tv Bloomberg Markets Bloomberg June 17, 2015 3:00pm-4:01pm EDT
believe the know, i believe thef plays a very useful role by undertaking reviews of the economic policies of all of its members. obviously there is a range of opinion among outside observers and market participants as well as among the committees' participants, as you can see in economicbout how conditions are likely to unfold and consequently the appropriate timing of an initial rate hike. i can tell you we all agree in the imf agrees that policy should be data dependent, and the committee is always doing its best to assess the implications of incoming data. , i want tont out
empathize, and i think the imf would agree with this come about the importance of the timing of the first decision to raise rates is something that should not be overblown since december, thearch, what matters is committee anticipates at the conditions that would call for a gradual evolution of the fed funds rate toward normalization. with respect to international spillovers, this is something that we had been long scheduled to. obviously we have to put in place a policy that is appropriate to evolving conditions in the u.s. economy, that thereot promise will not be volatility when we make a decision to raise rates.
what we can do is to do our very best to communicate clearly about our policy and our expectations to avoid any type of needless a misunderstanding of our policy that could create volatility in the market, and potential spillovers as well to emerging markets, and i have been trying to do that now for some time. i have been doing my best to make good on that. marty: marty with the associated press. you just talked about the fact you cannot promise of there will not be volatility. there seems to be two schools of thought, one that the fed learned from the mistakes in 2013, the taper tantrum, and that you are going to telegraph that that will limit it, and the more pessimistic
school of thought seems to be that when you do start raising rates, they have been low for so long that it is going to make the taper tantrum seem mild by comparison. which camp do you fall in on that? chair yellen: i think our experience suggests that it is hard to have great confidence in predicting what the market reaction will be to fed have been and their fed surprises in the past. i do not think the committee anticipated with its decision, what caused the taper tantrum. all i can say is that uncertainty in the markets at this point about long-term rates does not appear to be unusually high. do what is iny our power to attempt to minimize needless volatility that could have repercussions for other countries or financial stability
attempterally, and that asto communicate as clearly we can about our policy solutions, what they depend on, and what we are looking at. we would be responding to incoming data. we have tried to make that clear. i think it is clear that the market is also responding to incoming data, and you can see that in the daily market reactions to surprises in the economic data, and of course none of us can quite forecast what incoming data will be. mr. ridge: your latest >> your latest projections show that the unemployment rate will fall this year and more quickly next year. can you talk about what has changed in your assessment of the labor markets and how that influences policy?
chair yellen: so, we -- our -- productivity growth is a factor that affects participants in the labor market. productivity growth has been extremely slow for the last couple of years, and i think in int the pace of improvement the labor market that we are projecting reflects the notion that there would be some pickup in the case of productivity growth. obviously that is something that is quite uncertain and is considerable to this productivity growth. this is something i hope we will not see because it has negative implications. we could conceivably see faster improvement in the labor market, but in addition, there are other
margins of slack that do not show up in the unemployment rate , labor force participation that be, at least it appears to suppressed, at least to some extent because of cyclical weakness. the fact that labor force remainpation rates roughly stable for the last year or so when there is an underlying downward trend suggests that some slack is , in the sense by improved or diminished cyclical impact on labor force participation. i expect that to continue, and i would expect also to see some improvement in the degree of part-time employment for economic reasons.
jonathan: jonathan spiess with reuters. to your point, madam chair, in needing more evidence in order to initiate the first rate hike, how close do you feel the economy is to full capacity now ? given that employee cost and monthly raises are at a -- monthly wages are a six-year high now, how has the risk changed and inflation can change more quickly than expected? chair yellen: so the committee with the longer run, normal level of the unemployment 5% to 5.2%. at 5.5%, we have unemployment rate that still exceeds be a committee's best attempts to estimate what is normal unemployment rate for this economy, and as i mentioned, there appear to be unusually slack over andof
above that in the form of somewhat still depress labor force participation and part-time work for economic reasons, so i think it is fair to say that most members, most participants in the committee would not judge yet, although some might, but most would not judge this to be a "maximum employment." there have been some tentative signs that which growth is picking up. we have seen an increase in the growth rate of the theoyment-cost index, and growth of average hourly earnings. i would call these tentative signs of stronger wage growth. i think it is not yet definitive, but that is a hopeful sign.
the inflation not only headline but stripping out energy, underlying core inflation is still running below the committee's objectives, so i additionaled to see strength in the labor market and the economy moving somewhat closer to capacity, the output gap shrinking in order to have confidence that inflation will move back up to 2%. but we have made some progress. >> greg and then jeremy. greg: thank you. greg robb from market watch. i would like to turn your attention to the housing market. both rents and house prices have rapidly recently, sweeping americans on both sides. how comfortable are you with us,
and does it impact monetary policy? mean, theen: well, i house, the increase in house is restoring wealth of many households who have that as their major asset. it is an important part of the wealth of american households, the american household sector. and for all of the households that were underwater, those house price increases are improving their financial condition, otherwise the same time it is making housing less affordable for those who look to buy. the same time, housing overall given the still low level of mortgage rates remains quite affordable. i think credit availability remains quite constrained for mortgages for stop anyone who does not have pristine credit
veryg is -- finds it difficult at this point to qualify for a mortgage, and i think we are seeing quite a bit of reluctance given the job market and given the history of what is happened to house prices of young people to want to buy homes. we are seeing them delay marriage and wanting to have the flex ability to move, so the demand for multifamily housing to rent is very high, and rate prices are moving up i think because of that. >> jeremy? i have a question on europe. there is a growing political gridlock in greece, and it is doting everyday more likely,
you feel like it could impact the global and u.s. economy? sorry, when will you decide to increase the interest rates? chair yellen: well i -- unfortunately, greece and its creditors are faced with very difficult and consequential decisions at this point and in the days ahead. my hope is that they will continue to work together to try to find a solution to the .urrent difficulties obviously european leaders place great value on preserving european monetary, economic, and political. the people have made it clear that it is important for them to remain in the euro area, so this is a very difficult situation. in the event that there is not agreement, i do see the
potential for disruptions that could affect the european economic outlook and global financial markets. i would say that the united states has very limited direct exposure to greece, either orough trade and financial financial channels, but to the extent that there are impacts on the euro area economy or on global finance markets, there would undoubtedly be spillovers to the united states. it would affect our outlook as well. chris: thank you. bloomberg news. consumer spending has been very disappointing for many months in the u.s. economy. i am wondering -- do you think
there has been a meaningful shift and one that will persist in the behavior of households with was to spending and savings, or will you be more inclined to look at the recent, more encouraging retail sales and see perhaps a return of the american consumer? so i think in recent weeks we have received that consumerests spending is growing at a moderate pace. i would say, you know, car sales, for example, were very strong. part of it probably represents payback for weak sales during the winter months, but never the less, the pace of car sales has been strong, and recent readings on retail sales and on spending suggested anave
improvement in the pace of consumer spending. this are questions at point about just how much impact we have seen of lower energy prices on consumer spending. the decline in oil prices transfers into an improvement in household income on average of something like $700 per household, and i am not convinced yet, but the data that we have seen and the kind of response to that that i would ultimately expect, and i think it is hard to know what this point whether or not that reflects a very cautious tosumer that is eager to add savings and to work down borrowing, or in parts some survey evidence suggests that consumers are not yet confident
of the improvements we have seen, the decline in the need to spend for energy for gasoline, but that is going to be something that will be permanent. they may think it is a transitory change and not yet be respondent, so i think the jury is out there, but i think we have seen some pickup in household spending. peter: peter barnes, fox business was up i want to shift over to the decision and the aig case this past monday, and in it, the judge in the case that in his opinion "there is nothing in the federal reserve act or any other federal statute that would permit a federal reserve bank take over a private corporation and run its business as if the government were the is preciselyt that what the federal reserve bank of new york said, and the judge went on to cite the replacement
of aig's chief executive officer aig'sking control of business operations. i would ask you -- did the fed break the law in assisting aig back in the crisis? upheldthis decision is on appeal, how does that affect the fed's toolbox? how does it affect his ability to help firms in trouble in the future financial crisis? would it make that kind of us is in the legal, or would you have to get congress to change the law to make a fix? federalllen: the reserve strongly believes that its actions with respect to aig in 2008 were legal, proper, and effective. werelieves that they necessary given the threat that a disorderly failure of that company would have -- the likely implications for the economy,
for the flow of credit to and businesses in the economy. ofbelieve that the terms that intervention were tough and appropriately so in order to the risksxpayers from presented at the time they were made. now, i should emphasize that the freek changed theority and said that federal reserve may not any intervene to attempts to address the issues of a particular company. at the same time, it gave the government a set of new tools
that i could use in this situation like the aig situation or lehman to try to resolve such a situation that poses systemic risks in an orderly way. i would just say at this point the federal reserve, under dodd-frank, can continue. it is necessary in some future crisis to engage in broad-based programs similar to the program in effect, the programs we had in effect in 2008 to provide support for the issuance of asset-backed securities that enabled loans to small to students and for credit cards, you know, for credit throughout the economy,
or to support the issuance of commercial paper. at this point, i believe we are working with the department of justice to decide on next steps. mark: madam chair, mark hamrick with bankrate.com. the fed seems to focus on potential negatives. i would like to talk about whether you envision on intended benefits of higher rates. one of the things i am thinking about is that savers have suffered many years of miserly returns and maybe absolutely anticipating a positive way a better return on their investment. thank you. chair yellen: celeb he say to my mind the most important positives -- so, let me say to my mind that the most important positives to the decision to raise rates was signify very clearly that the u.s. economy has made great progress, and
recovering from the trauma of , i thinkcial crisis overly doubt be something that in many be confident households and businesses. from the point of view of the savers, of course this has been a very difficult period. mainly retirees -- and i hear from some almost every day -- are really suffering from low rates that they had anticipated would holster their retirement income. obviously, has been one of the adverse consequences of a period of low rates. we have a good reason for having kept rates at the levels that we have. congress toe from pursue the goals of maximum stability. and price
that is what we have been doing, and obviously there are benefits to everyrong economy household in the economy, including savers, from having a better job market and more secure economy, but yes, when the time comes for us to raise rates, i think there will be some benefits that flow through to the savers. jim: hi, jim from the "l.a. times." i think a lot of savers, people on fixed incomes were hopeful that they would see a rate increase, if not this meeting, soon. what kind of assurances can you give them an people out there who think the fed is never going to raise rates? i got some e-mails today from people saying, "they are never going to raise rates." what kind of assurances can you
give people that are waiting for that to happen? chair yellen: i cannot get an ironclad promise, but i think it is clear from our summary and economic projections that we anticipate that the economy will grow, that the labor market will improve, that inflation will , as ourk up to 2% as we objective over the medium-term, and even economic conditions unfold in the way that most my colleagues and i anticipate, we see it as appropriate to raise rates. and as you can see, the largest number of participants anticipate that those conditions should be in place later this year. obviously we have to -- you know, there can be surprises that might not happen. it is not an ironclad guarantee, but we anticipate that that is something that will be appropriate later this year.
mike: my derby with dow jones newsletters, can you shed some how likelylight on they will be in their initial phase, and additionally, how important our financial decisions to the pace of the fed's tightening cycle? how important is the market's reaction in determining how fast or slow and the ultimate in the fed tightening cycle? chair yellen: with respect to -- you asked first about overnight reverse loopholes, and we --municated in our minutes the committee has an intention to make sure that they are available overnight in large quantity at liftoff to ensure that we have a smooth liftoff.
will be an elevated level of provision overnight rop, however, it is our expectation and plan to fairly quickly after liftoff we will reduce the level of the facility, and we have a variety of ways in which we can do that. with respect to market reactions, we always, in evaluating the economic outlook, have to take account of financial conditions, whether it is the level of long-term interest rates or the value of the dollar in assessing the economic outlook to the extent that there are market reactions and market movements, whether they are in reaction to decisions of hours or reaction to other events, foreign events
or unfolding economic decisions. we will always take those into account in deciding on the appropriate path of policy. steve: steve beckner of mmi. madam chair, good to see you. you mentioned that the dollar has stabilized, and in fact since mid-march, i believe it has given up a good bit of its gains from last summer. to what extent now do you think that there will be an ongoing drag from the dollar, taking into extent this dollar retreats, and overall, how important is the dollar exchange rate in monetary policy these days, relative to the past? i think wen: well, still are, since last summer, have seen an appreciable
increase in the value of the dollar, th the city -- vis-à-vis most of our trading partners in emerging markets, and i think we have seen that it is had the negative effect on net exports, and so served as something of a drag on the economy, and probably that drag is going to continue for some time to come. so it is a factor affecting the outlook. forddition, import prices non-oil imports continue to fall. i think that is serving to push down a core inflation a little bit. eventually i expect that impact to ebb, but it is a factor affecting the outlook. we obviously have no
target for the dollar. in the dollarnts and its economic impact is one of many factors affecting the outlook, and in spite of the appreciation of the dollar, the committee obviously thinks of the economy is likely to do well enough to call, likely call for some tightening later on this year. hi, john hillman with american banker. i would like to ask a regulatory question if i could. last month, senator elizabeth warren and congressman elijah cummings ascend a letter asking about an inquiry into the fed and other regulators implementation of the investment act. cr concern being that the as it isa and limited now is not giving communities, like in baltimore, other places, enough access to basic banking services.
do you think the fed is doing everything it can in its cra implementation to give access of these communities to these kinds of services? do you think it can be doing more? chair yellen: we take cra very seriously and evaluate for those banks that we supervise. we have a set of guidelines and are very conscientious in attempting to evaluate cra performance. it is something that we certainly take into account in assessing applications that we receive from mergers, and we have very active programs to try to bring together community groups with banking organizations to try to provide them with information about how they can assess community needs
and best address them. but we are looking at cra >> thank you very much. yellen just wrapped up her news conference. we also have breaking news, jimmy lee died unexpectedly this afternoon. we will have coverage of this in a few minutes. first we want to get reaction to janet yellen's news conference. carl, from the press release, what was your biggest take away? >> i think the most important point is the fed is linking to to rate increases. that could change, depending on market reaction, but i think it
was an important single -- single task signal, that they are not backing off on that front, given the twists and turns in the economic data from beginning of this year. the sensitivity to the dollar, which janet yellen has increasingly highlighted in comments. evidenced that we had this week first quarter performance, the rebound is much more limited than what we saw last year at this time. that tells you it was not just a transitory story. wase was some weather, that transitory, but there are sustained factors like the collapse in energy prices and the blowback from the strong dollar. alix: you also said there were updates -- what matters most to investors/ ? >> the liftoff date.
it is most likely going to be october, so december will remain the base case for liftoff. alix: here is the chart, you can see a moving slightly. >> the long-run forecast and not change. that was an important signal. the new signal here is a fact that the pace of the rate increase in 2016 will be slower. 100 basis points as opposed to 125 basis points. this could reflect them slowing down the rate increases as they unwind the balance sheet. she did not give us new information on that. alix: you made it the distinction that they did lower the 2015 gdp, they will still be lifting rates, how does that work? >> that is a conundrum. growth rate is 1.9%. they are moving forward on
policy accommodation. economic growth is below trend, so you probably won't see acceleration in inflation. if we back out the quarterly q1, to hit the feds target we will have to be a 3% growth, that is still above trend. they are making a leap of faith that they can move off of the zero bound. moving from an emergency policy stands to something that is accommodative. with anan economy unemployment rate of less land 5%. scarlet: you could sum up janet -- in it allt depends. prerequisites,o the fed to talk about
dependencies, but they are very dependent on past cycles. the fed has to be very blunt and deliver it in telegraphing that it is moving at a very slow pace. they are doing this through market expectations, if the fed -- the market get ahead of itself, a pullback in the equity market, or the depreciation of the dollar, they will have to back away from rate increases. it depends on expectations and economic data. conversation,his what is it your take away from the press conference, will it be september? >> we will have to see how the data unfolds, but september makes ends. we get everything we got today in the press conference, all of those things. but more importantly, we get to see the second quarter gdp
numbers, we know how much the economy has recovered from the first quarter. and we get three more employment report, that is the primary opportunity for them to initiate liftoff. alix: if you take a look the screen, you can see an increase and expectations for september, but it will decrease for december, said they will reevaluate where they see the shift going. >> it is on the cusp. but they will make that move in september. scarlet: more to come. we want to get to the markets and see how they are reacting. julie, walk us through with the stocks are doing. interesting, been the reaction to not only the statement, but to her comments. we were lower, but now we are moving higher. the s&p 500 up on the screen behind me, that index is up
about .3%. we can pin it on a couple of different factors. the idea that the 2016 rate increase might be at a slower pace. and the idea that myth -- that yes, there will be an increase in september, but the door is those are the two potential interpretations of the gains you see in stocks. one would think with the fed's seeming to make it clear that we will see those two increases this year, that stocks would pullback. and look at the movement in the treasury market, because there is drama. there is a dive in rate as we heard chair yellen. and then it accelerated. that reflects some of these same perceptions about where rates are going to go.
you would think if we were going to see increases this year, you would not see the dramatic movement. also, we have been watching the dollar where we have seen similar movement. rate increases would mean a raise and at the dollar, but we saw a sharp decrease. it is a counterintuitive move across the board. as one trader i talked to said, what janet yellen says and what she does might be two different things. in other words, signaled some level of aggressiveness at the same time you signal that you are being dependent. alix: thank you. other breaking news, and jimmy leeice chairman died this morning. he is survived by his wife and three children. he was40 year career considered a master dealmaker and father of the syndication loan market. -- aamily released
statement, he was a master of his craft, and so much more. he was an incomparable force of nature. jasonwe want to bring in kelly who actually just saw jimmy lee last week. what was your reaction when you heard this news? >> i was shocked. this was a guy truly at the center of the master of the universe. he worked on every major deal, effectively invented the private equity business. anything that was going on in the land, he had a hand in it. he worked for big banks, not private equity firms. >> he identified the way to get deals done in the earliest days. this is going back to steve schwarzman, the founder of blackstone in 1985. jimmy was there with him. scarlet: he went with him.
>> became very close to going to work for steve at blackstone, but ultimately -- scarlet: he is a company man, loyal. >> yes and he had a tremendous impact across the landscape. if you think about the big names, ali obama, gm -- alibaba, gm, he worked in everything. alix: take us more through his career and his legacy. being aner was one of innovator on wall street. identify not just what deals could get done, but new ways to do them. the loan market, what that did was make possible the takeovers that otherwise wouldn't have been possible. ,e made careers of henry kravis other names that we associate with the private equity
business, his legacy is a --ti-trillion dollar m and a m&a market all the way to ipos. alix: we are get a reaction from twitter. we will read for you some of them. jack welsh, just got devastating news of my dear friend jimmy lee's death. a great guy, what a loss. and a business insider asked jimmy lee what was the best advice you ever got, he said it was from jack welsh, saying be careful -- be comfortable in your own skin. , saying iter tweet had jimmy lee was always world-class. scarlet: the reaction on twitter is mostly of surprise, reportedly he was in good health. alix: usually a runner. >> absolutely, he was in very
good shape. he was in the mid-of a -- in the midst of a huge deal. the deal and involved big names, wells fargo, blackstone and others. ofwas very much in the thick it. one of the notable things was that so many people as we talked to them, not just as a dealmaker, but as a good friend. alix: do we know what happened? >> we know he was working out this morning and was then taken to the hospital. scarlet: jason kelly, thank you so much. jason kelly has written about jimmy lee, so we thank you so much for coming in. alix: wow, jimmy lee has died at age 62. that was a difficult headlines erie. we will be back in a few minutes. ♪
♪ alix: welcome back. we will take a look at top headline. germangetting word that chancellor merkel will discuss greece in berlin tomorrow. person familiar with the government strategy says that chancellor merkel will attempt to tone down the rhetoric over financing europe's most indebted country. this is after greases prime minister said you can blame him if there is no deal to unlock bail out funds. they say that the government
if creditorig know demands are unacceptable. greeks could miss payments, there is this -- if there is no deal by the end of the month. leavingbig names are the company, a former ceo of -- nokia,-- gnocchi a and several other executives will depart from microsoft. microsoft is forming a new team called the windows devices group. a fine afterto pay being charged with slowing down for consumers. and fedex is putting its forecast.
rise in that gdp will 2015, it will be down from an earlier forecast. fed ex shares are falling. they posted quarterly sales of that missed estimates. and there is a new threat to the bloomberg business model. in overdrive or must be considered an employee. jairushas been serving as independent contractors. it they might be required to provide health insurance and a minimum wage. that is a look at top stories. back toill head it washington and the big topic of the day. peter cook was at the news conference with chair janet yellen. iner, what was the feeling the room, how was the communication? interesting to be in there. janet yellen looked comfortable
today and she clearly anticipated where the press would be going with questions. we tried many ways to get her to say if a rate hike would happen in september, december, she wouldn't bite. she did not move the ball all that much. think in that sense, she achieved her goal. the extent to which she wanted to press upon to the press and the markets overall, the force, that's what matters, not when we raise the rates, but the path or trajectory over the long term. the message and she delivered, listen, we will not raise that much, we will raise it and see where things stand. it will not be that measured pace we saw in earlier titans -- tightened periods. she had prepared a immense that
she referred to, she knew the questions that were coming. alix: did he get a sense that there was a unanimous vote, or that there was discontent? peter: you have to look at the outcome, it was unanimous. jeffrey lacher, he has been a known hock in the past, if he was dissatisfied, he would've expressed it in vote. and the rest of the group, they too could have expressed more reservations and they did not do it in their votes. right now, janet yellen feels confident that she has a good consensus around the table. that was reflected in the projections as well, 15 out of 17 say that it will happen this year. alix: thank you, peter cook. still ahead, that that is running toward an ipo.
labs rolled out in overhaul, including a new version of a security camera and smoke alarm. we are joined now in san francisco with more from emily. tell us what you saw. emily: we saw an update, a refresh of all of their products as well as a new nest program and camera. it will no longer be called drop camera. they will call it next. the next camera. -- it felt aelf lot more apple-y.
google.less like take a listen to how they describe the new camera and what is different about it. >> this is the best of a drop cam combined with nest. we made a versatile camera you can put it anywhere, even on your for greater with a magnet. to us, we have also put in high-quality video, so you get crisp clarity and you can capture fun family moments. emily: as someone who hasn't used in the drop cam for a long time, a lot of the new features are pretty important, better night vision, zoom, you can talk to somebody in the room, so that is exciting. at $199 for the camera and they offer a video storage of for $10 a month. alix: when will they be available? it to.i know you use
it they are in production, you can order them today. take a listen to what tony had to say about the shipping. >> we are in production, it is not a matter of getting them from production facilities at your. already the software shipping today, so it is available for purchase. it should be available in stores and 2-3 weeks. we have done our job, now we sit by and wait for customers' thoughts and comments. emily: i pushed tony on where else he can see nest expanding in the home and i got some interesting answers coming up on bloomberg west. even cap -- you can catch the whole interview then. alix: emily, thank you. watch the complete interview with the next ceo on bloomberg west. -- you buy said that stock fitbit stock?
are estimated to be around $19. final pricing around the corner. leslie is clear to talk to us about it. best guess, what is the price going to be? guess, thisest company is likely to price at the high end of the range, potentially above. they raised it three dollars a share yesterday, so in terms of pricing, it could be above the range. alix: it does not have any direct competitors yet in the public market, so how is it valued compared to others like go pro? leslie: there are no. , this isable companies going to be like go pro 2.0, it looks a lot like them from the
fundamental perspectives. will have strong revenue growth. that said, gopro will have a more expensive stock, absolutely so peoplesive, and are looking at this company based on the high end of the increase range. this company could technically trade up if it was compared directly to gopro, but gopro makes wearable cameras, so it is not quite in that same area. alix: look at gopro stock, surely they are way off of their highs. leslie: it is still more expensive than a fitbit. fitbit has the consumer perspective to it, you have retail interest in this type of company, because they know the product, they say this works for me, and they hold the keys of the product. --t isn't why often see pops that is why you often see pops
on the first day. done investors would have their spreadsheets and modeling, so no matter where these ideas -- get priced, they do tend to pop on the first day. alix: thank you, leslie. coming up, we will count down to the closing bell and wrap up comments from the fed. we are also waiting for oracle earnings coming out just after the bell. ♪
you are looking at stocks finishing slightly in the green. the s&p clawing its way higher after the fed announcement, after fed chair janet yellen was speaking. i should point out at one point the dow jones industrial average rose as much as 93 points off that high, but still finishing about 30 points higher for the day. we have oracle earnings crossing right now. julie hyman has those numbers. julie: it looks like the earnings-per-share coming in well below analysts estimate. $.87 is what analysts had been anticipating. adjusted