i think they are stuck or to be in a rock and a hard place right now. they should want to normalize rates. if you look, for instance, they said that they would be very data dependent. recent data, just today, we got a miserable industrial production report. nationally, here at home, really in trouble. maybe even already be in a recession. industrial protection. allowing them to normalize rates. is there any excuse for the fed not to raise rates. we do have moderate growth. maybe not great, but moderate beard inflation is starting to pick up. they could have gone ahead with the rate hike. >> yes, i do not agree with that last assessment. the report was weak because of utility outlet. one of the warmest february's we have had in decades. manufacturing, just manufacturing has been up two months in a row. you look at the core consum

the fed is looking at the global environment. to raise interest significant feedback effects. what may have been 100 basis points of easing -- tightening in the old model now it should be 50 basis points but how well brainerd can keep the fed on that path versus the concern that i will see stronger data later on is the key issue for the second half of this year and it relates to how much is janet yellen going to tolerate overshooting of the inflation target. alix: is there going to be and -- a battleground, economic indicator in the back half of the year? >> what it would be is some common nation of wages and actual inflation data. there would be sufficient to suggest that we are reaching full of florida might consider that inflation be an issue. the fed has been clear that inflation will weigh heavily in their decision. looking in the back half of this year what does happen to inflation assuming the economy stays on track. we have to get through the april meeting and the june meeting first. what is the hawkish message we will ge

menmore on the fed, two wednesday at 1:00 p.m. stern for the special live coverage of the fed meeting. david is going to stick around and we will continue to focus on politics on "bloomberg markets." that's next. ♪ mark: live from london and new york, i am mark barton with betty liu in new york. it is a typical week for primaries for republicans. donald trump is in north carolina, getting ready for another reality. one place he is not getting support is the fed. donald trump has not collected a single donation from fed employees while ted cruz has received $2000, while democratic front-runner hillary clinton has received over $18,000 this election season. we are back with the former budget and the management, david stockman. is this the week where donald trump sews it up or will john kasich be the fly in the ointment? david: i think it looks pretty inevitable that i would say that donald trump is a flying wedge of repudiation to the whole phony washington, wall street narrative that everything is fixed and that we are going to go o

goldman sachs had a message on the fed. say stop worrying so much about the stronger dollar, it is already in your inflation data. volumesropping by 4%, are meager. only 19% the average. crude stockpiles are back. gold drops by half of 1%. gold was at a one-month low. let's bring you some breaking news up next, if you buy your clothes there, you're adding to these numbers. full-year revenue for print one 15 billion -- $4. billion. the market was looking for 4 .14, but the actual number was arit's these .1's that brandede sales growth of three point 7% for your operating profit. that was a little bit below the operating side. dividend, ordinary dividend, dividends are one of those values that are becoming a little bit more scarce in these markets. let's change the agenda and get out to asia and talk about the msci, under pressure there. we see shaft -- shifts in the yuan. >> i wore the right color to work today. we are seeing a broad-based selloff. we are wrapping up this week in the red. one play and 6% down and shanghai, t

the fed sat on its hands, maintaining the current target range for the funds rate. is here to connect the dots. david: we are talking about the dot plots. the green line represents the rate hike trajectory based on the projections. it is not a specific endorsement from the fmo see governors. -- fomc governors. three things what were looking at, first the dots suggest to rate hikes, second markets think , andll only see just one third a view of both the markets and fed at the closest they've actually been. when we look at something of the green line, those are basically projections individually from the fed governors. based on fed funds rate in the medium forecast, if you read between the lines, it does look like we will get that first rate hike in september. let's have a look at this next graphic here it this is the other side of the same coin. -- at this next graphic. this is the other side of the coin. we are now likely looking towards the fourth quarter, september 4. 53% chance we will get that at the moment. inflation, this is what is key, picked up. janet yelle

then they could take the risk off the fed's balance sheet. rry about that. >> you worry about that? >> they have the largest bonds. >> they're the largest holder. china is the second place. >> they're not valued. there's a big bid for them. >> they're not valeant's bonds. >> 2018. why isn't anyone talking the maturity? >> we are right now. 2018 and 2030. big debt overall. it cease interesting to watch the change that has happened as a result of -- you know, when leverage is on a balance sheet, it was always good. lever up. your leverage rate shows too low. and now, of course, we see the other side of it. $30 billion in debt. >> it's not like j and j for instance. they have a huge amount. they have a giant amount of cash. $18 billion in cash. they could buy bausch and loam if they hadn't destroyed it. >> look at that. >> for valeant, that is another concern including the fact they didn't file their 10k. >> i always find that to be red tape. >> everyone expects they i'm file. the bonds are trading well below face value. so let's not just talk ab

the fed did not make their job any easier on thursday. ink officials are just as surprised that the market is reacting this way to monetary policy? >> i think the problem we haven't markets is they tend to with very strong convictions related to events. i think that is what happened with the dollar reaction of the fed on wednesday. i think that market is a little ambitious. that yellen times was trying to find any justification to say, we don't need to push policy higher. increasing degree of policy change we have seen from the central banks in the past few weeks, adds to the volatility in markets. that is something that perhaps the central banks would be good to learn, sometimes saying little is good policy. mark b.: sterling's rebound -- is that it, or as we get closer to the referendum, will the downward spiral continue? >> as soon as we had the referendum announced, sterling volatility rallying strongly. we have seen some be bound. -- rebound. as you were discussing, the market getting a little ahead of itself anticipating discussion.

is the limit to what the fed could do in qe? s a some reasonably additional quantitative easing would not have the same effect assisted before? body cam this comes at a really unusual context and the context is that interest rates around the world are very low. this is a nice chart taken from, it's by some bank of england economist and it shows you what interest rates are around the world adjusted for inflation on 10 year government bond. in other words, what we are seeing now is unusual. rates are low but it reflects a long period of rates being little. the point is that we have reason to believe that interest rates may be lower than normal for a long time. the trend is well beyond the great recession and the question is in the context with the fed be stuck near zero for a long time and how much will that limit their capacity? could the fed do more, could congress do more, and what would that be? to kick us off we are three speakers each of them has different cut on fiscal policy. we decide is going to first? wendy edelberg will

the big argument was the fed was out of step with the markets.rent plot and curve. they are chasing their tail. ois is going down because everyone is selling treasuries. is the fed at all connected to what is going on in your world? >> i think to some extent. they are connected to the stock market. the old bernanke put so to speak. perhaps the yellen put is still in effect. if the stock market went down by 5% or 10% tomorrow, the fed would respond. they affect pension funds, insurance companies, bank net interest margins. basically, finance companies today in terms of the market are doing poorly because they sense interest rates will go up less fast than previously. it is a negative for the finance industry, for pensions, and savers. going forward, they cannot earn as much as they should. >> the first time since the asian and russian crises of the late 1990's, u.s. monetary policy is a focus on the risk to global growth. what is asia signaling to the fed? >> it demonstrates power shifting. once upon a time, the fed would have woken up and the dom

to fight the fed. u.s.e last 12-18 months, equities have gone nowhere despite a continually easy fed. to us, this looks like a topping process than consolidation. equity valuations look so high. this is not an environment where equities would normally be performing well, but they still get periods of support from central banks. if that support is taken away, the downside would be pretty big in particular for u.s. equities. it's about trying to play the risk-reward. the risk on the downside looks pretty large. guy: asymmetric risks. draghi is going to be buying more dummies on friday. up next, japan suffers a big drop in industrial production. just a blip, or is it a sign of weakness? we are live in tokyo to find out what is behind the decline. ♪ guy: hans: welcome back to "on the move." i am hans nichols in berlin. japan's industrial production slumped 6.2% in february.it's the biggest drop in output since the earthquake in march 2011. let's get more with jodi schneider who is in tokyo. thank you for jo

we have seen this since the fed made its decision. the vix has come lower. credit spreads have narrowed. i am not sure the real economy is any less volatile. the last thing is certainly around, kind of, the signaling mechanism. betty: yeah. mr. arone: the signaling mechanism is there is a floor on prices, and the market, at least financial assets, like that. betty: it seems like we may have found one, at least thus far this year. michael, thank you. michael arone. still ahead, we'll hear from the chamber of commerce ceo tom donohue on how the u.s. presidential elections could affect jobs growth, and as we had to break, here is mark take on therber's election. farb i will vote for mr. trumper: as he may destroy the u.s. economy, but hillary clinton will destroy the whole world. that is the difference. ♪ betty: you are watching bloomberg markets. i am betty liu. it has been a big week on the economic news front, spurring debate over the quality and pace of u.s. growth, and according to tom donohue, the head of the u.s. chamber of commerce, the u.s. is at risk

how does that build into your outlook and the fed's? the piece of housing that drives the economy is new home construction. that finally in the last few years began to look better. but it's still very, very difficult. very weak. second of all, one thing that seems to be happening in the housing market is a lot of people feeling better, people wanting to trade up to a bigger highways, nicer house, in better neighborhoods. one is supply, and it's still not easy to get fipsing. ba financing. banks have not forgotten about ten years ago. >> david, i wanted to weigh in on another way home prices weigh in to the economy, and that's through confidence. you see when home prices are up, consumers end up being more confidence. hopefully that can drive some spending as well. in the first quarter in january you had a big fall off in the stock market. you got to wonder if some of the rise in the home value may offset that. >> i think it will. there are more people -- more homeowners than stockholders in the united states, by in large. for those home

the fed tapping the rate hike brake.s janet yellen go from here. >>> trump's big warning the gop front-runner says there will bery ob be riots ahead if the party tries to take away the election he wins. >>> say so long to shamu. new this morning seaworld ending its killer whale breeding program. so how will the company continue to make a splash with visitors? final hour of "squawk box" begins right now. >> announcer: live from the most powerful city in the world, new york. this is "squawk box". >>> welcome back to box here on cnbc, first in business worldwide. i'm becky quick with joe kernen and steve liesman. we're less than 90 minutes away from the opening bell on wall street. futures are a little bit weaker. they had been by up as much as 80 points above fair value. dow futures are down close to 60 points below fair value. s&p is down by nine and nasdaq down by 30. and early trading in europe there's red arrows. biggest decliner is the dax which is down by 2%. bank of england out with its latest policy statement leavi

if the fed was data-driven, they are correct. would have followed through on their forecast from december and moved rate higher. i think that janet yellen's arguments to the contrary do not ring true. it leaves us wondering exactly how sensitive are they to changes in inflation, unemployment, or whatever else he happened to be looking at at the time. need does the u.s. inflation to surge in other parts of the world? >> oh boy, i hope not. whatever you think you can control inflation, it ends up badly. of of the characteristics the central bank is that they take inflation seriously. if they were to argue that it should run hot to make up for weakness earlier on in order to boost overall global inflation, i would be quite worried about their ability to manage that piece as it gets larger. from four to move two. next oneou think the will take place? the next hike. >> our forecast is for two rate hikes in september and december. janet yellen did us a favor yesterday. i don't think she did the u.s. much of a favor. that is what you wi