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tv   Power Lunch  CNBC  June 14, 2017 1:00pm-3:01pm EDT

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>> i added to it earlier in week they have easy comparisons they did a good job on the digital platform not seeing operating leverage in the next quarter but i think it's come. >> great seeing you. dow is currently up six points that does it for us. "power lunch" begins right now sure does. welcome to "power lunch. i'm michelle caruso-cabrera. we have two breaking news stories this hour. first a shooting in virginia leaving a top-level congressman and four others injured. the assailant is dead. president trump and house speaker paul ryan weighing in. the other big story this hour, the fed's latest decision on interest rates, going to drop just under an hour from now. markets are expect iing a hike t the fed's balance sheet remains and why are yields falling so much today when they're hiking we'll get answers during janet yellen's news conference, we hope, live
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melissa? i'm melissa lee. let's take a look at the markets and how we're shaping up now ahead of the key fed decision. the dow hit an all-time high with the s&p just points away from its own as you see here hogging the flat line in that 2:00 decision dow is flat up by 6 1/2 points s&p down by two. take a look at rates this may be the headline of the markets here, the yield on the ten year sinking to the lowest level since november 10. as for equities, energy, the worst performing secotor as oil falls on bear supply data. chevron and exxon dragging on the dow. financials falling ahead of today's fed meeting. morgan stanley, bank of america and citi lagging today brian? thank you. we are going to get the latest on the virginia shooting in one minute even on a day like today we cannot forget our core mission on cnbc which is your money and the financial markets. do not forget the federal reserve will make an interest rate call in under one hour's
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time the expectation is another interest rate increase this could all come down to the language the fed uses. steve liesman is about to go into the federal reserve lockup. before he does, he joins us with what exactly investors need to be looking for and listening for in today's announce. steve? >> reporter: brian, it was going to be a boring rate hike meeting became more interesting with the release of weak data the consensus is it could prompt one or more dissents it's more we're likely to emerge from the statement and the press conference with less certainty about the direction of policy. take a look at the ten-year melissa was talking about. it fell sharply in the wake of the two data reports this morning. it hasn't been this low since november 10th, two days after the election the yield has fall en nearly 50 basis points from its post election high. economists said, quote, we now expect this afternoon's fomc statement to include a stronger acknowledgement of the recent soft inflation data. and over at pantheon, if this
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trend continues through the summer, then the next hike, which we have been expecting in september, will be delayed you can see here the fed's low inflation problem. unemployment is near a 16-year low but inflation now has fallen for the past four months heading away from the fed's 2% target. at least what this data will mean is a pause and talk of a tighter fed after today until the inflation and the growth data clarify one way or the other this summer, brian >> all right, steve. we're going to hear from you in a few minutes. thank you very much. well, now to the shooting at a congressional baseball practice in alexandria, virginia. congressman steve scalise was shot, in the hospital recovering the shooter a former home inspector is dead. kayla tausche is live at the scene. eamon javers at the white house. kayla, the latest on what we know >> reporter: brian, at this hour we are learning more about james hodgkinson, the 66-year-old illinois man now deceased who
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opened fire on a congressional baseball practice here in alexandria early this morning in the 7:00 hour. police here in alexandria have said it's too early to determine a motivation for the action and the shooting hodgkinson took early this morning but we are learning that he not only had a criminal record, he was approached as recent ly as marc by police for shooting a firearm in a residential neighborhood, but he was also a very politically charged scitizen where he lived in the 2012 election year he sent frequent letters to the editor of his local newspaper, the belleville news democrat his letters concerned the need to tax the rich, and he frequently cited the work of robert reich he said in one letter that is quoted on the newspaper's website today, i have never said that life sucks, only the policies of the republicans. that is what he wrote in one of his letters to the editor of that newspaper earlier today representative jeff duncan of south carolina
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said that he spoke to who he believed he was the shooter when he left practice this morning who asked who was playing on the field, republicans or democrats, and he said republicans. and we are now learning that hodgkinson was also apparently a volunteer for the presidential campaign of bernie sanders, the vermont senator, speaking and addressing that on the floor earlier this morning >> the alleged shooter at the republican baseball practice this morning is someone who apparently volunteered on my presidential campaign. i am sickened by this despicable act, and let me be as clear as i can be violence of any kind is unacceptable in our society, and i condemn this action in the strongest possible terms >> reporter: leadership on the hill as well as the president of the united states spoke today
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urging unity among both parties and among the citizens of this country. brian, we should also note the baseball game those republican lawmakers were practicing for, an annual charity event that was slate d to happen tomorrow is expected to go on. back to you. >> kayla tausche, thank you. now let's get to eamon javers it at the white house with reaction from there >> reporter: hi, melissa they've been changing the schedule around here today in response to what's happened. the president we saw in the diplomatic room earlier today where he revealed to the country the alleged shoot thor here had died of his wounds the president also took the opportunity to call for a moment of national unity. here's what he said earlier today. >> we may have our differences, but we do well in times like these to remember that everyone who serves in our nation's c capital is here because, above all, they love our country >> reporter: and, melissa, we
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saw a briefing here by ivanka trump speaking to report eers w were brought in off camera she echoed her father's comments from this morning in terms of the reaction here at the white house. also we're being informed just within the past few minutes here they're not going to do any briefing or gaggle here with reporters today. they want the focus very much to be on law enforcement, the incident this morning, and the president's comments we'll have no remarks from sean spicer or the other top white house press aides here directly from the white house they say they are available, though, to answer questions throughout the day back to you, brian >> thank you, eamon. former fbi assistant director joins us by phone. chris, obviously today makes us think back to 2011, the shooting of gabrielle giffords, the congresswoman did survive. others around her, though, did not. we talked about security for congressmen and women back then. we will no doubt talk about it again today. any way to fully secure or should we try to secure 535
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individuals? >> well, the short answer is, no, you can't fully secure 535 congressmen and senators it's just not practical. we may see that in the short term, but i think you'll see more of an awareness on their awareness and training, events where you have a gathering of congressmen and senators, there is, indeed, good security. and it sounds like it was serendipitous today there were three capitol police because there was a ranking member there. this is yet another challenge for law enforcement and the fbi and the people responsible for the day-to-day protection, the capitol police >> to get to the heart of the matter, the question is how did this man get his hands on firearms according to nbc the shooter, the alleged shooter, james hodgkinson, was arrested for assaulting his girlfriend in 2006 how could he possibly get this gun? >> how does a guy, an ordinary guy up there in illinois make
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his way all the way down to alexandria, virginia, armed to the teeth with an ak-47 and whatever else he had and a criminal record and do what he did today? my answer is the background check system is broken we've known that for a while it has so many holes in it particular ly when it comes to mental illness but to cases where there's no -- there's an arrest but not a disposition or an investigation but no arrest those types of cases completely fall through the cracks and the staff is under resourced they have to fix the system first. >> if you were investigating this situation, what would be your first question to ask in terms of determining whether or not he is actually the only one out there doing this or if he had some sort of, i don't know, partner. >> yeah, that is the immediate question is he ideologically driven, are there others that share his ideology, were others enabling
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him? we find sometimes when we call these folks lone wolves there are, indeed, enablers behind the scenes that have kept quiet knowing they were going to do something or provided some low level of assistance like procuring the guns for them when they couldn't buy them themselves the focus is on him and the focus is on his social network and very quickly getting some answers to these questions since the best source of that information has passed >> speaking of social networks, a lot of people are going to want to blame things like social media. is that, do you think, driving any of the violence or there are crazy people and this is what they will do >> yeah, i think it's a factor because information gets out there so fast and like-minded people who share some sort of toxic ideology can get together pretty quickly and efficiently on these sites i would describe it as a bit of
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a facilitator but these types of things will happen anyway. usually disturbed individuals who are flashing red there are signs all over the place. i bet we'll find with this individual that he was, as i said, flashing signs that he was unstable and about to do something. >> in terms of the investigation, a lot of people are say iing if you go on his facebook page, the alleged suspect, it does look like he is definitively anti-trump and very aggressively so. as in the fbi how would you sor of search for the next potential? how do you prevent another incident like this from happening? do you scour people's social media page and take a look at the level of their rhetoric and overlay that with a background check of some sort >> well, until 9/11 you couldn't do that. you had to have some sort of predication, a certain level to open up an investigation they now have the ability because of the patriot act and
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some changes to do what they call a threat assessment which is that they can check media, social media, to see if there's any type of action or speech that looks like it will transcend or morph into violent action that's difficult there's a lot of sites out there. you have dark websites, deep websites, chat, blogs. it's a very difficult task with the resources that they have >> yeah, and it's amazing that facebook, as of the last time i checked about ten minutes before the show, had not taken down his account yet and all you need to know about the state of partisanship in america right now you can glean from the comments on that guy's facebook page facebook, you need to take that down chris swecker, thank you for joining us up next our panel of experts weighs in on today's fed rate call what they are hoping to hear the heat map, h&r block. qu"power lunch" back in two
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the dow hit a new record high the ten-year yield hitting its lowest level this as investors await what they believe will be a fed rate hike later on at the top of the hour what's going on? global strategic adviser at pimco and head of strategist at boston private good to have you here, guys. we have some data.
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is it that simple? >> we've had now three months in a row of some disappointing inflation numbers. i expect today the fed will try to overlook that and get the rate hike in they're noticing it. >> because of the economic data this morning, the retail sales that were weak, the inflation that was weak. suddenly all this certainty, they're going to be hiking certain number of times this year, is that out the window as a result >> potentially and then you bring the bond portfolio into the discussion as well which we would have liked to hear more about today. they're going to have a pick today, talk about gdp, the unemployment or inflation rate >> can they talk about all
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three? >> which data point is most important to them and what matters the most >> what do you do then as a result >> i think from a positioning standpoint you need to think about what's most likely to happen i think the probability of a rate hike later this year is going to decrease after the statement. i think it's really important you list en to the language around reinvestment. it is con scentrated on the shot end, they have the latitude to be flexible about what they reinvest and what they don't i think we'll see the market move based on that statement >> so to underline we were focused on what the unwind would look like and now as a result of the economic data this morning we're back to asking basic questions about whether or not they're going to hike rates. >> they said they wanted to get the process to be well under way. this is the fourth hike that probably now counts. i'm with you for the rest of the year they probably will want to roll out the policy whornt we get the third rate hike in will depend on the data.
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>> do they do it in a good way, though the big fear is just be clear on this can they unwind it without financial calamity >> they hope so. >> what do you think >> i think they can pull it off. it will make the process predictable and if there is any prediction they'll slow it down. >> does it disturb you at all this is a grand experiment it has not happened before and we don't know what the tightening effects are of this unwind even absent another rate hike in the future >> it is a concern it has been an ongoing concern since the great recession. now we're going into a new phase of it. potentially we hope late they are year all mark, we will be watching with everyone else.
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we're talking the fed, the ted, the fed, but they don't control it anymore is the yield curve telling us about the economy and should stock investors be worried it's telling you you've had three months of weak inflation data for sure it's telling you that they are in play, lower stimulus >> the yield curve doing what it's doing put aside the fed. >> right, and we've been talking about the fed for the last several years and from our perspective having -- i think we're talking about the
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ramifications of the balance sheet but that can be used as a tool as well and we need to think about the fed being very flexible and being a little bit creative here as we go into the back half of the year particularly as we see this economic data softer we saw softening data and then a nice rebound into the fall i wouldn't necessarily chalk this up as the end of sort of the growth expectations for the rest of this year. we need to be cognizant of that as well. >> all of you are coming back. we have more to discuss. i'm interested if they ask janet yellen if they're looking for her replacement though she's not supposed to be done until 2024 >> crude oil dropping. our next guestays e sthslide isn't over he joins us straight ahead you always pay
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if you're surprised by the recent drop you probably haven't been paying attention to the show we've been talking about, higher production, stagnant demand and cheating of opec nations. i wrote on my facebook page yesterday. he joins us now by phone, john, shocker, shocker, libya, iraq, nigeria, cheating, u.s. oil production up. any sign we're going to see a bullish turn to crude oil prices >> no. it looks unlikely, brian as far as the situation with
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libya and nigeria in particular i think opec in particular underestimated their capabilities their capabilities of coming back they just didn't see their production coming back online. that's the big problem here. they are all free to pump as much as they can or want to and that's undermining things. >> up 387,000 barrels year over year production go up in iraq what would be the flip scenario -- what would make you turnbullish on oil prices? what would it take massive surge in global demand, surprise u.s. production cut >> there are risks surrounding the situation with qatar the middle east really a hot one
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right now. there's a lot of oil hanging in the balance there. that's one next month potentially the saudis will put the pedal to the metal and save this by cutting exports to the united states in particular if they were to cut by up to 300,000 barrels per week that's a real difference maker, brian. that is something i will have to be watching out for. the saudis have leaked that's their plan this is their last stand on trying to battle and keep prices up by cutting production >> john kilduff, always a pleasure thank you for joining us >> thank you >> the latest in the virginia shooting a benchmark. flexshares etfs are built around the way investors think. with objectives like building capital for the future,
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we're awaiting the fed decision, of course. here is where the market stands in the meantime at the flat line as we are waiting for what could be a very important decision not just a decision but also the statement and the press
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conference afterwards. the dow jones industrial average higher by 15 points. it touched a new record high in today's session. s&p down by two points nasdaq is higher by about two. fl tchevron, exxon mobil and jpmorgan the biggest drags on the rin decks. >> to sue herera now with the latest on the shooting in virginia >> thank you very much, everybody. here is what we know this hour the house majority whip steve scalise was shot in the hip by a rifle wielding gunman at a congressional baseball practice just outside of washington several other people were also hit and are listed in critical condition at george washington university hospital. officers who were part of the scalise security detail returned fire and wounded the shooter identified as 66-year-old james hodgkinson he had an assault rifle and a handgun and a lot of ammunition. efficiency taken into custody and later died of his wounds house speaker ryan calling for
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unity. >> we are united we are united in our shock we are united in our anguish, an attack on one of us is an attack on all of us >> the 51-year-old scalise is the number three house republican leader in 2008. he underwent surgery at a local hospital he is out of surgery now, said to be doing well hodgkinson meanwhile had a history of violence. law enforcement officials say it's not so far being considered international terrorism. that's the latest. it's still developing. when new details do become available we will bring them to you. more on the shooting, representative bill johnson of ohio was at the republican practice game. congressman, thank you for joining us can you hear me, congressman
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>> i sure can. >> great i wanted to make sure you were there. it's been a tough day. tell us what you saw from your vantage point this morning >> the democratic and republican baseball teams practice in different places so i was out in the field. coach mike doyle called us in and said there's been a shooting at the republican practice several miles from where we are. they held us in place in the dugout for about 40 minutes while we waited for the s.w.a.t. team to arrive to allow us to go back to our cars we gathered in a circle and said prayers for steve scalise and the police officers and others who were shot in this tragedy. >> we do have -- the game will go on tomorrow do you know what went into that decision making process? >> i don't know. i think clearly they wanted to make sure the sergeant in arms
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that we felt safe to play it i would hope that they have some evidence this is a lone wolf if they're allowing us to continue the game i'm glad the charities, the boys and girls clubs, and the other beneficiaries of this event will be able to see their money it's hundreds of thousands that help out youth in some of our most impoverished areas in the washington, d.c., area i'm glad they'll be able to do that and the spirit of camaraderie that exists, democrats and republicans, coming together around our national pastime won't be thw t thwarted by these horrific acts of a lone wolf >> congressman bill johnson of ohio is also with us as well, a republican congressman, a few questions you were there at practice this morning? >> i was, i was. i had left for an early morning meeting just a short time before the shooting occurred. i was not physically there when the shooting occurred but i was there earlier. >> and somebody that we spoke
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with that knows you said you may have seen the shooter actually come in -- not realizing he was the shooter at the time. >> we don't know that. i did tell the capitol police what i saw i saw a white male get out of a van. he did not seem threatening to me he thought he was a construction worker getting ready for his day of work. i've relaid that to the capitol hill police. the capitol hill police deserve all the credit for preventing a disaster and a massacre today. there were 25 members of congress the same thing over at the democrat practice facility and they're out there playing baseball unless they're running out a ground ball or fielding a grounder, they're stationary a lone shooter could pick them off one at the a time.
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thank god for the reaction of the capitol hill police. >> they were only there because members of the leadership were there, sir what about the rest of the members of congress getting security at this point is that something you would recommend? would it work? >> i can tell you that for me personally i've never felt unsafe at home when i'm in my district i've never felt unsafe here in washington, d.c., and i can tell you that my constituents don't have security. this could happen at any little league baseball field across america. what i think is most important is what speaker paul ryan and minority leader nancy pelosi sa said we have to get back to believing we are all americans first and that an attack on americans no matter where it occurs is an attack on all of us. we have to lower the temperature
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that's going on around throughout the kcountry because jarrett polis and i are prime examples of what happens a lot here in washington, d.c. there's a lot more cooperation and collaboration the american people never find out about. and this congressional baseball game is just one of those. i can tell you jared polis is a heck of a hitter he was a catcher and he fouled off 18 straight pitches. well, i might have >> how is this going to be looked at at this point? if someone had died and you looked at his facebook page, you could argue this would have been a political assassination. is this a politically driven crime or is this person just mentally ill >> it's early in the investigation. we haven't had any released to us about the perpetrator of this horrific, horrific act i think what's important for all of us, democratic and
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republican, is not to let the goals succeed. whether you're a liberal or conservative, democrat, republican, we all bleed the same color blood we're all here because we're patriotic. we're going to do the best we can on personal relationships more close ly together. >> i agree with that but you know as well as i do things are not cooling down, they're heating up it's easy to link up with others that may have extreme views. do you believe -- and i'm not blaming social media, i'm blaming this guy however, do you think something needs to be done to figure out a way to not censor but to control or at least monitor the way people are becoming extreme online >> in a country that values free
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speech, with speech comes responsibility make sure our rhetoric never becomes an inflammatory agent for those who are mentally unbalanced we have an extra duty to be careful about what we say. let that be a war of words and not gunshots. >> it isn't free all the time if it incites riots there are controls congressman johnson, you're a former member of the air force kind of an uncomfortable question here. do you carry a sidearm >> i am a concealed firearms carrier and i'd like to comment on what jerrod just said i'm a little older than jerod. i can remember back in the '60s and i'm sure your viewing audience can, too, when america saw the vietnam war and all of
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its horror and saw war for the first time and it changed our culture. that played out on our college campuses today through networks and a - 24-hour a day news cycle again, i'm not blaming the media for today's event, this was a perpetrator, but we have to understand the american people are seeing inside of the american governing machine from a perspective they've never seen it before. we disagree on something at noon today. by 6:00 everybody all over the country knows about it and they're picking sides. it has always been difficult, contentious, but it has grown the most fabulous on the planet and that's what we have to get back to believing. >> congressmen, be safe. thank you for joining us here on
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cnbc >> thank you very much >> thank you >> back to business. the countdown of the fed decision continues we are expecting a rate hike but it is janet yellen's next move that investors hope to get clues about today as we head out take a look at the dow. some of your best movers home depot as well exxon and chevron are losers as well
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i joined the army in july of '98. our 18 year old was in an accident. when i call usaa it was that voice asking me, "is your daughter ok?" that's where i felt relief. we're the rivera family, and we will be with usaa for life. welcome back bond yields sliding on weak economic data. rick santelli is following the action at the cme. what the heck is going on with yields >> reporter: wow, it was a wild one and obviously the horrific, the horrible events in d.c. didn't really make the market move much. as a matter of fact anybody whos had a one-minute chart, check it out. it was 8:30 eastern that did the market damage. we're down ten basis points. less inflation, maybe the fact it's on a fe d-day that will
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most likely end up in a rise of rates, a tightening, and it really came home if you look at a november first chart, we all know we haven't a lot of ground quickly in november we are getting close to back filling that but really the leader in this that i've been talking about this very weird relationship, it hasn't had any bounce to the ounce. now in the 96s, it's hard to imagine that they aren't going to get closest to 10%. what do you think it did to the yield curve? 74 will be huge support. the reason this is important, once again, it's all about the long end, yes, we're down at 130 i in twos. >> laid it all out there with yields today so interesting just about 20 minutes away from
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the announcement on rates from the federal reserve, listen to what we're hearing today reiterating the bet for a summer stock sell-off saying traders should raise cash literally today. over at rbc on "power lunch" yesterday says he expects to end the year at 2,600. that's a 6% rally from here. so where are the markets heading? let's bring back our guests. let me start with you, richard any fnervouses in to see stocks rising day after day but yields falling. >> so far not so much nervousness. we've had these disappointing and a trump stimulus has been taken out. a lot think this is a goldilocks period
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that's the way it looks to me. >> some would say wait a minute, maybe this is telling us growth is not going to be as good as people expected. putting aside the inflation. >> we're at 2% growth. we're in the consensus of growth interesting to see what the fed does today as well we're at 2% growth we're a double digit earnings. there's a big buyer on the sidelines waiting to pounce. we think they were waiting to pounce at higher yields when that cpi came out, etfs. we think they were ready to buy
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at higher yields and it reversed >> they cried uncle. >> investors are still putting more money in bond funds and stock funds this year. >> we always say these two words and i can't stand them but we say them dot-plots the fed's projections on where they think interest rates are going to be over time. do you pay attention or do you go with your gut >> we do pay attention to the dot plot we're seeing the market react well before the dot plot comes out. it's participate of the mosaic of things that we look at. >> the up side to such show yields you can look at it that way. we're in a very interesting low
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ball market where people are short volatility the more long certain funds get on the equity side and that could really set us up if there's a spike in volatility for massive move in the markets. >> that's an excellent point we are in period 25-dwryear low. we can think of things to worry about. the combination of low and leverage, we agree, we think the markets are too sanguine >> they're getting set up for janet yellen one of our producers there in washington, d.c., in the camera shot there >> it looks like larry page of google >> it is not it is not. >> he's the new fed chairman of course you knew that, on wikipedia yesterday. >> thanks. >> thank you. >> oh, hi. wall street is still working today and so we are, too, in street talk up next. [vo] when it comes to investing,
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u.s. steel, predicting the company will be forced to cut guidance when it reports later this summer. axiom has an and and sis indicating a 28% cu ebitda guidancguidance that indicates a cut. >> 14 a share? >> yeah. >> $20.50? ah all right. stock two is restaurant brands qsr, oppenheimer upgrades to outperform a unique catalyst forced upgrade. one of those boosting earnings estimates and believed popeye's deal, bought them, and burger king, and others strong franchise assets got a $70 target on qsr, about 18% upside. >> third stock is sprint cautious commentary out from pacific press on the company which announced its offering service for a year for free, in a promotion saying it shows desperation to make quarterly
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cub scribers and mma, should keep premium in the stock, extreme promotioning on the part of sprint. t-mobile may be better off ay loan notice both of your calls are cautionary and mine food related? a very -- >> telling about -- >> very telling. very revealing scenario. all right. your final stock call. >> both of them, food. >> that's what i'm saying. look cheesecake factory i had burger king, now cheesecake factory after yesterday's slide a buy from a hold. target 65 noting sales outlet trimmed. stock got crushed but like the presentation, spanning delivery to more restaurants and buy up more stock and testing another new fast casual concept remember, the rock/sugar brand upscale asian restaurant out in los angeles primarily as well as cafe luck. just under 25%
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an ugly stock but out defending it and upgrading today. >> michelle, over to you minutes awray from taway fr fed decision language expected what they'll pay close attention to ll they get the words we get to hear? we'll find out, next
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welcome back shares of seaworld higher on news voted to remove the chairman the board's decision to pay a special executive bonus related to the 2013 ipo. shares of seaworld up about 3% now but still down 13% so far this year. guys, back to you. >> and that stock -- thanks, morgan five minutes away from the fed's decision on interest rates first up to date on the shooting in alexandria, virginia. kayla tausche is live at the scene. kayla? >> reporter: hi, michelle. we are getting a statement from tyson foods. one of the players on this
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baseball field who is director of government relations for tyson foods. mike mika. the company is deeply concerned and confirmed he was among those shot today here in alexandria during a baseball practice for congressional lawmakers. the fbi is leading the investigation into the events because it contains an assault on a federal official. just a few moments ago we got a statement from deputy attorney general rod rosenstein aing, "the department of justice will provide all resources necessary for a thorough investigation." the shooter, james hodgkinson, 66 of illinois, now deceased, is coming into view as someone with a prior police record for a variety of events. but also someone who had very strong political views, and was not afraid of sharing them a facebook page belonging to hodgkinson from belleville, illinois, petition
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calling trump a traitor who "destroyed our democracy." saying "it is time to destroy trump and company. still trying to verify that specific facebook page and someone known to be politically active congressman mike bosch who represents the district where hodgkinson was from says he received 14 calls from mr. hodgkinson, angry rants of sorts, but said he never crossed the line congressman bosch making those comments to "the washington post." we are learning more exactly about this shooter why he came to this baseball field today, and opened fire on these lawmakers. a local affiliate i believe did speak to a friend of james hodgkinson who said this -- >> through the years he didn't back down from stuff i mean, he was in a few fights and stuff like that, but nothing that would demonstrate violence as far of what he did. >> reporter: what do you mean by that fights with people
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>> he never backed down from anybody. in a bar fight, whatever, he stood his ground. >> reporter: it's been 3 1/2 hours since the joint investigation, have various police departments giving updates what is currently happening and we will provide any details as we get that information going forward. back to you. >> thank you sounds like he was familiar with bar fights appreciate it. minutes away from the fed's latest decision on rates joining us, all-star fed panel danielle, former adviser and vogel's cio and jpmorgan funds, and after the introduction, no time for the conversation. kidding. >> and the balance sheet, they will indication a willingness to pause in the process of raising rates to evaluate the data coming in. a my view the september meeting a
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discussion not a rate increase. >> and danielle, more hawgishaw, dovish or stay the same? >> nothing changed, i think. pure neutrality. >> sounds like you don't believe that, though that nothing has changed, given the data >> three moss nths in a row shod be ringing bells for janet yellen it's not transitory. >> people haven't paid attention to, look at last three months of the cpi. annualized rate of zero which is we haven't been this low since right after the financial crisis. >> if you remoove rents. >> remove rents, goes negative. >> seen a slowdown in services inflation. not just goods, deflation, that typically is pulling it down. >> david, quickly what are you looking for in the statement specifically, and into the press conference. >> pretty balanced i think the fed will recognize the financial conditions look
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pretty good. unemployment good. ip agree, try the premium. >> and a check before the fed meeting is underway. nasdaq lower by two points, so is the s&p dow higher by 13 points. ten yield, 2.115 to steve liesman. >> federal reserve raises interest rates to 1% to 1.25% believing increases in rates will be warranted. the fed also announced detailed plans how we'll unwind the balance sheet. the fed says the balance will begin to be unwound this year provided the economy evolves as expected 12 of 16 members see three rate hikes this year as in one more additional this year 12 of 16 members see three rate hikes next year in 2018. the stance of monetary policy according to the fed even after today's rate hike remains
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accommodative. an elaborate plan for running off the balance sheet. i'll skip that let me know when they have it ready in the back. send up full screens to put up and go through when they get them talk about, reducing the balance sheet to unspecified amount. "hold no more security unnecessary to implement monetary policy effectively. the level apipreciably above th low, below the financial crisis. said about the chi shgeconomy, r market strengthens, economic growth rising plod ritually. like last night. job gains moderated but solid. unemployment rate declined household spending's picked up business fixed investment continues to expand. inflation, where there's changes, declined recently running somewhat below 2%. last time said it was running closer to 2% objective not true anymore inflation they said expected to remain below 2% near term stabilized medium term near term risks are balanced but
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add add line the which the is monitoring inflation developments closely the committee expects economic activity to continue to expand at a moderate pace and gdp being transitory the new forecast, i don't know how much is available in the back they left the forecast for the funds rapt in the future unchanged. 1.375 this year implying one more additional ike. for next year implying three hikes and 2019, 2.9% along, two a long of 3% lowered median inflation outlook this year to 1.6% down 0.03% and lowered unemployment, 0.2. and a big downward revision for the fed's expectations for
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inflation, but not much downward revision to the -- upward for inflati inflation. not expecting inflation to come from low unemployment numbers, folks. we can talk about the detailed -- bottom line, when the fed ramps up after a year begins, roll out of a balance sheet $50 billion per month or $600 billion per year. brian? >> i'll take it, steve thanks very much $600 billion we are year scott minerd what does that mean to you >> pretty much what we should expect start slow build up the real question in my mind at this point is, where is the terminal funds rate? we are not getting the increase in the neutral rate, which we expected, because the trump policies aren't getten implemented. we could find out that the fed has to abort tightening somewhere around 2% to 2.5%. >> didn't you hear softening,
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anying the exact same thing? >> i think so. >> mod every adorate oerated th. and key for the bond market moving forward. >> inflation declined somewhat a change from what was said before, meaning they don't have to keep hiking rates as aggressively as they thought. >> and forecasting the longest economic expansion in u.s. history. >> yes. >> given where they say the unemployment rate will be, not this year but next also added verbiage saying they'll shrink the balance sheet this year. we heard before, beginning 2018. >> david, is this another case of a fed sort of now matching what the markets had been expecting? >> i think that, ultimately, this will turn out more bearish for the bond market than people think. i realize monitoring developing carefully and have to see if there's a balance in inflation but also asset bubbles to worry about, and i think in a modern era, the problem really is that you don't get -- expansions
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don't end because of inflationary fees but bubbles. housing, could end up with a problem in the stock market if they keep goingality this pace i think they'll keep tightening. roll off $600 billion in 2018, depending what exactly the details are, that's equal to one full year's worth of budget deficit. a lot of new long-term paper off the market. >> bearish than a lot of people thinking >> i think it is that tells me if the fed keeps raising short, long rates go up. that's demand to take out of the bond market rather supply put back into the bond market. if they stick with that, long rates go up and it's still -- i agree a long expansion that will continue, but i think it's more than just -- low inflation. >> scott, get to you in a second a lot of our audience are not professional bond people like you guys are i want to push back on you a little, danielle you said moderating their
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moderation in there projection, forecast for 2019 seems a long way away but it's not. unemployment, 3.8% to 4.5% down from 4.1% to 4.8%. how is that mad moderating moderation, more optimistic and bullish about the bond market? >> added inflation lower unemployment without wage inflation. >> why wouldn't they think that? no whaun gotten a race except for professional athletes in the last 20 years because of this guy and the dodgers! >> actually the dodgers got a lot of raises. what we're real seeing here is sort of a repeat of the greenspan experiment which occurred in the late 1990s where he was willing to let the unemployment rates drop below 4%, because he didn't see the evidences of price pressure and wage pressures it's interesting
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we know how that experiment ended. >> asset bubbles. >> right. >> talking about asset bubbles the past two meetings. >> the last two recessions were a tech bubble and housing bubble, and we've got a bubble in the bond market i think a bubble building in real estate. could end up with a bubble in the stock market that is enemy number one, should be enmu nun one on central banks. they have to realize the easy money won't cause waging to bubble up or cpi asset prices bubble up and eventually could cause disruption in the economy, and that's what they're supposed to safeguard again. >> steve liesman bring you in >> reality check what we're t k talking a about. put up a chart of the two-year full intraday chart share. i saw it at 130. look at that and do a reality check what just happened the federal reserve announced a quarter point increase in rates. announced it could be shedding -- in 12 months' time up to $600 billion of assets
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look what yields did almost nothing up by two basis points look what the dow did. almost nothing the market and the fed here, i'm going to suggest, are pretty much in-line by the way, 12 of 16 members say they're going to do one more hike this year 12 of 16 members say three more hikes this year. the way the market looks to me digesting this information, i think it's beyond the best hopes of the federal reserve that it came out and it did hawkish. said hawkish said it was going to do more hawk things, and the market seems to be taking it with an unbelievable amount of cool. >> yeah, i -- >> well, i think -- well, ply personal take on this. forgive me for gives my personal take, but seemed like -- yet another example of the market having certain expectations and the fed meeting market expectation and why the market is not doing anything. >> i disagree. >> why >> i don't think we expected this detailed balance sheet plan today. i think it was several months
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down the road, and personally i think it's more aggressive than i thought the federal reserve would do. >> except they left open the door of winding it, pairing it back. >> no. we thought -- >> doesn't perceive as envisions? >> can't dismiss the language added. >> the fact, steve, we had a bearish statement for the bond market on the balance sheet, and the fact that long-term rates didn't react, isn't that telling us that the terminal rate is lower than what, what the fed is currently expecting? >> scott, i could jive with you on that. a definite possibility 3% may not be 3% i'm talking about the near-term outlook and not hearing the fed be quite as dovish as i'm hearing the panel interpret the fed is my point here inflationary comments are well worth -- good point there. they are in there but not
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dissuading policy yet. >> right, and on the -- >> steve, can i ask steve, before, i want to get to steve on another question. wondering if it's going to come up today, steve? janet yellen, on the front page of the journal, looking for her replacement. is that coming up? >> gary collins got a committee. >> it could come up. >> a small say whether that comes up i would have a small say woe possibly it could come up. >> ask it. come on. >> happy doing her job and not yet considered the chance to -- >> one thing, scott, get in there. we got guests. >> i got to say, i think that we got a lot of information today on just a lot more than all of us thought. >> oh, yeah. >> even my view, which was i thought they'd talk about the balance sheet, they way exceeded my expectation. >> scott, thank you. >> times exceeded our expectation. bond markets expectations. >> think about this. opposed to how many meeting it's
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last six meetings, we got virtually no information except information on changing rates. all of a sudden they use this as big data dump, and the market gave them a free pass. >> david kelly, comment and question comment, be on-set can't get in unless you're hear. got to physicianly jump lphysil jump in. >> true. >> a lot of people don't like janet yellen, view her leaning democrat, but is she doing a masterful job here >> i think she's doing a job that the administration appreciates. keeping rates low and i think they'll need low rates to finance their plans. but i still -- agree with steve. this is not at dovish as people think. yes, low inflation attempt rarely a one-time big drop in cell bills feeding through a year making the year over year rate look low for a year, but i haven't seen that much
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deflation. >> worried about asset ubl bubbles, to me, maybe not going a good job. >> i think she is trying to be balanced about this and also realizes we're out of labor market -- a little more hawkish than to this points. the thing she was worried about isn't there any more. >> all right, guys thank you, steve, thanks to you, too. >> and ask a question next time. >> you do that thanks, steve. >> are your bags packed, janet [ laughter ] stock reaction, get to bob pisani from the new york stock exchange hi, bob. >> it's obvious that the fed and the market, very much aligned. i agree with steve's position. looking around for some indication of acknowledgement of the recent economic choppiness, we've talked about particularly today, cp high and retail sales, it's not here. modest upgrade to the economic outlook. economic activity rising moderately so far this year. modest upgrade there
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we have seen household spending picked up in recent months modest upgrade business fixed investment continued to expand. also modest upgrade. they did acknowledge a slippage in inflation but talking about 12 moss basis expected to remain below 2% but stabilize around 2% objective over the median term and basically sticking with this is a short-term if a knoll nophn basically still there, a little off, towards the neutral area. bank stocks move, outward look or interest rates scenarios also on the flat side pretty much the key point will janet yellen be non-committal on a rate hike and what will she say if anything about the somewhat disappointing economic data during her press conference? back to you. >> thank you rick santelli watches action from chicago minor move in the yields rick >> i'll tell you, a lot of
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volatility you might be amazed how everything sloweddown. look at intraday dollar index. immediately it moved rather large more negatively but came back down 47 beforehand down to minus 60 plus, almost two-thirds of a cent now less than it was before the rate hike. 10s minus 2s yield curve. the one i find fascinating, flattened dramatically of late flattened on the news out of d.c. and the numbers of all that this morning most likely the numbers, but flattened more on the statement. finally, look at intraday 2s, 5s, 10s, 30s, you can see 132. 5s up two basis points put up a 212, back to 211 and 277, the long end is looking at this and yawning listen, i don't know what janet yellen's going to say, but the calibration of what's going on with the fed certainly isn't enticing inflation.
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a big question mark selling. back to you. >> get that question answered. rick, thank you. bring in bill grose of janice henderson. twice in two days. you heard the question, give us it's answer. are you one of these guys selling the long end are you yawning? >> well, not yawning i recognize that the markets are -- what we've heard today in terms of the, you know, the dots, it would suggest four increases over the next year and a half to perhaps 2.25 or 2.50% and heard in terms of the, the sell back into the treasury market of ultimately $50 billion a month. i mean, very bearish let me point out one thing that the market should know, brian. the market should know the federal reserve itself had a study just this month that quantitative easing over a period of time lowered ten-year treasury rates by close to 100 basis points if at some point in 2018 or
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2019, you know, a lot of that is gone, then the ten-year treasury at 210 below the fed funds rate projected by the fed at the end of 2018, where has it to go in terms of lower interest rates? i think it's a, it's a hawkish statement, no doubt. >> okay, then. is this an economy or a financial market or both, bill, that could withstand, call it 2.5% fed funds and 4% ten year >> well, that's the key. the 4% ten year immediately brings to mind where mortgage rates, 30-year mortgage rates would be and talking about certainly an increase of 150 to 200 basis points negative for housing market and ultimately talking about as the fed ponders as well what the neutral funds rate treinterest d slightly below 2% and doesn't seem to be rising. i would think the feds fund rate
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can go no higher than 1.5 to 1.75% over time given these current conditions given nominal gdp at 4% or less. given inflation at 2% or less. so, yeah i think that the fed can't follow through with their plan and think the fed can't follow through with what they're suggesting in terms of the sell backs and the treasury market, but ultimately that's their plan, and i think the market should begin to take notice of that at a 210 treasury. >> bill, scott meinert good to see you. you know -- >> hi, scott. >> i read that study and that would put the terminal rate, you know, somewhere in the neighborhood of 3% to 3.25% based on where we sit today. do you think that the market could handle or, you know, not just the stock market but also the housing market, do you think the market could really handle rates higher than that, or do
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you think we would reduce in the jegs. >> i think we would induce a recession, and let's point out that the fed as the global central bank if it intends to raise and sell back into the market like it suggests. you know, would put pressure, upward pressure other than the dollar and that is a consideration that must be taken into account by the global central bank. if we see a ten year above 3%, 3.5%, fed funds close to 2% or higher, other central banks at the moment are suggesting no change in terms of their particular monetary policy the dollar would, would rise significantly and pressure emerging market countries and other holders on a global basis. >> so if you're all right, bill, and i'll let scott or danielle jump in. they're still with you as welling. if you're right, how do you invest around that if i listen to bill grose:agree with bill 100%
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couple years down the road, things slow down, can't handle the rates. what do i buy now to profit that from that then >> i think you buy under the assumption of growth at 2% real growth at 2% and inflation at 1.5 to 2% and nominal gdp growth of 1.5 to 2% or so. and what goes well under those circumstances. i think ultimately high dividend paying stocks that consumer related, that do well with a 3.5% nominal gdp growth rate and investors they have to realize the days of double digits are over and that under this scenario and the fed's mild perhaps significant tightening posture is evidenced by this statement that dividends are going to be key going forward. >> all right, bill thanks, bill >> you're welcome. thank you. all right. got the fed decision and now coming up shortly, fed share janet yellen's news conference vgioonglatest on the shti
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inirnia. "power lunch" will be right back
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we are less than eight minutes away from fed chair janet yellen speaking at a news conference countdown clock ready to go on the wall here. more on that shooting in alexandria, virginia today the other big story. eamon javers joins us. >> hi, michelle. president trump came out earlier to the diplomatic room here at the white house to address the nation telling us the first time the alleged shooter in this incident died of his wounds.
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also spoke of a need for the united states to come together in unity and he talked about steve scalise, the congressman most badly injured apparently in this attack, as a personal friend here what he said. >> congressman scalise is a friend and a very good friend. he's a patriot, and he's a fighter. he will recover from this assault, and steve, i want you to know that you have the prayers not only of the entire city behind you, but of an entire nation and frankly the entire world >> reporter: the white house has cancelled a host of events that were supposed to be happening here today we did hear from ivanka trump off-camera earlier today she echoed her father's comments here to reporters at the white house. there's not going to be a briefing or gaggle here. they're going to let the president's remarks from this morning stand, and guys, as we know, that congressional baseball game is still on for
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tomorrow nap should be quite a scene here in washington, d.c. back to you. >> eamon, thank you. and a reminder, fed chair janet yellen's news conference is moments away. of course, we'll take you there live the moment it begins. first a quick break. "power lunch" will be right back
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we are as you see there just three minutes away from the news conference and fed chair janet yellen to comment on the fed's latest decision. danielle, and scott are here with us on set talk to this notion of the yield curve we are having a great conversation before. do we think it -- scott, the ten year two or lower? >> ultimately i think it does invert you know, we've had a pretty good move here i think, you know -- i'm still in the camp i think we are going to two or lower. but i always remind people, these things don't go in a straight line. if the economy starts to pick up in the second half, you know, we could probably see some upward pressure again, but ultimately by the end of this, the question i'm grappling now is, are we going to invert when the overnight rate gets to 3% or are we going to invert when the overnight rate gets to 2.25%
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but if it inverts at 2.25, that tells a lot of things about inflationary pressuredanielle. >> an interesting ot this morning, look at spread between the ten and two yooesh yield basically back to november of 2007 lows. why i think the market is not really buying the fed's bravado. i don't think they think the fed can get to where they say they're going with the terminal funds rate. >> can i explain the spread between the two and ten? the two dwrooer yield closer and the same at the ten-year yield you have a very flat yield curve. keep raising on the short end. >> to scott's point 2% on the ten year, catchingup from the short end. pressuring that inversion. >> recession potentially >> what the market before the fed statement, the economy so -- >> economy so slow now. >> and after the fed statement
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down to 79 points. though it's -- telling you something. indicating a message look at autos. >> talk about something before janet yellen talk about dividends think of bill grose as a bond guy. talking more and more about stocks think of you as a bond guy taken guggenheim from 10 cents to $280 billion. are you buying more stocks today? >> dividends are attractive. given where the market is, this isn't the time to wade into the stock market you know, i think wheev sue've a great run. data we're seeing, whether we like it or not is disappointing. you know, we're starting to realize that these deflationary pressures are stronger than we thought. this isn't the environment to be adding to a lot of risk. it's probably a time to take some profits and, and keep your po powder dry. >> cash. >> cash is not bad. >> seen used car prices drop the
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last five months pressure in apparel in this morning's cpi number adjust the retail sales numbers for inflation, it appears stronger than it is. flip the theory around, you see people can't get the sellers, the sellers can't get pricing power and having to reduce exactly what came out of the small business report as well. same message >> interesting -- i don't want to overstate this but i think it's important that -- >> hold on. >> okay. >> you see her coming. >> okay. >> good job. >> here's the chair. >> fed chair janet yellen. good afternoon before i get started, i just want to say that our thoughts are with those who were injured this morning todayed federal open market committee decided to raise the target range for the federal
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funds rate by were quarter percentage point our decision to make another gradual reduction in the amount of policy accommodation reflects the progress the economy has made and is expected to make towards maximum employment and price stability objectives assigned to us by law. we also releapsed today as an addendum to ou normalizati normalization, principles and plans, additional information on the process we will follow in normalizing the size of our balance sheet once we determine that it is appropriate to begin doing so i'll have more to say about our interest raitts rate decision and balance sheet policy, but first i'll review recent economic developments and the outlook. following a slowdown in the first quarter, economic growth appears to have rebounded, resulting in a moderate case of growth so far this year.
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household spending, which was particularly soft earlier this year has been supported by solid fundamentals including ongoing improve innocent in the job market and relatively high levels of consumer sentiment and wealth business investment, which was weak for much of last year, has continued to expand, and exports have shown greater strength this year, in part reflecting a pickup in global growth. overall we continue to expect that the economy will expand at a moderate pace over the next few years. in the labor market, job gains have averaged about 160,000 per month since the start of the year a solid rate of growth that although a little slower than last year remains well above estimates of the pace necessary to absorb new entrance to the labor force. the unemployment rate has fallen
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about a half percentage point since the beginning of the year and was 4.3% in may. a low level by historical standards, and modestly below the median of fomc participants estimates of its longer run normal level border measures of labor market utilization have also improved this year. participation in the labor force has been little changed on net for about three years. given the underlying downward trend in participation stemming largely from the aging of the u.s. population, a relatively steady participation rate is further, a further sign of improving conditions in the labor market looking ahead, we expect that the job market will strengthen somewhat further turning to inflation the 12-month change in the price index for personal consumption
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expenditures was 1.7% in april up from less than 1% last summer, but down somewhat over the past few months. core inflation which excludes the volatile food and energy categories, intends to be better indicators of future inflation, has also inched lower. the recent lower readings on inflation have been driven significantly by what appeared to be one-off reductions in certain categories of prices such as wireless telephone services and prescription drugs. these price declines will as a matter of arithmetic restrain the 12-month inflation figures until the extraordinarily low march reading drops out of the calculation. however, with employment near its maximum sustainable level and the labor market continuing to strengthen, the committee
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still expects inflation to move up and stabilize around 2% over the next couple years in line with our longer run objective. nonetheless, in light of the soft eer recent inflation ratin, the committee is monitoring inflation developments closely let me now turn to the economic projections that committee participants submitted for this meeting. as always, participants condition their projections on their own individual views of appropriate monetary policy, which in turn depends on each participant's assessment of the many factors that shape the outlook. the median projection for growth of inflation adjusted gross domestic product or real gdp is 2.2% this year, and inches down 1.9% by 2019 slightly above its estimated longer run rate.
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the median projection for the unemployment rate stands at 4.3% in the fourth quarter of this year, an ticks down to 4.2% in 2018 and 2019. modestly below the median estimate of its longer run normal rate. finally, the median inflation projection is 1.6% this year and rises to 2% in 2018 and 2019 compared with the projections made in march, real gdp growth is little changed. the unemployment rate follows moderately lower path, and inflation, although marked down this year for reasons i mentioned earlier, is unchanged over the following two years in addition, the median estimate of the longer run normal unemployment rate moved down one-tenth to 4.6%.
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returning to monetary policy, for the past year and a half, the fomc has been gradually increasing its target range for the federal funds rate at the economy has continued to make progress towards our goals of maximum employment and price stability. our decision today continues this process we continue to expect that the ongoing strength of the economy will warrant gradual increases in the federal funds rate to sustain a healthy labor market and stabilize inflation around our 2% longer run objective. that's based op our view that the federal funds rate remains somewhat below its neutral level. that is, the level of the federal funds rate that is neither expansionary nor contractionary, and keeps the economy operating on an even keel because the neutral rate is currently quite low by historical standards, the federal funds rate would not
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have to rise all that much further to get to a neutral policy stance, but because we also expect the neutral level of the federal funds rate to rise somewhat over time, additional gradual rate hikes are likely to be appropriate over the next few years to sustain the economic expansion. even so, the committee continues to anticipate that the longer run neutral level of the federal funds rate is likely to remain below levels that prevailed in previous decades this view is consistent with participants projections of appropriate monetary policy. the median projection for the federal funds rate is 1.4% at the end of this year 2.1% at the end of next year and 2.9% at the end of 2019. about in-line with its estimated longer run value compared with the projections
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made in march, the median path for the federal funds rate is essentially unchanged. as always, the economic outlook is highly uncertain, and participant lgs will adjust the path to the federal funds rate in response to changes of their economic outlooks and views of the risks to their outlooks. as i've noticed previously, policy is not on a preset course let me now turn to our balance sheet. as i noted in our policy statement, we are continuing to maintain the size of our balance sheet by reinvesting proceeds from maturing treasury securities and principle payments from principle debt and mortgage-backed securities provided that the economy evolves broadly as the committee anticipates, we currently expect to begin implementing a balance sheet normalization program this year
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consistent with the principles and plans we released in 2014, this program would gradually decrease our reinvestments and initial a gradual and largely predictable decline in our securities holdings. the addendum to our policy normalization principles and plans that we release today provides further information for both treasury and agency securities, we will reinvest proceeds from our holdings only to the extent that they exceed gradually rising caps on reductions in our security holdings initially, these caps will be set at relatively low levels $6 billion per month for treasuries and $4 billion per month for agencies so any proceeds exceeding those amounts would be reinvested. these caps will gradually rise
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over the course of a year to maximums of $30 billion per month are treasuries and $20 billion for month for securities and remain in the utilization process. by limiting the volume of securities that private investors will have to absorb as we reduced our holdings, the caps should guard against outsized moves and interest rates and other potential market strains. as i previously noted, when our securities holdings begin to gradually decline, so, too, will the supply of reserve balances in the banking system. at some point, probably a few years down the road, the committee will bring the decline and our balance sheet to an end as the quantity of reserves is normalized i can't tell you what the longer run normal level of reserve
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ball,ebal balances will be, because that will depend on the committee's venchy decisions how to monitor policy most efficiently and effectively in the longer run as well as a number of yet unknown elements including the banking system's future demand for reserves in various factors that may affect the daily supply of reserves what i can tell you is that we anticipate reducing reserve balances and are overall balance sheet to levelss appreciably sen in recent years but larger before the financial crisis. as readers of our minutes know, the committee has on previous occasions discussed potential long-range frameworks for monitoring monetary policy depreciations do not need to be
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made for quite some time, and our future deliberations will benefit from the experience we will gain during the normalization process. at this point, i'll just point out that our current system is, would go well, and has some important advantages in particular, its simple and efficient to appropriate, does not require active management of the supply of reserves, and most importantly, provides good control of the federal funds rate and an effective transmission of changes in the federal funds rate to broader money market rates and because our current system is likely compatible with a much smaller quantity of reserves, our plan for gradually reducing our balance sheet does not constrain the committee's future options for how to implement monetary policy. finally, as noted in today's
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addendum, the committee affirmed changing the rate is our primary stance of adjusts the monetary policy in other words, the balance sheet is not intended to be an active tool for monetary policy in normal times. however, the committee would be prepared to resume reinvestments if a material deterioration in the economic outlook were to warrant a sizable reduction in the federal funds rate more generally, the committee would be prepared to use its full range of tools, including altering the sizes composition of its balance sheet if future economic condition was to warrant a more accommodative monetary policy and can be achieved solely by reducing the federal funds rate thank you. and i'll now be happy to take your questions
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>> from the "wall street journal. chairman yellen, the principles you release today say the balance sheet winddown should commence once interest rate normalization is well under way. with this latest rate increase, do you believe normalization is now well underway? >> so that is something that we've said for some time, and i've previously, when i've been asked, what well underway means, said that i don't want to define that in purely quantitative terms, but rather in quell tavty te call tative terms. there's no specific level of the federal funds rate that means we're well under way, but it's also a question of not only the current level but our confidence in the outlook and our projections for the future path
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of the federal funds rate. so we have increased our federal funds rate target now several times. our outlook is that we anticipate further increases this year and next year for the federal funds rate, and our statement indicates that if the economy continues to evolve in the manner that we expect, that we would feel the conditions will be in place to begin this process this year. >> madam chair, wondering if you talked to the president or members of his staff about the possibility of staying on as chair for a second term? and also wondering if you would consider doing that? something you thought about doing? and finally, there are three vacancies on the fed do you have any comment at all for the president on his failure to nominate anybody for those
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three positions? thank you. >> what i've said about my own situation is that i fully intend to serve out my term as chair, which ends in early february i have not had conversations with the president about future plans, and i do very much hope, i know that they have been working hard to identify appropriate nominees for the open slots, and i do very much hope that there will be nominations in the not too distant future in that the senate would take those up expeditiously. i look forward to having a full board. >> do you desire to stay on? >> i really don't have anything for you at this point. >> sam clemons from the "financial times." had a fairly long streak of weak inflation numbers as noted by the cpi this morning as well
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marketplace based inflation expectations are declining what kind of vigilance to you now say is needed in terms of weak inflation how does that interact with your policy outlook and would further disappointments argue for present calls on rate hikes or delaying balance sheet runoff? how do you think about those two potential responses to weak inflation? >> let me just say as i emphasized in my statement and always say, monetary policy is not on a pre-set course. we indicated in our statement today that we were closely monitoring inflation developments, and certainly have taken note of the fact that there have been several weak readings, particularly on core inflation. our statement indicates that we expect inflation to remain low in the near term, but on the other hand, we continue to feel that with a strong labor market
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and a labor market that's continuing to strengthen, the conditions are in place for inflation to move up now, obviously, we need to monitor that very carefully. and -- ensure -- especially with roughly five years of inflation running under our 2% objective, that is a goal to which the committee is strongly committed, and we need to make sure that we have in place the policies that are necessary to achieve 2% inflation, and i pledge that we will do that, but let me say with respect to recent readings, it's important not to overreact to a few readings, and data on inflation can be noisy as i pointed out, there have been some idiosyncratic factors.
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i think that have held down inflation in recent months, particularly a huge decline in cell telephone service planplans some declines in prescription drugs. we had an exceptionally low reading on core pc in march and that will continue to hold down 12-month changes until that reading drops out. but we are this morning's reading on the cpi showed weakness in a number of categories and it certainly is something that we will be closely monitoring in the months ahead. we're focused on making our policy decisions on the medium term outlook and we will, you know, be looking carefully at incoming
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data and as always revising our outlook in policy plans as appropriate. [ inaudible question ] so continue is today's actions show to feel that the economy is doing well showing resilience we have a very strong labor market, an unemployment rate that has declined to levels we've not seen since 2001. and even with some moderation in the pace of job growth, we have a labor market that continues to strengthen and policy remains accommodative. so it's important that inflation move up to our 2% objective as our projections show we continue to expect that and believe the
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conditions are in place. but we will monitor incoming data obviously and be attentive to rethinking our outlook if it seems appropriate. >> -- from bloomberg news. hate to belabor the point on inflation, but i was wondering, i hear a lot of the conversation now and other committee members, it's an unobservable thing, at best an estimate the assumptions in there seem to me the economy today is much like the economy yesterday when if anything, we've learned that the post-recession economy is vastly different than it was before the recession so i'm wondering something you've talked about is to focus more on the change in inflation. actual inflation and is it going up or going down and basing policy more on that?
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what would be the risk of that and why not adopt that if you have such a long period of underperformance >> well, we are closely looking at the actual performance of inflation. and altering our views on the basis of discrepancies between what we see and our expectations and while it is very difficult to pin down what is the longer-run normal rate of unemployment and there's a great deal of uncertainty about it and it's hard to pin down especially given the fact that the so-called phillips curve appeared to be quite flat. that means that inflation doesn't respond very much or very quickly to movements in unemployment nevertheless, that relationship, i believe, remains at work we've seen that operate historically now, in the face of very low unemployment that we've seen, while wage growth has picked up
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somewhat, it remains low and inflation is influenced by a number of different factors. but we certainly haven't seen much or any evident upward pressure on inflation. in light of that, the committee has successively moved down the estimates of the normal longer run rate of run of unemployment. and in this projection, it's moved down to 4.6%, a tenth lower than it was last time. so while the unemployment rate is below that, it's not that much below it. >> -- "the washington post." we saw measures of consumer and business rise after inauguration on expectations that the administration would move quickly to introduce policy changes like tax cuts in infrastructure spending. some of those policy changes have been slower to materialize than initially expected. how do you view the positive and
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negative risk from policy changes to your outlook? and has your view changed on that at all in the last six months >> so i would say that business and household sentiment remains quite strong although many forecasters have pushed back somewhat the timing of expected policy changes such as changes to tax policy or fiscal policy more generally i would say that based on my observation of actual spending behavior and my discussions with our wide range of contacts, that i haven't seen very much evidence that thus far expectations of policy changes have driven substantial changes in either consumer spending or investment spending.
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so i really wouldn't expect any significant pullback many of our business contacts, i think their confidence remains high they've not really changed their plans yet, and they have a wait and see attitude >> measures of financial conditions show that since the fed started raising interest rates two years ago, financial conditions actually have loosened consumer business borrowing costs in many cases are down do you have the sense that the market is not listening to you how much of a concern is that for you? and at some point does it convince you you need to raise rates, perhaps, more quickly >> well, in deciding what the appropriate path of rates is, we take many different factors into account. we have certainly noted the stock market is up considerably
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over the last year that usually shows up in financial condition indexes and isan important reason why some of them show easier financial conditions there's been a modest decrease recently in the value of the dollar although it's up substantially since mid-2014 so we take those factors into account in deriving our forecasts and deciding the appropriate stance of policy we've done that. but other things also affect the stance of policy so there really can't be any simple relationship. we're not targeting financial conditions we're trying to set a path of the federal funds rate the taking account of the factors and others that don't show up in financial conditions index
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we're trying to generate paths for inflation that meet our mandated objectives. >> howard snyder with reuters. on inflation again, what's the possibility that something more nefarious is at work here? which is the sort of weight of central bank credibility now for a generation really plus globalization has just pushed the world into a low inflation environment that's going to be very hard to get wages and prices moving again. and then related to that, why not four, why not 3.8? you banked a quarter of full percentage point now why rush >> so i don't think central bank credibility, at least the fed's credibility has been impaired. we look at a whole variety of indicators of inflation
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expectations professional forecasters whether it's in the blue chip or the survey of professional forecasters, those expectations have remained quite steady and in close alignment with our 2% inflation target tips-based measures of inflation compensation do not provide straight reads on market participants, estimates, and expectations about inflation they embody other elements, risk premia they had moved down and now have moved the remain at low levels but they've moved back up again. it is true that some house hold surveys of inflation expectations have moved down, but overall i wouldn't say that we've seen a broad undermining
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of inflation expectations. but you asked, also, i guess about structural changes, perhaps impacting the inflation process. and that certainly is possible and estimates of the normal longer run unemployment rate, they are quite uncertain i agree with your assessment really not certain what they are. and policy is not being -- is not based on some firmly held preconceived notion. we're watching very carefully how the actual economy performs. and, you know, i continue to believe, though, that with job growth running well in excess


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