About more rate hikes ahead and about the outlook for the American Economy were all over that. You cannot afford to go anywhere power lunch starts right now lets get a check on the markets ahead of the fed decision the dow is up for the first time in about three days, pushing closer to record highs a gain right now of 82 points. The s p 500 up for the first day in four. Thats up about 9. 5 points the nasdaq is on a threeday winning streak, its longest since late august. The nasdaq is higher by 34 points ibm is driving the dows gains adding 25 points all by itself and that is helping to offset the drop in nike shares on the back of its earnings it is the ipo of the day here, and of course were talking about survey monkey. Shares are soaring about 60 in its debut as a publicly traded company. And Home Builders are taking a hit at the prospect of higher rates, Mortgage Rates and a 30year loan very close to 5 new home sales data coming in strong more on the health of housing straight ahead less than an hour now to that fed decision. A quarter point Interest Rate hike is widely expected, and Steve Liesman is standing by uptown in washington hi, steve. Tyler, thanks very much we are ready for whats expected to be the third rate hike bringing the fed funds rate between 2 and 2. 25 and maybe bracing for a fourth rate hike in december. Take a look at the cnbc fed survey 98 of our respondents saying theyll hike today 96 saying theyre going to hike again in december. And thats why you see there an average of four rate hikes expected and then the big debate, as melissa was suggesting, is it two, is it three or maybe even four rate hikes in 2019. I want to share with you a comment here from Goldman Sachs that points the way here they said inflation is at target, the Unemployment Rate is below target and falling, and yet the funds rate remains 100 basis points below the feds estimate of its neutral level. Most fomc participants now agree that this makes little sense, the fed has some catching up to do and how much they do and they think they have to do well get today because we are going to get new forecasts for both the economy and the outlook for the funds rate from fed members as well as, of course, the press conference with jay powell just there are some new members whose forecast will be interesting. Richard clarida making his seat for the fist time. All of these guys except for Lael Brainard are trump appointees jay powell appointed by president obama as the governor, appointed by President Trump as the chairman each one has a little expertise in a different area there. Sometime next year, maybe later this year, theres three new trump a pointi nominees to the Federal Reserve. Shelly bowman, nellie liang and Marvin Goodfriend whos been sitting out there with some opposition to his apparently hawkish views on the Federal Reserve. So 2 , 2. 25 today, and then well see if next year we go up to 3 , tyler thank you very much, steve. Melissa, ill toss it over to you. All right, tyler. You know markets are higher ahead of that fed decision s p 500 up by about a third of a percent. Dom chu joins us here at the new york Stock Exchange. As usual, sort of waiting for the press conference really. Were getting the fed drip. We didnt see it yesterday but were seeing it today. Up 70, 80 points like you said the thing that a lot of traders are watching is this idea that we have financials trying to assume some kind of leadership role but continuing to fail on that front they just its not that theyre going down down, theyre just not going anywhere. And with the idea that Interest Rates are creeping higher on the long end, the yield curve is relatively flat but still trying to steepen a bit, those Interest Rate sensitive stocks outside of financials are seeing some of that pain but youre not seeing any real leadership role emerge from financials. Its something art cashman spoke to me about, theyre going to be watching and financials may need to assume a little more leadership. We saw signs of life last week and already this week theyre down almost 2 which is a surprise going into the fed meeting. Right and its not just the real estate sector overall, it is the traditional lenders, the regional banks, some of the Money Center Banks out there as we watch to see how this fed trade play goes into it, we know its a near certainty theyre going to raise rates the idea is the commentary the presser is going to be key whether or not headlines come out of that, giving some indication of how certain that december look will be or how much that aggressively perhaps upward trajectory could be in 2019 could have a real effect on some of these Interest Rate sensitive stocks for right now we know utilities and real estate have been laggards if that continues to be the case, that could be something to watch as well. Dom, thanks dom chu here at the Stock Exchange with me lets now find out how bond traders are positioning themselves ahead of the decision and powells News Conference Rick Santelli is tracking the action at the cme. Hey, rick. Hi, melissa lets just highlight yield curves traders are going to watch should the rate move up to 2 , 2. 25 . Theyre watching 7 to 10s. Theyre watching 30 minus 5s and 10s minus 2s the latter two a little steeper than some of the recent flat narrow areas they traded one week of 10s, where did it stop right at 3. 11 yesterday. If you open up to may 1st, you can see why that is so important. That is the high close of the year go all the way back to june of 2011 if we take it out, thats what well be comping to. This could be a big 25 basis points and finally the dollar now, i look up at the board and its up a little bit if i put a oneweek chart up, youll see on the right side a little hump. It was up a bit. When you put it into context the way its traded the last four days in front of today, you can see clearly going nowhere quickly, although it is holding 94 tyler, back to you. Rick santelli, thank you very much the fed meeting may be our prime focus in washington but up in new york at the United Nations, President Trump has stepped up the war of words with china over trade. Eamon javers is there. Reporter yeah, thats right, tyler. Im here in new york city where the president chaired the Security Council meeting here at the United Nations earlier today and he levied a fairly dramatic accusation at the Chinese Government of interference in the 2018 u. S. Midterm elections in a speech earlier today. Heres what the president had to say. They do not want me or us to win because i am the first president ever to challenge china on trade and we are winning on trade. We are winning at every level. We dont want them to meddle or interfere in our upcoming election. Reporter tyler, the white house hasnt put out any evidence of chinese interference in the election. Of course they have accused of chinese of politically selecting their responses to american tariff action by placing tariffs on products that they know will affect particular congressional districts. But in my emails with Administration Officials over the past couple of hours, it does seem as if the administration will be putting out something to back up the president s accusation, perhaps later today, so well stand by for that information if we get it from the white house. The team traveling with the president here in new york city today but otherwise, tyler, a dramatic allegation from the president of the United States that the chinese are trying to interfere in this 2018 midterm congressional election. Eamon, thank you very much. So Interest Rates, trade, political upheaval, all with potential effects on the markets and your money lets discuss that with the vice chairman of ever corps and evan moore. Gentlemen, welcome, good to have you both here. Thank you. Lets get the easy question out of the record out of the way first and on the record. What do you think the fed is going to do today . The fed is going to raise by 25 basis points. Theyre going to hike 25 and i think signal that they expect to be hiking again in december. In december what they do is one thing. What they say or eliminate from saying from previous statements is quite another thing i was reading your report, krishna, and you think that they will remove the language let me let you describe what language they may remove and what it means. So right now the fed has a line in the statement that says policy remains accommodative in regular english that mean its stimulative, its below the neutral rate setting i think at this meeting that language goes, so they no longer describe policy as accommodative. Now, the question is what does this mean . Is this dovish, is this hawkish . My sense is that the market may be tempted to read this dovish. Why, because if theyre not going to be accommodative, the opposite of that is restrictive. So what you say i think has a certain basic common sense to it, but i think theres a mindset in the market that jay powell has told us hes just taking rates back to neutral and so when they get rid of this language, what theyre saying is theyre starting to draw closer to that neutral setting. My own view is thats actually not the right way to read it i think we have to be careful here in my mind the fed is backing away from the idea it has any idea what neutral is and so thats why they want out of the business of benchmarking rates next to this neutral setting. There was a piece in the wall street journal today on this very point. Its the r is what it is, that were trying to move to a neutral but nobody really knows what neutral means, do they . Do you farr knows but im not going to tell. I really shouldnt do that when you start with an inflation target so they have designed a certain goal and we know that they have these two mandates for price stability and then they have employment. Arguably theyre there on both of those and what theyre worried about is this growing economy that continues to show strong numbers. And they dont want to fall behind that curve. They dont want to be in that 1970s position where we have that runaway inflation so they play this balancing act with rising rates just in time to try and stay ahead. Maybe theyre going to do it, but you know the saying on wall street is that bull markets, old bull markets dont die, theyre killed by Monetary Policy and the real risk, i think, is that Monetary Policy kills this bull market. Melissa lee has a question from the floor of the nyse melissa. Krishna, if the real risk is Monetary Policy, are you afraid theyre going to raise too many times or what the market might perceive as too many times in 2019 weve got new dots coming in on the dot plots, but that could effectively alter where the fed sees the economy growing and, therefore, change the way they think about future rate hikes. Look, i think what the fed is trying to do is its trying to ballet set of mostly international and traderelated Downside Risks with the strength of domestic momentum that creates some kind of medium term overheating risk not inflation running away with us today, tomorrow, next week, next month, but on a two, threeyear view getting too much inflation in the system. So trying to find the rate path that threads the needle and gets the balance right between these risks. Im perfectly comfortable with a basis of three hikes next year. But my question to you, michael, is the fed, i think, will still be data dependent. Jay powell will be. How the economy is performing and if trade and trade tussels turn out to be a weight on the economy, will he wait to raise rates . Yeah, thats the key question and were all going to see at the same time and we hope we dont see him blink at the wrong time i had dr. Jeffrey lacker on the farrcast, my weekly podcast, and dr. Lacker things we are underestimating the fed. He thinks we could have six more now, he was hawkish, but he thinks the risk is to being behind the curve a lot of economists, and i would ask krishna too, think that the fed is indeed late on this, that they should have begun raising rates years ago and theyre still now playing catchup. I think that theyre looking to have that dry powder that they dont have now and i hope they dont overreach is my sense. Final thought, quick. So im not sure they are behind i do think they need to keep going. Remember, inflation and Inflation Expectations are still fairly subdued and they do need to finish the job of getting those reanchored long before we go into the next downturn. Gentlemen, thank you. Weve got to leave it there. Nice plug for the farrcast, by the way. Im sure its on itunes. Download it all day now. Well see you a little bit later. Melissa. Thats a catchy name too. Coming up, new bombshell accusations against Supreme Court nominee brett kavanaugh. Kavanaugh responding now well have that and a first look mbs hat the nominee will say to meerof the senate at tomorrows big hearing thats next on power lunch. Im ken jacobus, im the owner of good start packaging. We distribute environmentallyfriendly packaging for restaurants. And weve grown substantially. So i switched to the spark cash card from capital one. I earn unlimited 2 cash back on everything i buy. And last year, i earned 36,000 in cash back. Thats right, 36,000. Which i used to offer Health Insurance to my employees. My unlimited 2 cash back is more than just a perk, its our healthcare. Can i say it . Whats in your wallet . Yes or no . Gin. Do you want the same tools and seamless experience across web and tablet . Do you want 4. 95 commissions for stocks, 0. 50 options contracts . 1. 50 futures contracts . What about a dedicated service team of trading specialists . Did you say yes . Good, then its time for power e trade. The platform, price and service that gives you the edge you need. Looks like we have a couple seconds left. Lets do some card twirling twirling cards e trade. The original place to invest online. Welcome back to power lunch live from washington, d. C. Im Tyler Mathisen as we count down to the fed decision on Interest Rates, there are new bombshell accusations against Supreme Court nominee brett kavanaugh. Brett kavanaugh is now denying those allegations from a third woman who accused him of participating in Sexual Assault. The woman is Julie Swetnick and her attorney is Michael Avenatti, the lawyer who is famously representing stormy daniels. Swetnick says kavanaugh and his friends would spike the drinks at party, and then have sex with them this happened to her and she told two other people about the rape swetnick does not say that it was kavanaugh who raped her. She also does not say she saw him directly assaulting anyone else, only that she watched him participate in the leadup to those actions. In a Statement Released through the white house, kavanaugh says, quote, this is ridiculous and from the Twilight Zone i dont know who this is and this never happened. Cnbc has not vetted swetnicks allegations. Avenatti has been teasing this announcement for days now and it comes less than 24 hours before kavanaugh and the original accuser, Christine Blasey ford, are slated to testify in an open hearing on capitol hill. Kavanaughs prepared testimony was released this afternoon and in it he called Sexual Assault horrific and morally wrong and that previous accusations were lastminute smears chuck grassley, who is the head of the Senate Judiciary committee would say only that his committee has received the statement from avenatti and that his lawyers are reviewing it President Trump just tweeted that avenatti is a, quote, thirdrate lawyer making false accusations. Tyler, for the moment the committee is still scheduled to vote on this nomination on friday however, weve heard that senator jeff flake is headed to the senate floor to make some comments his support or lack thereof will be critical to whether or not kavanaugh gets confirmed. And the hearing is still scheduled for tomorrow morning. As of now, that is right. The white house has told cnbc that they stand by kavanaugh. Thank you very much stay with us, if you dont mind. So how will these new allegations against judge kavanaugh impact President Trumps agenda in the future lets bring in cnbc contributors michael farr and sara fagan. Sara was white house political director for george w. Bush. Sara, let me begin with you. I will get to your relationship with judge kavanaugh its a personal one, you Work Together with him and well get there in just a moment but as we look forward to the midterm elections and as this turmoil continues to brew, and there is that tomorrow and there is the president s meeting with mr. Rosenstein about his continued tenure as the Deputy Director at the Justice Department, how do you think all of this will play out with the electorate and the voters in early november well, the Supreme Court i call it chaos, because thats where we are right now, has really energized both bases. There was a lot of thinking and actually a lot of evidence in polling and other Public Opinion measures, ballot measures that republicans werent energized and werent showing up in primaries as compared to the democrats. I think that changes all of this theres no doubt democrats are energized probably more so, but republicans now are mad. They feel like democrats are trying to take the Supreme Court nominee away from them. Take him down. Take him down at whatever cost. Pure and simple. Raw politics at whatever cost. Is this as what we talked about yesterday here and what i think irks a lot of people and im speaking for people as well is the idea that these allegations, the first ones, were in a letter to senator feinstein of california and she held those allegations for Something Like six weeks before bringing them forward. If she had brought them forward six weeks or eight weeks ago, maybe this would have unfolded in a very different way. And so the fact that she didnt plays into the idea that this is a political hit job using the words that the president did yesterday. It absolutely does, tyler and look, these are serious and they do need to be reviewed. The senators are doing that tomorrow, at least with the first accuser, and that should be done. But at the same time you make a very valid point. Michael, jump in here is the trump agenda, per se, damaged by these kinds of allegations, damaged by this process, damaged by whats going on at the Justice Department you know, i dont think that weve seen, at least from the markets reaction, much get damaged by these various blowups in the media regarding the trump agenda so weve been through these blowups before and markets seemed to hold in just fine. And it does and trade they dont seem to be fazed by the trade issue, none of it. Well, the government too, the government funding bill, you know, appears to be moving forward. So despite all of the chaos on the Senate Judiciary committee. And the threats to even shut down this weekend. But we are right before a midterm election, sara, and this does the timing at least around washington, rumor circles, say thats the real point here does it have does this have a real effect and what would the effect be . Who wins and loses even though it energizes the base, i guess the question is what happens to the College Educated swing voter who is a woman who might be perhaps concerned by some of the accusations that weve heard against kavanaugh. I think that you can look toward senators like Lisa Murkowski and Susan Collins to see how this might play amongst republican women and i think it was very telling that yesterday murkowski said this is no longer about kavanaughs qualifications, this is about do you believe the women. I was going to ask you about murkowski. She remains effectively a swing vote you have a relationship, a professional one, with judge kavanaugh from having worked with him in the bush white house. Has anything you have heard given you any pause or changed what im told has been a very, very high view of him . No, not a thing particularly this new allegation is ridiculous. To accuse somebody of premeditated gang rape, which is what this Michael Avenatti client has done, it just doesnt add up it does not comport with the person i know. I worked with him for five years. Ive been in many social settings with him, big groups, small groups hes a gentleman hes respectful. This just does not line up with the person i know. And i do think this has become very political and i dont think any of these women, no matter what happened to them by whom, when, how, what, i dont believe it was judge kavanaugh. They have not been well served by this process because they have brought this out in the 11th hour and turned it into a political circus, which is exactly what its been designed to do. Fiasco is the word that comes to mind here really. Sara, thank you. Michael, thank you as well melissa, up to you all right, tyler. A busy week for the senate, not just kavanaugh but also hearings today concerning what social media giants do with your data well have the latest from capitol hill. Another big step for comcasts takeover of britains sky. That and much more coming up on power lunch. Looking good at booking. Com, we cant guarantee youll good at that water jet thingy. But we can guarantee the best price on this hotel. Or any accommodation, from homes to yurts. Booking. Com booking. Yeah welcome back to power lunch. Im melissa lee at the new york Stock Exchange it is the everchanging media landscape. Fox is selling its remaining 39 stake in sky to our parent company, comcast, for 15 billion. Fox previously agreed to sell the stake to disney as part of a separate deal. Disney gave fox the green light to sell. The announcement comes just days after fox lost out on an auction to comcast. Big tech firms facing tough questions in washington over what they do with your data. The latest on the data privacy hearings coming up. And we are 32 minutes away from the feds decision on Interest Rates a hike is expected but wt llhawi fed say about the economy . Stay with us to find out, well be right back. Our new, hot, fresh breakfast will get you the readiest. buzzer sound holiday inn express. Be the readiest. With pg e in the sierras. And im an arborist since the onset of the drought, more than 129 Million Trees have died in california. Pg e prunes and removes over a Million Trees every year to ensure that hazardous trees cant impact power lines. And since the onset of the drought weve doubled our efforts. I grew up in the forests out in this area and honestly its heartbreaking to see all these trees dying. What guides me is ensuring that the public is going to be safer and that these forests can be sustained and enjoyed by the community in the future. Im frank holland, heres your cnbc news update at this hour President Trump meeting with israeli Prime Minister Benjamin Netanyahu at the United Nations this morning he repeated his belief that a twostate solution is the only way for lasting peace between the israelis and the palestinians i like a twostate solution thats what i think thats what i think works best. I dont even have to speak to anybody, thats my feeling now, you may have a different feeling. I dont think so, but i think twostate Solution Works best. Pennsylvania corrections Officials Say bill cosby will serve his sentence at a new state prison in the philadelphia suburbs. That 400 million facility opened two months ago. Its about 20 minutes from his debated estate cosby was assigned nn7687. Pope francis offering a message of hope that the vatican can heal past divisions with catholics in china he spoke with the faithful in st. Peters square. The vatican completed a landmark agreement over the nomination of bishops in china thats the cnbc update at this hour melissa, back to you nike shares down slightly despite a beat on earnings yesterday. The report on the heels of nikes new just do it campaign facing controversial former nfl quarterback Colin Kaepernick lets bring in Credit Suisse analyst Michael Benetti for his take on the quarter. Michael, great to see you. Good to talk to you, thanks. There are things to pick at in the quarter, but overall what kind of grade would you give it . I would give it a strong grade. There was something to pick at, mostly because expectations are fairly high heading into the quarter. The company has been coming off the mat after a couple of years of losing shares to competitors around the world so the numbers are generally moving in the right direction, but the stock got a little ahead of it so you see it give back a little bit today no Serious Problems in our view. It hit an alltime high just since september 21st when you think about valuation, because this seems to be the one strike against nike when it comes to investors who generally love the stock but dont like where the stock is valued right now, historically speaking compared to itself, where is nike in terms of valuation and where should it be in your view . You know, i think its at about 30 times on a pe basis you can make the case for high 20s certainly. You can look back in late 2015 where it touched 30 times. The s p was in worse shape at that point nikes fundamentals were about to peak, so you could argue here they have been giving up share they seem very well poised to be taking that share back now at this point and they have done a lot of things behind the scenes to raise where they can take margins of the business over the next few years you can think about higher highs from here as they have takenth chance to deep dive on the business and make it more profitable Going Forward as they give back that share. You mentioned a time when they were losing share they were losing share to adidas for the most part. Are they taking it back from the player that took it in the first place . I dont cover adidas on our side, its covered across the atlantic, but it does seem like when we talk to retailers, the nike product theyre getting in stores, theyre saying these guys are much better positioned than they were with product coming into our stores a few years ago. We hear it in the u. S. , we hear it in europe, so very important markets. We do hear retailers say were going to give them back a few spots on the wall and places on the shelf that weve given to other brands adidas was one of them so the indicators are pretty good. Footlocker is up 4 on the back of nikes earnings. Is that justified . You know, footlocker is the opposite its a very cheap stock. Theres some controversy in the stock right now about whether nike will do some things over the next few years, to be selling more of their product through their own channels footlocker is very cheap and very heavily levered almost 70 of the product is nike and you are on the front end of a nike product cycle. When nike says the product is working, were going to be pushing more product out, their wholesale business new about 9 in the quarter, that was a good acceleration from the prior quarter. That seems to look like the near term is pretty good for nikes wholesalers so i think thats why footlocker is up on that. Michael, thank you, appreciate it. Big tech in the crosshairs today. Lawmakers Holding Hearings into data privacy its not about if there will be legislation but what kind of regulation Silicon Valley might be facing. Well discuss that. Were counting down to the feds latest Interest Rate decision which is followed by jay powes nllews conference well be all over it, so dont go anywhere. Danny Dichter in 1989, a new Wireless Technology was being tested for the first time ever. It allowed more users to connect at the same time while on the move. Other wireless carriers considered the tech too expensive, but we saw it as the birth of reliability and the backbone of a company we all know as verizon. So we were the first to commit to the cdma system and the first to build our entire network around it. Today, once again, were transforming reliability as we know it, building americas first and only 5g Ultra Wideband Network with unprecedented capacity, enabling faster speeds and the lowest latency anyone has ever experienced on a wireless network. Which is crucial, because well be relying on it more than ever. man its really quite impressive, uh, what yall have put together here to, uh, to show the quality of the system. There is a chance thats the last time. 300 miles per hour, thats where i feel normal. I might be crazy but im not stupid. Having an annuity tells me retirement is protected. Annuities can provide protected income for life. Learn more at retireyourrisk. Org welcome back breaking news on trade not involving china this time. Tyler, two sources are telling us that the u. S. Trade representative does plan to issue the text of a deal with just u. S. And mexico tomorrow, though that deadline could slip ahead of the deadline to submit that text to congress. One source is telling us that the text will be written in a way to allow canada to join onto this deal later, but for now the u. S. Trade representative, Robert Lighthizer has said there is still a fair distance between the u. S. And canada on trade negotiations time is running out and so two sources telling us that the text of a deal with just u. S. And mexico will be released tomorrow. And what is notable here not only is that were going ahead with just mexico in this case, ill get your thought on that in a minute, michael, but this is the first time we will have seen the actual details of the mexico deal that was struck a month or so ago. Thats right. There have been questions about what text actually means is it bullet points, is it a detailed outline when i spoke to representative kevin brady yesterday, who was chair of the ways and means committee, he said that he expects to see the actual written legislative text of a deal that congress would have to then approve at some point in order for it to move forward. Why, michael, has the stock market seemed to step past all of this trade turmoil . You know, the stock market has stepped past most of the noisy headlines that are out there. I think maybe based on the north korea example, that somehow in spite of all of the bluster were going to end up in a decent place ive known Bob Lighthizer personally over ten years. Very bright, very reasonable, effective, efficient kind of a guy. Frankly, i cant imagine how you have a nafta without canada, but its its a pretty big country up there. They take up a lot of space, pretty Good Business trading partner with us. But it does sound like the door is open and it puts pressure on canada saying we will do this without you. But here you go. You can join in, but were very serious. We have to leave it here, but its hard to see how it would work okay, canada, you can come in and accept whats been signed between the u. S. And mexico because there may be separate issues, separate kinds of products that are at issue here with canada, like dairy, like automobiles and so forth its hard to see how that would work. The question is if its even legal as well. Thanks very much. Melissa. All right, tyler amazon, google, apple and twitter are under scrutiny as the senate holds a hearing on data privacy Julia Boorstin is monitoring that for us. They are questioning executives from at t, apple, google and twitter as well as Charter Communications about their Data Protection practices and how to best craft regulation there is a strong desire by both republicans and democrats and by both industry and Public Interest groups to work in good faith to reach consensus on a National Data privacy law that will help consumers and force shady practitioners to clean up their act. With general consensus that regulation is inevitable and that federal laws are better for businesses than a patch work of state laws, amazons representative pushing to avoid the comprehensive approach of californias privacy law set to go into effect in 2020 google saying that complying with new european privacy regulations is a tremendous challenge, that law is similar to that in the u. S. Would hurt startups senator klobuchar pushing companies for a 72hour window for data breach notification most companies do not support the idea of making consumers have to affirmatively opt in to having their data used and shared, saying it would inconvenience users and hinder their businesses this is a story that is not going away any time soon. Apparently not, with the degree of disagreement out there. Julia boorstin in los angeles. For more reaction lets bring in Scott Galloway scott, great to have you with us. Thanks for having me. If you were asked by this committee what can we do, what should we do, would your suggestion look like anything like what the European Union has put in place in terms of gdpr . No, i think theres been unintended consequences. I would argue gdpr may have entrenched big techs position if you get an optin requirement from google, your finger is on that accept button as soon as possible if you get an optin button from bbc or a Media Network thats not as strong, in addition, these companies, regulation like this is expensive and complex to adhere to. These firms have a lot of lawyers to handle this type of thing and a lot of administration as a matter of fact, google is advertising to some of its biggest customers, if you spent more money with us or are part of our advertisers, we can help you comply with gdpr so they were turning a bug into a feature. These things are regulation, and i think we talked about this i think antitrust is the way to go but i dont think gdpr is the role model. Amazon was expected to say that it had to divert significant resources, both human and monetary resources, in order to effect gdpr and thats Amazon Amazon has really deep pockets but in terms of the willingness, the political will for antitrust solutions of these big tech giants, is that does not exist . Id like to think it does i think that rather when you vote for regulation, youre voting for the government. I think when you vote for antitrust, youre voting for competition. The market is how do you break up a google, though easy. Google, google cloud, youtube. It was broken up before. That doesnt change the dominant position that google has in search. It doesnt change certain when you say google is a monopoly, you can say its got 98 or whatever High Percentage of all the search terms. When you break it up according to those business lines, it doesnt change that, does it i think you end up with three different organizations where theres probably more hiring, probably more venturebacked Companies Looking to be bought, a Broader Tax Base to your base it doesnt crack the monopoly on search. But when you go into a company and say we want to break you up for agentitrust reasons, isnt it because they have a monopoly on something . The reason you break it up is because you want more Small Companies to have a shot at getting bigger when you have google, which also controls youtube, thats bad for Small Companies to get out of the crib if you had three different companies, you would have most likely just more competition quite frankly. I think, for example, them going after each other, i think google would be more inclined if they were alone to proactively say were going to regulate ourselves, because right now the reason google doesnt show up to the Senate Hearings when called can be explained in a number, and thats 90 or 93. They have a 90 share. If they were a Search Engine with 30 share, they probably would have shown up. To your point, im not sure how you take that search share down without some sort of regulation that either creates some sort of, i dont know, tax on the data but going to amazon, i think amazon in the retail community, theyre the largest employer in america, is healthier if they can subsidize with the profits from aws when the chinese brought in steel below cost in the 80s, we called it dumping. When amazon does it with aws, we call it innovation. Of all the major social media giants facing criticism in washington right now, who do you think is most at risk in terms of their business model, in terms of what they do and how much theyll have to spend on regulation hands down Facebook Facebook has been weaponized if you think about it, social media is nicotine, its addictive, but doesnt give you cancer advertising is the tobacco that gives you cancer in order to get more clicks, these companies traffic in rage, controversy and go to the highest bidder so netflix hasnt been weaponized the companies that want to get more engagement will sell to the highest bidder, even if they pay in rubles. And facebook doesnt put up any safeguards to protect the commonwealth Scott Galloway, nyu thank you very much. We are moments away from the fed decision on Interest Rates another increase, of course, widely expected, a quarter point. Up next, well take a closer look at how rising rates affect housing, and how it becomes a reality. 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And this is moving day with Reliable Service appointments in a twohour window so youre up and running in no time. Show me decorating shows. This is staying connected with xfinity to make moving. Simple. Easy. Awesome. Stay connected while you move with the best wifi experience and twohour appointment windows. Click, call or visit a store today. Welcome back to power lunch, everybody. Were Just Moments Away from the fed decision on Interest Rates, expected to raise those rates by a quarter point, potentially pushing up mortgage points, nearing 5 thats old school numbers. I remember when they were even higher. Me too. Mortgage rates are near a sevenyear high an the 30 year fixed loosely follows the yield on a 10year treasury 30 year fixed mortgage is up a full percentage point from a year ago it was below 4 until january of this year. With the supply of entry level homes very low, its no surprise were seeing a slowdown in home sales. Freddie mac is predicting sales will be lower this year than they were last year. There are new homes coming on market why arent people buying them. Too expensive . New homes are actually, yes, the supply is rising we know that newly built homes were higher a year ago home prices are at a premium and higher we saw them rise up over 2 compared to a year ago builders would love to put up more homes, but there is a Price Premium because of the high cost of land, labor and especially materials when you have those new tariffs in place none of thats helping they would probably love to buy the far compound we would all love to buy that its for sale, please make me an offer this is what were concerned about with the fed hike. When this happens, we see affordability go down. House price gains are slowing down a little bit, theyre still faster than inflation. Interest rates higher, its still a problem 7. Melissa we are just minutes away from the fed decision on Interest Rates. Well have what that means for you live stay with us on power lunch. We are just minutes away from the fed decision on Interest Rates Tyler Mathison is live with more for you from d. C lower rah from rbc capital markets. Lori, what are you looking for we think theres a possibility theyre going to talk down trade. Im curious to see if we hear anything on consumer replacements today no change 25 basis points in rates i think the interest thing is, when they put in 2021 in their forecast, does the Unemployment Rate stay in their forecast. I think it will be interesting to see how long they want to prolong this idea of steady expansion. 2021 will be interesting. Do you really care what they say about 2021 this is a purple market how much longer does it last they may well implicitly say today that they think the bull markets will run the economy michael farr, can you get the statement in your hands, what are you going to be looking for . A couple things mark list is a, ill be looking to see if they change the language thats going to be important in the markets, im going to be watching the bank stocks im keeping my eye on Goldman Sachs, jpmorgan, bb t and pnc. Those prices are all down coming into this statement, i think were going to see them go higher after the statement, this is an improving environment for banks. Id like to jump in and ask david a question last hour they said if they remove the language about being accommodative, that a lot of people might interpret that as dovish the fed thinks we have gotten closer to the end of the rate hike cycle do you see it that way or do you see it that it means that maybe they dont know where that normal rate ought to be and that it leaves them wide open to continue to raise rates. How do you interpret it. It is confusing, they said they feel the normal federal fund series between 2 and 3 4 and 3 if i were them, id leave it in there. If they dont, we dont know what they think is neutral i dont think they should do that, its important if they say neutral is 2 to 3 thats neutral you think in the back of their heads, we dont want to look like were succumbing to trump . They want to steer clear of politics as much as possible they dont want to talk about tariffs or washington. I think theyre sort of boxed into a corner right now, where they dont want to where does the market go from here, were going to go lower on the announcement and rally back, its pretty much in the soup so to speak how do the markets react if the word accommodative is removed. I think tyler hits on a great point. When you say its out and dovish its counter intuitive. It was counter intuitive. You got to understand this on a much deeper level than i do. Thats not how i get it. We also dont know where inflation is, and powell doesnt know where inflation is, thats the trillion question, where is inflation, and now all of a sudden, do we have a handle on it if you dont know where it is, and its trans tory, how do we know youre affecting the right rate policy here when i hear that, i take it as a warning sign. When that language goes, the fed has reversed direction, rates are rising now, thats what you need to watch. Rates are on the rise, whether they change and say, were now tightening policy or not we know that rates are going up, those liar Interest Rates are causing a you know, slow down in the increase of a lot of housing prices now, and theres a concern as these Mortgage Rates get back to 5 and above its not just Mortgage Rates. Its auto loans, you have to wonder at what point the consumer starts. Were going to pause for a moment, were 7 seconds out from the fed decision the s p is higher by 7 points. The Federal Reserve raising Interest Rates by 1 4 of a point. It removed language saying its policy is currently accommodative, raising that rate by a quarter point it continued to signal future increases in the months ahead. It will be consistent with policy 12 of 16 members of the forecasting of the fmoc saying a fourth hike this year is up from 8 in june the fed going above neutral in the forecast, for at least two years, and well take a look at that when the charts come up, what youll see is that theyre forecasting 3. 4 for 2020, 2021, and the long run rate, is it now at 3 . And it sees gdp being at the long run rate for four years on the economy the Federal Reserve saying the labor market can strengthen, very much a carbon copy of a description of the economy in the last meeting these are all the same comments the last time. The risks are roughly balanced if you have the charts open, probably too early to have them ready, what you see is that theyre forecasting 3. 1 for 2018, thats up three basis points 2 for 2020. So this kind of gradually decleaning there we go, theres the fed funds forecast, you can see now that the long run rate is 3 , at least for two years now, 3, 4, in 2020, and 3, 4 in 2021. Theyre forecasting to be a bit above neutral to slow the economy. Do we have that chart . Maybe not. Youll see its gradually declining. So the bottom line so far is it doesnt sound like anything is deviated from consensus in terms of what was expected out of the statement not through the statement, the forecast 2019 . I think the forecast is interesting. I think the idea that theyre the first look at 2021 they show us that they see ourselves remaining above neutral also the idea that they see gdp at the same time, they havent changed that long run potential rate of 1. 8 thanks, steve well check in with you in a little bit lets bring our panel back in. The s p 500 going into the decision was hire by a quarter of a . Some movement here in financials what do you make of it usually its the reverse of what they do i was hoping they would sell them off im worried this doesnt hold and the markets been strong on every basis you can imagine. I would assume it holds this level, i am nervous, its the reverse of the initial move. What steve said has me worried as well. Are they looking at gdp . Is it trans tory, is it longer where are we what im noticing is that the financials are not behaving well right now, and tech is doing well, thats been a little more of a defensive trade lately, i would agree with you, it looks good at the s p numbers, but it doesnt feel good under the surface. I think this is the case of the missing cycle. We have growths trending out above neutral or both long term trends we have unemployment, we have holding the federal funds rate which is supposed to slow the economy down its 8, it doesnt really slow the economy down its suspended animation or suspended disbelief we can go another 3. 2 years in the Unemployment Rate. It feels like theyre doing it to do it at this point. Question for david, i was right before we got the news i was going to say, i was persuaded by davids argument, why remove the language about accommodative until you get to that point where you are at neutral. I wonder if what the fed is saying, and ill direct this first to you, david, and then to Steve Liesman. Has the fed implicitly said that neutral may be hire than what neutral was . I think theyre saying they dont know where neutral is. I think that actually, i think that sows uncertainty. Theyre driving for neutral, we dont know, we believe the fed doesnt know what neutral is essentially if they said they dont know theyre accommodative, therefore, they dont know theyre in neutral. Im sorry, they said that above neutral would be 3. 4 . 3. 4 would be where they say is above neutral. Cant we assume that is below 3. 4 steve, jump in here on this, it was the old Supreme Court justice who said, i dont know what porns definition is, but i know it when i see it. Im saying maybe the fed doesnt know neutral until they see it i think thats right. They did raise the neutral rate from 2. 9 to 3 thats not a big jump. In general, the feds neutral rate has come down are we at a point, is it on the way back up. The fed has said the neutral rate is something that can move around overtime. Why is the fed raising rates you cannot trade the stock market as if the economy is at 3 , and not expect a 3 funds rate i think this is more for grasso, if youre going to have your cake, you got to eat it too. Is the way to think about it, the fed is saying, the economy is doing better. Unememployment is low, and by the way, theyre willing to tolerate it. Gdp above 3 , with the steady run rate of the economy. Do you see the gdp as tra transitory or do you see it front loaded and do you see that coming, in versus escalating in red, ratcheting higher . If you see it ratcheting higher, i see why youre raising rates if you dont, i think you sit on your hands i any you got to raise your rates, even if its temporary, steve. My story is, were going to see about that stuff youre going to the best scenario i could mention, i dont think 3 is the new rate for the economy, unless we find a way to make these phones a lot more productive than theyve been the key here is asset prices. Asset prices are steadily going up, no particular bubble, everythings been going up the value of assets has been going up for years and in the last 25 years, recession has been called by asset bubbles bursting they have to try to slow down the pace of asset policing increases, so they dont have a problem later. Lets check in with don chiao with how the markets are reacting what we did see, you guys pointed out a nice run toward session highs. Especially with the s p 500 on the heams of the fed increase. We have given up those gains so far. Were back down toward the dow the interesting part, and this is something that lori brought up with you before, how poorly the financials are behaving overall. I want to call your attention to a couple of these ets we track earlier. Also this fighter regional banking. The tickers kre both of them have been trending lower all session long they just ticked a little above their session lows the financials are still behaving relatively poorly for the overall market it is something that is worrying some traders down here, i spoke to art earlier today, he thinks that financial willings need to reassert in some way were not seeing it right now. One of the things i would also watch is the Home Construction market diana olick mentioned the Interest Rates and how theyre affecting the housing side of things the itv, thats the i shares Home Construction etf is down 17, 18 so far, year to date some folks are looking to that as a possible canary in the coal mine well see if that at least negative reaction on the near to medium term continues with those Home Construction related stocks as well, melissa taking a look at the yield. It looks as if we have a little yield compression. We have a rise in twos, and the tenyear, we actually went a little lower, on the back of the decision its not surprise iing. Just about 25 basis points as you said rick is standing by with reaction well, you know, lets start off with the dollar, we should give the dollar a little bit of a kick, didnt it was up 4, down a couple now 94 is significant as it trades up to and bounces and holds that level. With respect to the twos, were 283 going in 297 on 5s. Heres Something Interesting the tightest distance on the curve is 7 to 10, that would make sense, it doesnt mean traders still arent focusing, they didnt move, they were 303 before, 303 now. That spread hovers at four basis points 321 is where it went out it was toying with 322 a moment ago. All things considered, Interest Rates moved up, stopped at 311 anticipating this, just because we havent crashed through 11, doesnt mean it wont happen tomorrow melissa lee, back to you rick, thank you we have watched the markets settle into this fed decision a little bit what do you think now . If you look at everything you stated before, and everything we talked about about the banks lower, about yields lower, you would think this is a real dovish commentary, if you took away what the fed just did, the market has settled in with what they expected. I think this is already what the gauge, it was 100 that they felt that they were going to raise today i dont know if they feel as good about a december raise, and if they skip december, is it going to be january . Thats going to be 100 even if they skip december, do they just go on january i think its a forgone conclusion that the market understands the rates are moving higher, theyre absorbing it now within the marketplace, the s p doesnt seem to mind at this point. Where does it push it over the line i think you still have enough room, to put back on the asset bubbles, i dont know if were there yet, i dont know how you call an asset bubble it really is the valuation. If you look at the valuation total asset prices is going up and up and up. Were using a lot of cash to buy back stocks, push up home prices, were not pushing up home prices. You can see the prices of assets go up, thats a dangerous trend. You want asset prices to be anchored to the real economy, and right now we have too much growth in the asset prices is this a worry of yours . Is that a worry of yours . I think its a worry of investors, davids been right the fed is trying to slow down these prices investors dont like that, we like it when they go up and up and up what i see in the statement so far, the fed is not making the case for why theyre battling inflation. Thats the push back i keep hearing. They get that the pedestrian is moving december is probably going to happen, i think what investors dont quite understand is why. Unless its were moving to accommodative. I think they shouldnt have done it, by moving they can say were accommodative. Have you to stop squeezing the american consumer, theyve already gone they left behind that assertion that theyre accommodative, that makes it difficult to defend continued rate hikes i want to jump in and give the word to michael farr how does this play out a couple years from now, if the fed is saying the fed funds rate is going to be at 3 and a quarter, 3. 4, Something Like that, that takes the 10year to what . That means borrowing costs are going to go up, that means mortgages are six. It does if you add thats 125 basis points or so from where we are right now. That will be the 10year, you say, were going to be at 425 to 450. And i extrapolate from there were going to be 6 Mortgage Rates. Moreover, weve seen the s p over the past 10 years, a lot of those Companies Double the amount of debt on their balance sheet. Thats going to roll off and they have to refinance it at higher costs thats going to come out of Profit Margins this is how higher rates create head winds for the markets and the economy. The far cast . The far cast. Thank you very much our panel is up in new york, thank you guys as well david, lori and mr. Grasso were less than a half hour away were 15 34iminutes away from fed chairs press conference plus, tax bill 2. 0 and the economy. Well join us to discuss all that and more. Thats confident. But its not kayak confident. Kayak searches hundreds of travel and Airline Sites to find the best flights for us. So im more than confident. Kayak. Search one and done. You might or joints. Hing for your heart. But do you take something for your brain. With an ingredient originally discovered in jellyfish, prevagen has been shown in Clinical Trials to improve shortterm memory. Prevagen. Healthier brain. Better life. Welcome back to our special fed day show in washington, d. C. The fed hiked Interest Rates today by a quarter point policy makers moving the language accommodative from the policy statement, this was a critical change according to many fed watchers, the fed expects to stay above neutral. Fed chair powell getting ready to hold a News Conference now. Lets bring in jeb in texas, hes the chairman of the House Financial Services committee lets talk about trade and work our way back to the fed if you want to come along, canada, come along you have been outspoken about your concerns about tariffs, which you see as taxes simply put indeed, i have been concerned, because i believe that for most americans, theyre enjoying the best economy of their entire life. Tyler, im heartened by the fact that we seem to have now a truce with the eu, im heartened, but we havent seen the text the fact that we seemingly now have a handshake agreement with mexico, i believe its important that canada be a part of that, i must add mid also having returned from china, thats where our problem is, theres a serial violator of the wto, theyre still taking our technology our intellectual property by hook and crook, ive encouraged the administration, let us focus our resources, first in dealing with china. Thats the most important thing to do. There really are as you point out to all accounts, serious legitimate concerns with the way china plays . Indeed. We would seem to be stronger in our negotiating position with the chinese, if we have tight and good trade relations with mexico canada, japan, korea, weve just done a deal with korea and as you point out, the eu as well were Better Together facing off against china . Were certainly Better Together in that part of the world in asia, it would be better that the u. S. And our allies write the trade rules as opposes to having china take any lead in that im happy to have china be prosperous, just not at our expense. Ultimately, we have to know that trade benefits americans so much of this is a tax right after historic tax relief, that people are feeling in their pockets. All of a sudden, the prospect of a trade war, i say today, were still kind of in a trade skrimish when you look at the total amount of trade. But the threat of the trade war has cap ex checkbooks. If im a soybean farmer in the midwe midwest, im not going out and buying a combine, i dont know whats going to happen 37. We should be addressing these imbalances with china and wherever we have them, if we go in the order of china, and mexico and then go to the eu, perhaps the good economy, and the economic strength that we have at our backs may not be there and will be left still with these areas of unfairness, does it make sense that i understand how people of texas are benefiting greatly from the economy now . But should we use this strength to take on these challenges now . And are they doing it the right way . You mentioned challenges, unfair and imbalances. Unfairness and imbalance are two Different Things in my mind. To me, what is the ultimate solution here. The ultimate solution should simply not be to reduce the trade deficit. You can watch disposible Family Income go through the floor. We need to leave it to Free Enterprise to decide what our Global Supply chain is going to be decided over here, over that end of pennsylvania avenue or that end of pennsylvania avenue, when you say unbalances, i dont think thats what were geared toward what were geared toward is the unfairness of those who would used a status economy with subsidies and nontariff barriers to prevent americans from being able to export not following the globally sipped rules of trade. So again, at the end of the day, we want to export more, not import less. The trade deficit in and of itself, is not a terribly meaningful statistic to me, its understanding, why does that exist . What are the underlying causes weve known since the time of David Ricardo and adam smith about comparative advantage. One of the comparative advantages we have is intellectual property and technology, and we have to keep it the president has just said that he hopes hell be able and the congress will be able to reach an accord under which the government will stay open, funding year ends in four days, five days, do you think the Government Shutdown is in the cards or not well, im glad i can answer rapidly and confident and say, i dont know if it is shut down, its probably because of our friends on the other side of the aisle if the president s going to sign this bill, its going to get signed into law. Theres no doubt in my mind that we need to plus up our national defense. It was hallowed out in the previous administration, too many of our brave men and women are dying in trade accidents and the world is a better place when we project american influence and American Military power. Having said that, the last i looked, the National Debt clock is still spinning out of control. I think our defense funding has been held hostage, i dont like to pay the ransom. And ultimately, one day, i believe mike mullen said, the greatest threat to our National Security is our National Debt, that hasnt changed. Good to see you again great to have you here. Melissa . We are just a few minutes away from Jerome Powells News Conference well get final thoughts from our panel and where they think e d es fm thfegorohere power lunch is back in 2 i dont care where we go and i dont care what we do just take me with you there are roadside attractions. And then theres our worldfamous onroad attraction. The 2019 glc. Lease the glc300 for just 469 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. A few minutes away from fed chairman Jerome Powells News Conference david, ill starts with you, if you were there, what would you ask him . Id ask him, okay, if Monetary Policy is no longer accommodative with todays move, what Interest Rate do they think will be tight. I want to figure out what the range is of uncertainty in terms of where you get accommodative id ask them to really explain to investors why are you so worried about inflation why do you feel the need to move so aggressively. You dont see anything . What i hear from investors is that they continue to be worried about policy error, theyre worried about the yield curve and just worried that the level of inflation doesnt warrant this pace of rating. Policy error could include tariffs. And tariffs could be inflationary i think all of this goes into the sausage making but i would like to see where they think this is where is the end game for powell at this point . Is he doing this for the next downturn its more a case of that, instead of a case of fighting inflation. He doesnt know where itis if it was just one question, why so fast . I think really just the why. You think this is fast . No, Goldman Sachs has had four rate hikes in 2018. The fed has done three i get why it feels fast were not worried about inflation. Thats a good question. I have two questions, thats my followup it looks fast it feels fast to most quitly investors. They dont feel its important to the data. Consumer data has been strong theyre facing higher rates across the board plus the impact of tariffs its unusual to have this stimulus 10 years into an expansion. Also in the next week, were going to get auto sales looking pretty squishy housing stopped growing did the stimulus take place to preempt all the tariffs that were seeing the difference between if it seems like they did it for a reason im going to hit the pause button here. Thanks to our panel. Lets head to Jerome Powell at his News Conference. Good afternoon, everyone. Thanks for being here. Im going to start with an overview of how we see the economy and our expectations for the months ahead our economy is strong, growth is running at a healthy clip. Unemployment is low, the number of people working is rising steadily, and wages are up inflation is low and stable. All of these are very good signs. Of course, thats not to say that everything is before. The benefits of this Strong Economy have not reached all americans. Many of our countrys economic challenges are beyond the scope of the fed my colleagues and i are doing all we can to keep the economy strong, healthy and moving forward. That is the best way we can promote an environment in which every american has the opportunity to succeed each time my colleagues and i meet, we face the same question. How can we set policy to best support job growth and low steady inflation for many years, this question called for low Interest Rates to help in an economy that had been damaged by the deep financial crisis that gripped the world 10 years ago. The fed has been gradually returning Interest Rates, closer to levels that are normal in a healthy economy. We took another step on that path today with a quarter percent increase in rates. My colleagues believe this gradual return to normal is helping sustain the economy to the benefit of all americans as i mentioned, ten years have now passed since the depths of the financial crisis. A painful 35r9 of our history cost Many Americans their jobs, their homes and for some their hopes and dreams in addition to holding Interest Rates low, to support the recovery, weve taken many steps to make the Financial System safer. Were holding the largest banks to much Higher Standards in the amount of capital and liquidity they hold. Im confident that the system today is stronger and in a far better position to support the financial needs of households and businesses through good times and bad. We continue to work improvements while ensuring that regulation is effective now let me go into more detail on the developments that motivated todays policy decision both Household Spending and Business Investment are expanding briskly. Several factors support this assessment fiscal policy is boosting the policy ongoing job gains are raising incomes and conference and overall, financial conditions remain accommodative. These conditions are subject to this meeting the growth of real gdp is 3. 1 this year and 2. 5 next year job gains averaged 185,000 per month over the last three months the Unemployment Rate stood at 3. 9 in august, and has been near that level since april. Smoothing through variations, the Labor Force Participation rate remains where it was in late 2013. A positive sign given that the aging of our population is putting downward pressure on participation. We expect the job market to remain strong. And the meeting of Committee Participants later this year is 3. 7 and a bit lower than that in 2019 overall Consumer Prices as measured by the price index for personal consumption expenditures increased 2. 3 . The core price index which excludes the prices of energy and food rose 2 over the same period the fmoc seeks and expects to see inflation remaining near our 2 longer run objective on a sustained basis. At any given time, inflation may be somewhat above or below 2 . The recent rise in oil prices has pushed inflation above 2 . The median projections for both the overall and core inflation measures remain very close to 2 across the whole production horizon. Today the committee raised the target range by a quarter percentage point bringing it to 2 and a quarter this action reflects the strength we see in the economy looking ahead, todays projections show gradual Interest Rate increases, continuing monthly as foreseen the meeting of participants views and appropriate policy through 2020 are unchanged since the june meeting these projections play an Important Role in our work my colleagues and i believe its useful to communicate our views on likely prospects for the economy and policy we are well aware that the economy regularly surprises and that even the most carefully constructed projections are highly uncertain the projections about the appropriate path of policy assume that the economy evolved broadly in line with inflation if the economy were to falter, lower Interest Rates would be appropriate. Right now as our statement indicates, risks to the Economic Outlook appear roughly balanced. Readers of the fmoc statement likely noted that the committee dropped a sentence that indicated the stance of the policy remains accommodative this does not signal any change in the likely path of policy instead it is a sign that policy is proceeding in line with our expectations we still expect as our statement says further gradual increases in the target range for the federal funds rate and this economic taking is reflected in the projections that i just discussed. Thanks very much, and im happy to take your questions thank you given the legs of Monetary Policy, i want to know how you think about ending the tightening cycle how do you know when to stop and do you need to keep going until something in the economy breaks the tightening cycle is the reflection of the strength of the economy. Its almost three years weve been gradually raising rates i think the fact that we have moved quite gradually in a way allows us to carefully watch incoming data in the economy and the Financial Markets to see how the economy is processing higher Interest Rates, and the fact that were moving so gradually, i think it limits the long and variable lax problem, were able to raise rates and see how the economy absorbs these rate increases, so far the economy has performed very well and very much in keeping with our economic takings President Trump has stated publicly hes not thrilled with the Interest Rate hikes. His comments didnt appear to have any impact on you or your colleagues were his comments discusses at the meetings, and do you have any comment on this . So weve been given a really important job to do on behalf of the American People by congress. And weve been given the tools to do it, my colleagues and i are focused exclusively on carrying out that mission. We consider the best think, the best theory and the best evidence try to set Monetary Policy to achieve maximum employment in the context of price development. Whats what we do, we dont consider political factors or things like that, thats who we are, thats what we do, and thats just the way its always going to be for us Steve Liesman cnbc. Thank you. Can you explain how the stock market being at the all time corporate spreads being very tight, how does the level of the market factor into your decisions to raise Interest Rates. Is there a concern on your part . And then a second and related part, can you tell us what happens in 2020 and 2021 that i know you cant tell us, youre shaking your head, that prompts you to the fed to think the rate ought to be above neutral in that time period. In terms of Financial Markets and Monetary Policy, we as we say in our statement every cycle. We take financial conditions into consideration theyre one of the many things that we take into account. What we do with the federal funds rate, and that has effects out through the full Interest Rate curve the answer is, we take everything into account but broader financial conditions are just one of the things we take into account in terms of 20 and 21, why the funds rate needs to be above neutral. Youre right, some of the participants have mostly very modest shoots of their estimates of neutral a couple three years out, you know its far out into the future, i think its hard to be confident that thats the way things are going to be what were going to be doing is asking at every meeting whether Monetary Policy is set to achieve our goals. And i think that thats an assessment of where policy will need to be some years down the road, and ill leave it at that. Is this too good to be true you have four years of unemployment below 4 . No reaction of inflation there i dont think thats ever happened why do you think its going to happen now or is this forecast being driven by extendsed line out to see what happens youre right, the Committee Committee forecasts, what they show in general is where employment remains in the high and middle threes. And inflation remains very close to 2 . That is what the forecast shows. That is based on our understanding of the way the inflation process works now on the fact that the inflation tends to be its a world of strongly anchored Inflation Expectations, thats not just our forecast thats many forecasts, that is the forecast, so you may ask, i mean, the sense is, what is the longer run natural rate of unemployment mean, that really is a longer run concept that we think the economy will return to over the longer run. But obviously that longer run isnt its not creating problems in the short run for that forecast. Now, lets just admit that the inflation process has changed dramatically from where it was in the 1960s to where it is now. Its in a good place now we cant take for granted the way it is, we will be watching carefully if inflation reacts more strongly or more weekly to the Strong Economy, well adjust policy appropriately Interest Rates have effects on growth, have effects. I mean, if i guess the your question was, what are you buying with Interest Rates, what would the economy look like if you didnt raise rates it would look very different were always trying to work our way between the two problems we face, one is that if we move too quickly, we can snuff out a recovery unnecessarily and inflation falls short of its 2 target or if we move too slowly, we have an economy that can overheat thats happened through history, we dont see any signs of that now, were always trying to navigate between those two and we think that gradually, you know, raising Interest Rates is the way that we take both of those risks seriously. Thanks very much. The fed has been saying that Financial Stability risks are moderate what kind of developments could prompt a change in that assessment to elevated risks and there an argument for moving the buffer even when risks are moderate, rather than waiting until the risks are seen as elevated which could be too late i think one of the most important lessons for the financial crisis is really the importance of the stability of the Financial System and so we since the financial crisis as youre aware weve had a major focus on building up our monitoring of financial conditions and Financial Stability issues weve also put in place many initiatives to strengthen the Financial System through higher capital. Central clearing, margins on unclear derivatives, all things like that that are meant to strengthen the Financial System. We feel the Financial System is in a much better place as we look at conditions most recently, and this was at our last meeting and the minutes for the last meeting, quarterly we have a briefing at the fmoc and the board of the staffs views on stability and the staff judged the overall vulnerabilities to be moderate if you dig into the different aspects of that question, households are Balance Sheets are in good shape. Employment is high wages are rising that sort of thing the Banking System is much higher capital, much higher liquidity, is much stronger. If you look at asset prices, its true that some asset prices are in the upper range of their historic historical ranges. And then if you look at nonfinancial corporates, there is the story of leverage there, so its not that there arent any vulnerabilities. We see them as moderate. You ask about the cervical capital buffer its a tool that we added to our tool kit, i think finally back in 2016. We said that we would deploy it when vulnerabilities were meaningful above normal. We would revisit that on a regular schedule the last time we revisited it was last year, sometime last year, and concluded that the test was not met as i mentioned at the last briefing, the assessment was the vulnerabilities were moderate. It remains a tool for our tool kit that we can deploy when and as we feel appropriate as i said, i think im in the camp of seeing vulnerabilities as relatively moderate i think the Financial System i think another thing we learned in the crisis is that we need to be alert to the build swrup of vulnerabilities as a long expansion continues. I dont see that in troubling amounts at this point. But, you know, i think its appropriate for us to monitor that very carefully. Marty, the research is that the European Central bank this week put out a paper saying that the impact of a trade war on the u. S. Could be dire that the u. S. Economy could drop by 2 in the first year after a widespread trade war could you talk about the discussion you had for your policy statement doesnt mention the trade tensions that you did not mention them what kind of outlook do you have right now for the trade war . Sure. So i guess i need to start by saying that were not responsible for trade policy, and we dont comment on particular trade actions, and that sort of thing but you will have seen that we have this very Extensive Network of business contacts around the country through the reserve banks largely, and weve been hearing a rising chorus of concerns from businesses all over the country about disruption of supply chains, materials Cost Increases and loss of markets and things like that, weve been hearing quite a lot of that, and the reserve Bank President s talk about it in the meeting and it goes into the minutes. Were transparent about hearing all of that, i think if you look at the aggregate performance of the u. S. Economy and the aggregate at a national level, its hard to see at this point. You can look at it the other way. Have all of the tariffs that have been announced been applied . And theyre still relatively small. We worry about a couple things one is loss of Business Confidence we dont see effects that we can measure yet. Also the possibility of a Financial Market reaction over time to unexpected trade developments more than anything. I would worry in the longer run where this is going. If the end place we get to is lower tariffs, that would be good trade generally supports productivity, supports higher incomes. And fair trade under nationally accepted rules can be a good thing. I think if this perhaps inadvertently goes to a place where we have widespread tariffs that remain in place for a long time, in a more protectionist world, thats going to be bad for the United States economy, for families, workers and also other economies. Heather long from the washington post. This is the third time this yeas growth forecasts im wondering if you could share a little bit about what is causing that rise and whether you see supply side effects coming through from the fiscal policy, fiscal stimulus yet. So its true. This year weve kept raising our forecasts for this year. As the year has gone on, the economy has come in stronger than we expected, and thats a really good thing, and the economy, as i mentioned at the beginning, is strong, and theres good reason to expect that to continue you ask why. You know, some of it is no doubt the effect of the fiscal policy changes, the tax cuts and the spending increases thats got to be part of the story. Part of it may be Higher Oil Prices which are calling for more investment in the oil patch, but, you know, the growth picture is very much supported by very high readings of household confidence, Business Confidence, so its a its a its a pretty particularly bright moment i think if you look back over the last decade this is a pretty good moment for the u. S. Economy. Supply side effects slide side effects. We hope they are huge frankly. The idea is you cut you reduce taxation on corporations and particularly and allow faster expensing for investment. The idea is to encourage more investment, and that is one of the things that drives productivity which is one of the main things that drives rising incomes, so the effects are very uncertain there. The literature is theres no clear answer to exactly how these mechanisms work or how effective they are, and it would be soon to be seeing sly side effects. Supply side effects are both more uncertain and are probably slower to come in. But, you know, as i said, i certainly hope i hope that well be marking up our estimates of potential growth as well craig torres from Bloomberg News taking a page from your Risk Management approach in jackson hole, mr. Chairman, im wondering if you could talk about what risks would make the committee, plausible risks, go fastener 2019 . What risks would make them go slower, if you could talk about scenarios, and then i would like to ask do you see yourself as the stimulus tails off which it does in the forecast possibly cutting rates to soft land the economy . I know the forecast doesnt show that, but im curious how you soft land without doing that okay. So i i think i mentioned in the opening remarks maybe something that addressed your question about what would make us go faster and slower. You know, the main thing where we might need to move along had a little bit quicker would be if inflation surprises to the upside we dont see that. Really dont see that. Its not in our forecast, but any so i would i regard that as a risk i think either significant significant correction and lasting correction in Financial Markets or a slowing down in the economy thats inconsistent with our forecast, those are the kinds of things that we would we would react to. In terms of what you know, what we would do, you know, i think were always going to be adjusting Monetary Policy to in light of conditions on the ground, so if the any is weakening, then its very possible wed be wed be cutting rates, and, you know, vice versa, so i cant rule that out. I think its quite difficult though to know what the effects what the sort of end effects of fiscal policy are going to be in 2020. Its difficult to know what the policy will be, let alone what the effects will be, so we have to make estimates, but we know that they are highly uncertain hi. Edward lawrence from fox business thank you, chairman. The Unemployment Rate is now at 3. 9 the average hourly wages rose 2. 9 for the past 12 months. Inflation, according to your numbers, holding steady. The amount of Job Vacancies that we have out there and the number of people coming back into the workforce this year, where is the point that were actually above the natural rate of unemployment and the Federal Reserve should reexamine the consistency of the rate hikes Going Forward so not to cool an expanding economy . You mean, where is the point at which inflation unemployment is too low . Yeah, yeah. You know, i think i think the Labor Force Participation has surprised us on the upside there is a long run trend there, and weve now had basically five flat years if you look at Labor Force Participation youve had an oscillation thats basically a sideways movement in the face of a significant downward trend thanks to aging and other factors. Thats a gain of well more than a percentage point in participation. So thats really a good thing. Those are people who were remaining in contact with the labor force and looking for jobs, finding jocks, so thats thats a great thing and it by the way, its a signal its one of the things that has allowed the Unemployment Rate not to fall further, and its a signal, too, that there may be more there on the supply side. There may be more slab supply than the prior trend would indicate so its a very positive thing to see people staying in the labor force, and, you know, we dont know how long it can continue we have models, and we look at we look at this question all the time, and admittedly weve been surprised on the Positive Side here, so were open to the idea that that may continue or not. Hi, chair donea boriac with cnn. Just to follow up on the tariff question you said earlier that it seems that the effects of the tariffs so far havent quite materialized those werent your words verbatim but walmart, gap, cocacola, general motors, macys, have all said they expect the tariffs to affect the prices of everyday consumer goods so my question is when should there be an effect and when would you expect to see that, and at what point do you think it will affect Consumer Spending and dampen Economic Growth its a concern. Its a risk. You could see prices moving up you dont see it yet, but you could see Retail Prices moving up the tariffs might provide a basis for companies to raise prices in a world where they have been very reluctant and unable to raise prices where raising prices is very difficult with the ability to shop on the internet this could provide, you know, a way again, we dont see it in the numbers, and, you know, until we see it in the numbers, its hard to say how one would react. The other question would be, if youre just talking about the effecton inflation, is it just a onetime increase in the price level, or is it actually fueling higher inflation Going Forward, and thats thats an important question in how we would think about the appropriate response. But is there a sense of timing in terms of what you might see that kick in, the effect of it dont see it yet, you know. Dont see it yet but youre hearing broadly across the economy, its not just tariffs youre hearing were hearing a lot of talk of labor shortages, of material costs in particular industries. Were hearing, you know, what amount to supply side constraints and things like that, but were not seeing it. Were seeing sort of modest increase in wages, inflation right around 2 . No sense of it moving up really, so were not seeing it yet, and and you know, we just ant, and were watching very carefully. Mr. Chairman, michael mckeen, Bloomberg Radio and television financial conditions are still extremely loose by all the measures that track that the flow shows a decline in shortterm borrowing other than treasuries im wondering if that suggests a change in the way fed tightening affects the economy, and along those lines, you mentioned that you you dropped the word accommodative doesnt suggest a change in policy, but if youre dropping Forward Guidance in terms of accommodative, does the dot plot really serve any purpose anymore if as you say you cant be confident after 2021 whats going to happen with the economy . A couple of questions in there. So the dot plot i mean, its not i dont think its a new point that forecasting two and three years out are fairly uncertain the dot plot is individual fomc participants who are writing down their individual views on the over lose of the economy and the individual Monetary Policy these are general forecasts. We think market forecasts find that interesting information, and so it seems to me sob serving a purpose. I think the point with accommodative was that its useful life was over, you know we put that in the statement in 2015 just when we lifted off and the idea was to provide assurance that we werent trying to slow down the economy but that in fact we were still Interest Rates were still going to be pushing to to support economic activity. Well, you know, that purpose has been well served, and the language now doesnt really say anything thats important to the way the committee is thinking about policy Going Forward thats why that came out did i get all of your financial conditions remain loose even though youve raised rates 200 basis points. Yeah, yeah. If you look at a broad financial conditions index, thats pretty much the answer youll get we dont control, that and as i mentioned earlier we do take financial conditions into account in what we do, and financial conditions are affecting the broader economy so by definition were taking them into account, but if you look at Interest Rates, you know, look at longterm Interest Rates this year, and shoredterm Interest Rates this year. Very significant increases and with your long and variable lags that should be having an effect over time. Hi, victoria guido. I was just curious tha