And beyond anxious about the statement they will issue alongside the decision. The countdown is on we are now less than one hour from the big decision and it will be followed by a press conference from chairman powell. Good afternoon, everyone, im caley evans here with melissa lee at the New York Stock Exchange, Tyler Mathisen in washington welcome to power lunch. Lets get a check on trading ahead of the fed stocks at session highs pretty much right now, an unexpected rise in home sales this morning, comments from Senate Majority leader Mitch Mcconnell about avoiding a shutdown, all of this helping to fuel the rally. The two stocks were watching this faur, fedex tumbling on its warning, shares on pace for the worst day in when years, down 8. 5 and facebook under fire again over misleading users about their data now d. C. s attorney general filing a massive lawsuit, facebook down more than 6 we will have much more on these stocks coming up. Kelly, thank you we begin this hour with the biggest Federal Reserve decision of the year and perhaps of many years. The markets awaiting, main street is wondering and you Better Believe the president is watching everyone with a stake, personal, political or otherwise, everyone right now in a kind of suspended animation as we await the feds action today at 2 00 p. M the man who has been tracking every poll number, every speech, every smoke signal, our Steve Liesman is here with what we can expect steve . Yeah, tyler, about a year into his tenure Jerome Powell faces his first big test since Federal Reserve chairman to hike or not to hike amid opposition from the white house and wall street now, if powell they could look Something Like this why should they hike the economic potential is above gdp and unemployment, inflation is just about at the feds 2 target rates are below neutral and the fed has said it wants to withdraw the emergency stimulus from the financial crisis and then theres all that fiscal stimulus from the tax cuts and additional federal spending. Why hold the line . We have this market selloff that forecasts a worsening outlook, Global Economic weakness, trade uncertainty and inflation has been softening the last couple months most likely outcome the street is predicting is what they call the dovish hike where they hike rates a quarter point. The fed likely will reduce the growth and the rate hike outlook. Remove the phrase of further gradual increases are needed and instead emphasize data dependency, acknowledge market volatility, maybe weaker Global Economic outcomes and maybe also weaker housing and Capital Spending the big changes the market will want to see, a reduction in the outlook for rate hikes next year and beyond or the forecast for it, but the fed may not move as much as markets wants, they will probably show a decline from two hikes to three futures market are barrel pricing in one unless there is a big change the consensus fed forecast could also show the feds still intending to hike above neutral in 2020. You may get some goods news today but not maybe as much as the markets want to hear steve, thank you very much. We will check back with you every so often this hour and then well into the 2 00 hour as well. Ylan mui is with us for breaking news on russia and sanctions. The Treasury Department is lifting sanctions on rusal and two other companies. These sanctions will be removed in 30 days treasury said the companies have successfully severed the control over the firms and diminished his stake. The companies will also have to overhaul their boards of directors, however, treasury said it will continue to enforce sanctions on deripaska himself treasury is imposing new sanctions over attempts to interfere with the u. S. Election those are on more than a dozen members of russias main intelligence unit. The russia sky network was also involved in efforts to undermine International Organizations and an assassination attempt in the uk back over to you thank you so much we are obviously on the floor of the New York Stock Exchange with bob pisani we just came off the session highs this seems like the typical drift. Fed drift, a tendency for the markets to go up in the 24 hours before that. Steve liesman had very good points here. Rarely have we had such confusion about how the market might react to the Federal Reserve. Normally we say the fed is going to do x, y and z, we would have a pretty good idea how the market may react thats not the case this time and its led to some anxiety lets look at the possibilities. Steve mentioned a dovish hike. What if that happens the fed hikes, then they signal fewer rate hikes in 2019 you might say thats what everybody wants, we are going to get a rally, but a lot of people are saying, well, no, thats already priced in the market or some people are saying, yes, they might give dovish indications but it might not be dovish enough. The market could sell off if the fed does not hike. Do you get a rally because, oh, some people want that but other people are saying, no, it would signal the fed is really concerned. Melissa, you get this worry here about how to interpret the fed signals and how the market will react and right now id say the camps are divided. Even im not quite sure and this really bothers me because were paid to be sure about what were saying on these things on the markets you can see whats been going on its encouraging to see the most beaten up sectors, energy and financials as a leader, healthcare is also done well, semis are down because of the micron Earnings Report were looking for bottoms in certain sectors, energy is one and housing. Encouraged two days in a row housing stocks are up, we did have the existing home Sales Numbers today, they were a little bit better than expected, is second day in a row weve seen beaten up down 30 most of these stocks on the year move. So, again, looking for some sense of bottom. The power of this the fed rally into the decision, i mean, yesterday when the fedex news crossed and micron news crossed i didnt think anybody thought we would be doing this well in the markets today but yet we have this extreme reaction ahead of the fed meeting. The fedex news was quite concerning. Very jarring. Very blunt that the Global Economy is definitely slower, although the u. S. Is strong. Had we been up dramatically this month that news come out we would have been down huge. Its a signed of how oversold the market has been. And a difference in the past three months between the guidance in september and the guidance yesterday that is a real difference and that is exactly what the markets have been focused on, right yeah. Deterioration that theyve seen in the markets and Economic Indicators over the past three months. And i anticipate we will see Fourth Quarter earnings come down a little bit, they are already down 16 from 20 and i think 2019 numbers now at 8 they will definitely be coming down the question is where. Some people have zero, some people have 6, thats what the fight is right now, 2019 numbers. Bob, thank you. Bob pisani over to you. Weve heard lots of opinions from a lot of big names on cnbc this week on what the fed will do and should do dominic chu is looking at that for us. Policymakers, former policymakers, ceos, money managers, portfolio managers, you name them theyve been on our air and here is a sampling of the advice, the conditions, the commentary that theyve had about this fed decision. The fed should not raise rates. We are now below 2, which we used to be the feds target and dropping that is a sign they shouldnt be hiking. I think theyll probably hike again, theres just theres so much momentum and central bankers by definition are so conservative and for them to change that quickly would require this unbelievable change. The only argument im hearing for the fed to raise rates now is that somehow they have to exert their independents from the white house. This is a bad argument. When talking about the risk of the fed doing it too much too fast theres also a risk of doing too little too slow. Its easy for people who own assets to say its all about lower rates, but a Strong Economy normalizing rates is a good thing. They shouldnt raise them this week. I dont think they should. The bond market is basically saying, you know, fed, youve got no way should be razing Interest Rates. And that of course is why a market is a market, buyers and sellers all with diverging opinions and, tyler, thats just a sampling, you can tell why this is probably the most controversial and most important fed meeting we have seen in quite some time. You got that one right, dom. The scene is set down here, the countdown on, some want the fed to nudge rates higher to normalize in central bank parlance, others including the president and a couple of the voices you heard want rates to say where they are les they become an impediment to growth lets discuss that, were joined by greg ipp and michael farr president of farr, miller and washington, he is a cnbc contributor. Guys, welcome. Thank you. Im going to ask you, greg, what you think the fed should do based on two things, one is what the Economic Data are saying, the other is what the markets are telling the fed. What should the fed do today the Economic Data is fairly clear that the case for raising rates is pretty strong i mean, we just saw strong home sales data for november today, we had strong retail sales the committee is performing exactly as the fed expected. Now, they are expecting a slowdown next year from what was an unsustainable pace in 2018, so theyre not that alarmed that some numbers do point to a slow koun thats supposed to happen. It has to happen we are at a 3. 7 Unemployment Rate unless growth slows down we are headed to 3 and below that and thats an inflationary risk. That said they have to have a little bit of sort of like second guessing of themselves going on right now, given what were seeing in the markets. You know, volatility in the stock market, the yield curve flat as a pancake, you know, the internals of the market looking very light cycle i guess thats why you make the case for a dovish hike. So the market if i am interpreting greg correctly, michael, is saying Something Different than the backward looking Economic Data are saying the markets seem to be saying, as you listen to jeff dunnlock, the bond market is saying dont raise rates, late cycle stuff in the symptom market beginning to show up. What do you think is going to carry the day in the feds thinking given the fact that theyve been pretty forward in saying theyre going to continue gradually raising rates to normalize . As greg said, you know, they have the the Economic Data say we should raise rates. Okay now, they are less overwhelming and compelling than they have been in a long time, so things are clearly slowing down, and as you look at a 2. 5 sort of percent gdp rate for the next couple years, it makes sense that perhaps they should adjust and be a little more data dependent. Markets, you know, markets are still have been given a sugar fix, you know, for every day for ten years from the Federal Reserve and the fed saying we are not going to give you sugar anymore. There has to be some sort of responsible medicine out there where they taper us off. Isnt that what theyve been doing . Theyve been trying. Theyve been lifting rates every quarter for a couple careers now or largely and taking that qualitative easing out of the system. So the language today is going to be very important, right . The guidance Going Forward about what were going to get from the fed Going Forward i think makes this the most important Inflection Point for a fed meeting that weve seen in a long time. I want to make an important point here the very removal of a Forward Guidance is a form of monetary targeting. In the period after the crisis when the fed was throwing everything but the kitchen sink at the economy they brought rates down to zero, started buying bonds and Forward Guidance telling us rates were going to stay low or rise only slowly for a very long time. They have one by one taken each of those unconventional forms of easing away, theyre raising rates, shrinking the Balance Sheet and as of today the Forward Guidance goes away thats one of the reasons why risk markets and stocks are struggling so much the fed needs to be aware this is not your fathers tightening cycle. They do have some risk of overto go it because they are pulling back from the hand holding, the sugar high and sugar high i dont mean it as a bad thing. I want to get to a couple things, im famous for my compound questions so i will ask one part to you and the other part to you. Lets say the fed does what a minority of fed watchers think it will do and that is pause right now, not raise rates is there a risk in that, greg, that by doing so the fed will either explicitly or inadvertently be signaling to markets that the economy is worse off than we thought it was, it is in danger of weakening . There is always that risk, but if the fed genuinely thought the economy was in danger of weakening then the risk of raising rates is greater than leaving rates alone and taking it on the chin. You would prefer to see them do that. Okay let me pose a different side of that question to you, michael farr, and that is this the president has been outspoken in saying, hey, listen to the markets, feel the markets, its saying watch out if the fed stays and pauses right here, are they in danger of appearing to the markets that they are the president s puppet . You know, as you asked the first question to greg, thats what i thought, i said, yeah, no, the real risk would be theyre going to look like theyre caving into political power. Right. Having that political independents is so important for the Federal Reserve, the fed needs to be apolitical, needs to be left alone and the president wants lower rates. If he had not been so vocal perhaps about these lower rates it would have given the fed more room. I actually disagree with you on that one. Do you . I honestly believe that these guys are basically putting their hands over their ears, looking at the data, trying to get a feel for the markets, make the right decision. You dont think they care at all . They care, but theres basically a no win situation if they act if they do it because the president wants it, thats a losing game, if they do it because the president doesnt want it thats a losing game. I want to get a definitional matter cleared up here when you say a dovish hike, what do you mean . They raise rates but their guidance says we dont know what were going to do next as opposed to the current statement which talks about further gradual increases. So its a hike and a flexible comment, they need to be firm, fair, but flexible and that flexibility is going to determine how wall street trades this afternoon. Ipp, thank you, farr, out. Thank you. Were going to dom chu with i guess breaking news. We got a market flash johnson and johnson not helping the dow cause today. Off by over a percent but off the worst levels of the day. This on the heels of multiple report that a judge in missouri has rejected johnson and johnsons appeal of that massive 4. 7 billion multiple class action suit over its baby powder and talc products. That did send shares lower we are bouncing just off there at this point. Thats the reason why Johnson Johnson shares are moving lower when the rest of the market seemingly is moving higher back over to you. Dom, thank you. Dom chu alt headquarters while the broader markets are higher ahead of the fed the dow transports are lower a huge reason why its lowering its guidance the company blaming nearly everything under the sun, saying political decisions around the world are hurting the Global Economy we are delivering a huge fed day edition of power lunch. Stay with us this isnt just any moving day. This is moving day with the best inhome wifi experience and millions of wifi hotspots to help you stay connected. 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. The countdown is on, about 40 minutes until the feds latest decision on Interest Rates, that will be followed by fed chair powells News Conference half an hour later a warning from the other fed, fedex, that is, slashing its 2019 outlook because of Global Economic uncertainty it pointed to a slowdown in europe and asia. The company also starting to offer buyouts to some employees and other cost saving measures fedex shares are down 8. 5 today, their worst day in a decade and it comes after the ceo said the issues facing fedex are the result of bad political choices around the world he blamed tensions between the uk and europe over brexit, also talked about the trade war between the u. S. And china melissa, here is the astonishing thing, fedex is at 1. 69 today, it was at 2. 75 this year back in january, its completely plunged and its forward pe is 10. 5. What changed in the past three months is what had analysts caught off sides and investors for that matter. Fedex raised its four year outlook and took it down yesterday. Its the magnitude of the slowdown that caught investors by surprise. Nobody guessed europe and china would be further weak thing. Fred smith, you know him well, we all know him, and in the past he has been supportive of the administrations pro business policies and for him to say it is political, its the policies that are causing the slowdown, thats something to take a note of. Doing the voluntary bouts in the u. S. Even though theyre point to go international weakness. Strength is in the u. S. He said the u. S. Is fairly strong its a little bit of a conundrum. The shares clear the verdict for investors they hate this its down 100 bucks this year. Fedexs warning sign that the Global Economy is getting worse, lets bring in david kell. He with Jpmorgan Funds and kenny picari david, i will po he is that question to you, is this a confirmation that that outlook from fedex, a confirmation what the markets had already been coming to grips with i think the market is a little bit too worried about the Global Outlook fedex has a lot of visibility and they certainly will be very negatively affected by trade wars, so i dont blame them for talking aggressively about policy decisions and the need to get to trade truth, but, i mean, given if you just think about their business, their visibility isnt necessarily any better than anybody elses and what were seeing around the world is we are not seeing too much economic excess anywhere Global Growth has slowed a bit and i think trade tensions are part of it but i think Global Growth can pick up next year. Really . I dont think that theyve got any crystal ball that the rest of us dont have on Global Growth. Do you think the fed should go full steam ahead and proceed with its path . No, i think the fed should keep its nerve here, they should hike and i think they will, but i think what we will do is we will get a fed hike with a flock of dovish signals accompanying it i think we will have a more dovish statement, a dovish press conference this he may push the interest on excess reserves up by 20 basis points which would keep this to a 20 basis point hike instead of 25 i think maybe they will say only two more rate hikes here what i think they could do is make this sound more dovish, i think it will be positive for the market. The markets are fully anticipating a dovish hike so is that going to be the sell the news event in the markets . I dont think so. I think it is going to be a buy the news event i think the market has been so overdone, i think the market has been so overreacted, so oversold i think its found a little bit of support right here and i think that it was a sell the room, a buy the fact kind of event is what youre going to see. The markets are holding right in here today, my sense is depending on how he says it or how people how people interpret it, right . They will want to listen, digest it, pull it apart but i agree with david, i think theyre going to raise today, i think they had three hikes for 2019, i think theyre going to paris that back to two, if he paris it back to one the market absolutely takes off but i dont think hes going to say that specifically i think hes going to leave the door wide open and give himself wiggle room in 2019. How weak does the Global Economy have to be to slow down the u. S. Very weak, barring psychology we only export about 11 for 12 off our gdp so you have to have a catastrophe overseas all we ever hear is bad news, if its good news it does not make the press. If you look at the global pmi data generally most parts of the world the big economies are growing, growing more slowly but theyre growing and there is no huge excess, financial excess or economic excess. On the point of europe just this week we got the manufacturing numbers, france contracting for the first time in four years, germany the lowest redding in four years if europe goes into a recession corporations are more exposed to europe than the u. S. Economy dpl the overall european pmi is still positive, my native ireland was something close to 60. Wow. Seriously, you hear about these problems, we only focus in on the problems, but europe has easy pun i think europe will do better next year. Mario draghi announced hes pulling back on qe if he was really concerned about where the european economy was would he have been more i wish hes pulling it, thats it, at the end of the month its over i agree with david, i dont think that the european economy is nearly as gloomy as what about what fedex said . I hear you, but i think fedex is being much more cautious. I think thats much more spoken around trade policy. And its not just guidance they took down, theyre shrinking their network because of their belief in what the Global Economy wont do next year, thats a big step. I think thats a mistake. I think thats a mistake. We will have to leave it there. Thank you very much, kenny pulcari and david, thanks to you as well. You will stick around and join us a little bit later in the show. And still to come, fed policymakers wrapping up their twoday meeting in a little more than half an hours time we will find out their latest decision, see if powell will press pause on rate hikes or not and how the markets will react we have you covered here power lunch is back in two of your finance business. Ry t and so if someone tries to breach your firewall in london you start to panic. Dont. Because your cto says weve got allies on the outside. Security algorithms on the inside. That way you can focus on expanding into eastern europe. That makes the Branch Managers happy yes, thats the Branch Managers happy. At t provides edgetoedge intelligence. It can do so much for your business, the list goes on and on. Thats the power of. When this happens youll know how to quickly react. Hello, im sue herrera here is your cnbc news update. President trump appearing to back of his demand for 5 billion to build a border wall signaling for the first time he might be open to a deal that would avoid a partial Government Shutdown white house counselor Kellyanne Conway had this to say. Its what the congress is going to put before him. A short term cr or cr that goes through february 8th keeps the government up and running. That doesnt mean that the president is backing down as a promise president of the United States and our commander in chief to keep us safe. Shik filet is predicted to become the Third Largest fast food chain in the u. S. Based on sales, thats according to Kalinowski Equity Research they could potentially knock subway out of the third slot next year. It might also surpass, taco bell, burger king and wendys in sales. It was on this day 20 years ago that the house voted to impeach president bill clinton for perjury and obstruction of justice. The charges stem from clintons efforts to hide an intimate relationship with white house intern Monica Lewinsky two months later the senate fell short of the votes needed to remove him from office you are up to date, thats the news update this hour. Ty, i will send it back downtown to you in washington thank you very much, sue. Were checking stocks to watch right now, ely lilly is up after getting upbeat earnings and revenue guidance for 2019, also raising its dividend, up by 3. 5 General Mills in minneapolis, those shares also moving higher, sales boosted by its acquisition of the pet food company blue buffalo. But the companys core business is still struggling in north america. And finally winnebago is moving higher, earnings and revenue both beating expectations thanks to the strength of its tow abls motor home sales fell more than 3 melissa. Got to love those tow abls. We have the details of a huge deal for one u. S. Energy producer that could help europe get away from its dependence on russia we are waiting for the fed of course, one of the most uncertain decisions in a very long time. What will the fed do or say in its statement . Maybe raise rates in a dovish way. Nobody knows but we ll fwiind out together in 30 minutes from now. Stay tuned e best of geico. Its geicos alltime greatest hits back on tv for a limited time. And if you love the best of geico, youre gonna really love voting online for your favorite. You can even enter for a chance to appear in an upcoming geico commercial. This fires toasty, linda but the best of geico collection sounds even hotter. To vote for your favorite geico ad and enter to win, visit geico. Com bestof. Thats geico. Com bestof. Lets get a check on the markets ahead of the feds decision on Interest Rates stocks are higher but off the session highs, the dow was up more than 300 points earlier in the session, we are now up 185 the s p 500 is up three quarters of a percent or 19 points, 12 points off the session highs facebook, the stock is taking a sharp leg lower at this hour, the social media giant under fire again over user data and d. C. s attorney general slapping a major lawsuit on facebook. We will have much more on this story straight ahead and Semper Energy and the polish oil and gas company are announcing they have signed a definitive 20 years deal to export u. S. Lick wide natural gas. Lets bring in jerry martin and frank fannon gentlemen, welcome to you both. Delighted to be here. Mr. Fannon, let me begin with you, strategically to me this seems like abig deal, its u. S gas being sold to europe does this mean there might be less need for russian gas in the future yeah, thank you thank you for having me on youre exactly right, this is a big deal this is a big deal for a couple of Different Reasons first, id like to also recognize poland as stepping up and answering the call on Energy Security for not just europe but the transatlantic Energy Security what theyre doing is investing in their own future by signing a 20year deal with sempra, which is really initiating the second wave of l g in this country. Its a remarkable step and falls on the july meeting between President Trump and european commissioner euchre where they underscored the importance of usl g as a critical component. Does this mean that american gas can be price competitive in europe, enough so to sign a 20year deal because we know consumers there need cheap fuel that russia has typically provided that. Can america now compete . No request he about it. Weve got some of the lowest priced natural gas in the world, low volt tilt, deep cap into the markets and to franks point, just like poland is investing for their Energy Future america is investing for its Energy Future, too, and were glad to be part of that. Are there in i more deals, jeff, like this for sempra on the horizon . We certainly hope so. We think theres an important folio of opportunities we have a very large project in louisiana that were look to go bring into startup operations next year. 12 million tons per annum so the facility were talking about supporting poland is one in texas. Weve set our goals of being americas l g provider with 45 million tons per annum we have five projects in the works and the one we look to dispatch to poland will be a project were looking to build in texas. Frank, can we expect more like this, of the u. S. Trying to work with our partners in europe, in germany, maybe, for example, to say, you know, lets rethink some of these pipelines like nord 2 that are in development with russia. Russia might be more antagonistic towards them than it already is. A american gas strategically important for those objectives, frank . Yes, youve really raised some critically important points here youre exactly right, nordstrom 2 geopolitical project of the kremlin which is intended to sever ukraine from the west. U. S. Gas really does have a significant role to play, as we talked about, jeff was speaking to the price competitive nature of it, id also note that u. S. Gas is in this next wave thats coming in particular is going to change it really is already changing the entire Market Dynamics globally. Working with u. S. Producers like sempra and others allow for companies and countries that are importing to partner based on transparency, flexibility of contracts and you are negotiating with private sector, you are not negotiating with the government for all of these reasons we anticipate significant more volumes of u. S. Gas will be destined to europe but also around the world all right gentlemen, thank you both very much for i think skro us to talk about this today. Thank you thank you very much. Jeffrey martin and frank fannon now to eamon javers at the white house. It looks like we might get nor drama in terms of this Government Shutdown. I spoke to a Senior Administration official at the white house who declined to say for sure flat president is definitely going to sign the cr, the continuing resolution that members of the senate are working on this official telling me, look, let them pass what they want to pass and send it over here and we will take a look at it. We are interested to see whats in the cr, but not making a definitive declaration that the president will actually sign that bill if and when it reaches his desk the white house official suggesting that they want to take a good look at whats in it before they make any commitments. Its possible, tyler, that we might see a situation here where the president holds off on signing this cr, at least holds off on committing to it until he either satisfies himself that he has no other course of action or extracts some other commitments or some other Political Exchange in return for signing the bill. Its interesting, a couple hours ago likely Government Shutdown was a thing of the past, now not so fast. Eam eamon, thank you so much shares of facebook falling today on the back of a bombshell report about what the company has been doing with data Facebook Says it never sold your data, but maybe it did give it away for free. The details of those accusations and why this time it could hit the company where it hurts and a fed day power lunch. We will be right back with that and more not long ago, ronda started here. And then, more jobs began to appear. These techs in a lab. This builder in a hardhat. The welders and electricians who do all of that. The diner staffed up cause they all needed lunch. Teachers. Doctors. Jobs grew a bunch. What started with one job spread all around. Because each job in energy creates many more in this town. Energy lives here. Enforcement today, being sued by the d. C. Attorney general, this as the New York Times article says the company was sharing user data with other tech companies. Julia boorstin is here to describe why this could be a costly issue. Its already been costly for the stock, facebook shares fell over 6 earlier today, now they are off about 5 the latest is a lawsuit from a washington, d. C. Attorney general over privacy violations stemming from the Cambridge Analytica scandal. The attorney general saying facebook failed to protect the data of their users. The ags office saying the maximum damages that facebook could incur is 5,000 per violation. For the d. C. Consumers affected that would be 1. 7 billion facebook responding to the lawsuit saying, quote, were reviewing the complaint and look forward to continuing our discussions with the attorneys general in d. C. And elsewhere. This comes after the New York Times reporting that facebook gave microsoft, amazon and others access to user data including email addresses and phone numbers. Reportedly giving netflix and spotify the ability to read users private messages without their explicit user consent. Facebook responding to that report that they are winding down integration of partnerships and saying that their partnerships and their partners do not get to ignore facebooks privacy settings netflix, spotify, amazon and microsoft all telling us that they respected User Preference but the big question here is whether facebook violated its 2011 agreement with the ftc that barred it from sharing user data without explicit user permission violating that agreement could add up to billions of dollars in fines. Julia, when you read this article it is so damning in that it seems like a list of the whose who in Silicon Valley that have tapped into the Facebook User data. Is there any risk according to your reporting that these other players, netflix, microsoft, spotify, that they might be in jeopardy in some way well, its interesting because ive talked to all of these companies that were many of these companies that were named in that New York Times report and some of them said that they didnt even understand or could not even imagine that reading Facebook Users messages was even something that was on the table. Thats why they were so surprised to see the report from the New York Times. I think one thing thats really interesting, a lot of these companies are no longer as integrated with facebook as they used to be, take netflix, its social efforts really fell flat so they just dont integrate with facebook anymore, but a lot of them are advertisers on facebook so you have to wonder if you are a netflix or spotify, do you not want to be associated with facebook and will you start to pull back those ad dollars . I think the same thing could be said of big brands in general, will we start to see these negative headlines really impact those big brand advertising dollars . Julia, thank you. Julia boorstin in los angeles. Tyler . Melissa, thank you very much. As if the fed was not enough, weve still got thetrade issue down here in d. C. And now the prospect of a Government Shutdown this weekend. Maybe, maybe not, maybe fading and not to mention the sleel slalom the white house has to ski in the face of ongoing investigations and impending democrat control of the house. So is wall street pricing in these risks and doing it right lets bring in dan clifton, cnbc editor at large john harwood, michael farr also with us as well john, im going to go g. Ing to start with you, the headlines in the past couple minutes that our friend eamon brought us that maybe the president is not so willing to sign a continuing resolution that seemed to be moving through the senate. Your view on that . I think he will sign t i do not think there will be a Government Shutdown. Mitch mcconnell didnt just casually come out and introduce that punt until february so i think theres consensus on hat the democrats are on board as well the president likes to talk big, especially to reassure his base hes still fighting for them and, by the way, i think thats playing out or has played out on the issue of china and i think the constraint on the president on china as well as on the Government Shutdown is what is the backlash, especially in Financial Markets. He takes that as a grade of how hes doing and if we get into early next year and he thinks that the Financial Markets are going to freak out at the prospect of an extended intense trade war with china, i think he will back off on that as well. So this continuing resolution would not have money in it for the border wall, right thats right. It includes 1. 6 billion for Border Security measures, but it forbids money for construction of a wall. The president has indicated that his line on insisting on 5 billion was pretty soft because he has said and he continued to say in tweets today the military is going to build the wall any way. I dont need money from congress so that is foreshadowing how hes going to get out of it, but he doesnt want to make his base think hes too eager to surrender. Dan, lets say this little fiscal tif is resolved one way or another, that does not mean that in 201 there arent other fiscal collisions between the democrats and the republicans on the hill and in the white house, there are appropriation bills that have have to move through, remember that phrase debt ceiling, that comes back next year, sequestration spending comes back next year we have a year ahead of us. We noticed that investors were a lot more anxious over this current spending budget debate than you normally see, its a Government Shutdown, if it shuts down the democrats will open the Government Back up on january 3rd. Shouldnt really be viewed as a big deal, but your forecasting or foreshadowing Budget French warfare possibly coming back in 2019 as we have to go through this series of rolling fiscal cliffs. To Nancy Pelosis credit she was an excellent speaker in 20072008 when george bush was president and made sure there was no major cal issues and demanded her priorities, an increase in the minimum wage, student loan Interest Rates going down the question will be whether her caucus will be that willing to go for accomplishments which i think is the right strategy or are they going to want to have a fight over the trump tax cuts and that remains to be unresolved eight years ago no one believed that the republicans were going to make this major debt ceiling fight until you got to april may then it was like we into he had to rip the roots out of this we have to watch that progress itself, but these issues are now in addition to trade, in addition to the president s investigations, in addition to slowing Global Growth and it becomes a founding effect. Lets pivot to trade, michael farr you as an investing working, putting other peoples money to work, as you look at trade and there are two things out there, not just china, its what is going to happen with that u. S. mexico Canada Agreement on the hill and how it might be changed. How do you look at those two issues and put money to work in light of what you think is going to happen . The toughest thing we have had to do over the past year, tyler, is to try to distinguish the rhetoric from the reality because theres so much more rhetoric in washington, its so much more heated and trying to parse through it and find out exactly what the details are going to be, and on both of those fronts we still dont have any idea i guess we have a better idea with the new north American Free trade agreement, the form its taking and it doesnt look bad but clearly tariffs are an impediment, right . Its another tax, it slows things things down its another headwind to markets and to the economy whats going to happen with that mexico canada trade deal . It goes to michaels point about the rhetoric again, this is a case where i think trumps bark is worse than his bite he has said that he is going to withdraw from nafta before sending that deal up to the congress to give them a take it or leave it proposition. I dont believe he will do that. That is a very serious step to take i think its going to be hard to get the votes to pass that deal. Would he withdraw from the existing treaty prior to sending it up there as a dare to get the you got no trade deal or you take this one . Right i think markets would react negatively to that thats why i think the president will not end up doing it. Dan listen, the s p 500s not declining 12 months following an election since 1946. President s want to make sure the economy is humming the president is going to push it as hard as he can on china and nafta until he gets right up to the point where he needs to get the economy going. I think hes going to get a good deal with china. Not perfect, but a good deal with china i think well see it closer to march 1st than january 1st. Lets talk about the investigations that are swirling around this administration it has been a rough couple of weeks here is the market discounting what could happen to his presidency is it not even paying attention to it . Does he care i think the market cares desperately. But i think also the market is getting a bit weary. The Mueller Investigation has gone on for a long time. Were hearing both sides trying to characterize and spin the results. Theres been so much information, were building up calluses that may be setting us up for an unpleasant surprise as we come to the year end. Heres my question for my two colleagues, if these investigations become extremely serious, how will the market react to that . They may notreact i mean, the question about whether its priced in depends on how they react. You tell me. Were assigning a lower multiple because the investigation of mueller is so wide ranging the market will be able to handle it. Were no where near that point yet. A little bit of risk with that, but other issues are taking precedent right now. What a year ahead guys, thanks very much youll be back, michael, thanks, guys we appreciate it. Were just minutes away from one of the biggest most controversial fed decisions in a long time. So what will the fed do . What will they say about the economy, about rate hikes next year all those questions are about to be answered in seven minutes and six seconds. Dont go anywhere. Welcome back were minutes away from the feds decision on Interest Rates. Lets get a check of markets going into this. The dow is up 278 points right now. 279. Still below the 24,000 mark. The s p 500 there is up 26 points better than 1 gains to the dow and s p 500. The nasdaq is up 60. Lets bring our panel back welcome back to all of you alicia, since youre joining us, what do you think the market is doing ahead of the meeting they were up in anticipation of this. We think the fed goes today with its one hike because were at 70 expectations for that and it tends to be what happens. We think for next year theres a bringing down of the number of hikes to about two we think its going to be one with a drag in the beginning of the year theyre going to pause in the beginning of the year and well get one eventually. What was your thinking on that, same same thing. And i tend to agree with that i think we may get a rate hike in march. Were not going to get an inflation pushed through were going to go into an 11th year, the longest ever, and still theres no inflation its hard for the fed to move further. Watch on what they think the longterm mutual rate is as that goes down to 2. 9 that begins to look like maybe they get away with two more hikes michael, what about you are you with these two do you think its going to be a dovish hike so to speak . Im with those two. I think alicia came out with it perfectly. I think the risk to a market thats up 250 going into this with very specific expectations is to the downside i think theres a big likelihood that somehow this statement from jay powell will be interpreted in a way thats disappointing. Theres a lot of risk here and the markets are pricing in a positive result. Were at session highs on the s p 500 going in, alicia im going to ask this again, is this the sell the news kind of event . Weve seen the way the market has been trading, this is a nervous and worried market if you look at next years expectations for rate hikes, were less than one for next year its very hard for me to see any statement coming out of the fed today thats going to be as dovish so the market is less than one . Less than one for a number of rate hikes for next year. If it still signals two or three, david i think the fed has been biassed all along. I dont think its actually a reflection of true expectations. Look, the market has risen into this, its been having a rough time the past few weeks. Right now, were at 14 and a half times next years earnings. Well still have low Interest Rates and in a low Interest Rate environment, thats good. Intel trading is ten times earnings f facebook is trading at 18 or 19. Arent those just numbers unless you believe that Global Growth is really here . So the question is whether the 2019 eps numbers are believable. Do they have to come down my guess is theyre coming down on average they come down 3 from january 1st to the end of the year were at 8 now. Take 3 off that, youre at 5 growth for next year and were not even talking about the energy patch. Weve got to Lower Oil Prices we dont have inflation. This is going to be the longest expansion ever maybe it goes on for a few more years. Do you have any position for that i dont think so. People keep on saying late cycle. I want to say long cycle we know its a long cycle. We dont know how late we are in this cycle. I hear these things dont die of old age, but they could die from mistakes. Exactly from the fed. Fed errors. I cthink the fed can extend the cycle, the question is whether the earnings hold up it doesnt mean they wont meet up eventually, but right now its disconnected. Were moments away, the s p 500 is up by 27 points or 1. 7 lets get to Steve Leishman now for the decision. The Federal Reserve raises rates to 2. 25 to 2. 50 . The Federal Reserve says it judges some gradual increases will be needed the Federal Reserve raising rates by. 25 . The fed did add while it says it sees gradual increases as needed, it will continue to monitor Global Economic and financial developments and assess their implications for the economic outliook. A nod of what has happened to markets of late. On future rates, its a bit dovish they lowered it from a consensus of 3 to now 2 . Its seen going from 2. 9 from the current range of 2. 4 . It took out one hike for 2019. It lowered the consensus for neutral to 2. 8 from 3 . So it hits the middle of that range by its consensus estimate. Next year wi, two more hikes the average fed member sees the fed going one hike above muteermutneutra in 2020. On the economy, they evaluate the economy as strong. It lowered gdp for 2019 though by 2. 3 . Unemployment is unchanged at 3. 7 took one tick off the forecast for inflation next year to 1. 9 . The Current Assessment of the economy is a carbon copy of the november statement the labor markets continue to strength Economic Activity is rising at a strong rate. Unemployment rate declines Household Spending continuing to grow strongly and Business Investment moderated let me give you details on the rate outlook you may want to get a pencil out for this 2019, two members say no rate hike four members say one hike. Five members say two hikes and six members say three hikes or more on 2020, nine members still want to go above neutral and four want to stop there so a more dovish fed in the forecast and in the statement, but the question you guys will debate is it as dovish as the markets wanted to hear back to you guys. All right, steve, thank you very much. I just want to get a check of the markets quickly here we have seen a sharp reaction. The s p 500 is now higher by 11 points we paired our gains by more than half, were up by. 4 we have come off those highs here steve, in your view in terms of what youre seeing, the differences here, what stood out to me was the addition of some gradual increases. I dont know what stood out to you the most. Well, i think powell was trying to get a middle ground between the most dovish desires of the market and the white house. And his committee, which still seems to be a little bit thinking that they want to get out of this game of being below neutral. That they want to hit neutral or go a bit above it. Youve got nine members who by 2020 want to go at least one rate hike above the new neutral. Which by the way is a little bit lower. They shaved one off you know, the market can say, hey, we got a little progress here and eventually if the numbers dont comport with what the fed is expecting, well get more progress but right now, the fed is not giving up the prior forecast all together from one meeting to the next steve, well come back to you in a minute. I want to look at how bonds are reacting theres the two year it has spiked 2. 769 . Flip it over to the five, 2. 675 theres the ten. Rick santelli has more on this yeah, its definitely a curve flat right out of the gate the long end, at least defined by ten year notes, really hasnt done much. Weve seen the 30 years drift, but the 30 years have biteen an anomaly to begin the index is the area to pay the most attention to outside of equities the dollar index was down a half a cent it cut its losses by more than half well have to watch and see how well it holds. The reason thats important, 97 handles is an important area, showing good strength. Its close to recapping that area with respect to price action i think as we watched the market, that what we will learn is the press conference is the real thread the needle here. Listen, everybody expected this. The real issue for the fed is to try to put forth the notion its not going to continue to be a lagging indicator. I think hes going to try to tell the markets he wants to normalize, but hes not going to do it if the market ends up being penalized for the pace back to you, kelly rick, thank you a flatter curve as he said thats been the concern for months now the dollar coming back, the nasdaq turning negative. This is simple to explain this this was sort of what certain people were concerned about. The fed did indeed issue a dovish statement, but not dovish enough for the markets the markets have moved very, very far in the last couple of months particularly since the beginning of october from the idea of we hope there will be a couple of rate hikes in 2019 to the hope were not going to get any rate hikes. The Federal Reserve went part of the way, but not all of the way. We have some who want an increase the market wanted some further gradual increases removed completely thats still in there, although it is reduced a little bit in the impact in terms of the expectation for 2019, weve moved from expectations of an aggregate three rate hikes from the committee to now two again, the market was hoping theyd go much lower than that as steve very accurately pointed out earlier, the fed doesnt move in those big quantum leaps. 30 is too much to expect. Theyre getting dovish, its just not quite dovish for the markets. The big issue for us down here on the floor is who is the marginal buyers left for the close of the year . Exactly bob, thank you lets get back to our panel, alicia and david are still here. Alicia, what do you make of this clearly the fed did not meet where the market is for next year its a disappointment. And i think eventually well get to that one hike next year, but its going to be very slow on an institutional basis. The fed projects first and then acts its a nervous market. Youve got people doing tax loss selling right now. You have a selling bias going into this particularly because pretty much every buy was a bad buy. You have people selling for tax reasons and i think it will be a tough market till the end of the year. When we take a look at market reactions, no surprise rick was highlighting the yield curve flattening we have seen though small caps hold onto their interday session gains. Theyre up a percent this is a group people are concerned about having the greatest percentage of leverage with floating rates. Well, first of all, the economy is not going to get hurt by a federal funds rate between 2. 25 and 2. 5 it wont get hurt by 2. 8 either its not an economic threat here also i think the market may be misreading this. Remember the Bank President s have to put in their forecast beforehand this is not a decision that were going to put these numbers on the page, you know, at 2 00 in the afternoon so i think what well see in the press conference is i think jay powell will look at this reaction and realize he needs to put a little bit more soothing, a little bit more dovish language in there. An easy way to do that is to say were going to do two rate hikes in march and june. If he cares about the markets reaction. He might be say i think he does if you saw the way he changed his language about neutral over the last few months, he cares. I hope Steve Leishmans first questions, is that march and june i know jay powell to have an opportunity to say we can wait a long time. We might not do it at all. Russell is down sharply now bam. Gone tyler . Folks, i want to jump in here with a question for the round table. In light of what david was talking about, how do we know what neutral is when in september i believe it was mr. Powell said we were a long way from neutral then more recently he said were getting close to neutral now, well, weve raised rates so we must be closer to neutral how do you know what the hell neutral is theres an Old Supreme Court case about that, tyler it was about pornography. I know it when i see it. When you see it you know it when, for example, the economy goes up or the economy rises and you have inflation along with that, then your funds rate is probably below neutral if you dont get any inflation with that, then you may be at or above neutral so i think thats a big story and i think you have to the fed will feel its way there. I want to raise two questions. One of the other panelists suggests the market was priced in for a further reduction in the outlook. Which i think is a little curious. There was no way the fed was going to move from forecasting three rate hikes to forecasting one or none. I guess its possible the market was mispriced going in its curious to me as i said earlier in the week, there was no possible way the fed was going to move from three to one im sorry you didnt get that. It wasnt going to happen. But it may get the eventually. It was also not in one step. One of the changes in the language was from the phrasing further rate hikes to some further rate hikes thats asking the word some to do a lot of work. I think thats right. I think thats a little on the hawkish side that brings me to my next point, tyler, which is i think powell is showing a bit of backbone to the market maybe a bit of stubbornness. The market is saying, hey, we feel good about the outlook for the economy. We felt pretty good about our forecast before. We needed to tweak it a little bit. Were not bowing to the pressure of either the president or the markets here i dont know what thats worth now or some time down the road, but theres a bit of defiance in this statement thats worth talking about from a point of view here. You let the record show you said you thought the market would decline sell off, which it has done if we got the action and rhetoric that we did. Right i flipped the quarter and it came up heads. I thought the market was setting itself up for a perfect, perfect kind of a result from the fed. And probably a much too dovish response from the fed, message from the fed i think this is actually a very perfect i mean, this is almost a goldilocks if you follow jay powel ju judicial he is hes got it on the table but he doesnt have to do it. He didnt cave in. He hits rates i think this is a perfect message and i think it will become more perfect when wall street starts to digest it. The only thing is the point that was made this week like you highlighted earlier, the fed is running 600 billion off the Balance Sheet next year. You know, how does that mesh with these changes on Interest Rates . Its an issue and, kelly, i think its a legitimate issue that stan and kevin bring up i think its one the market hasnt talked enough about or hasnt put enough pressure on the fed to discuss we survey this and ask the market whats in equivalent to and they think another 35 basis points of hiking from 25 to 50, as ive talked about that. Some people say its worth as many as 75 basis points. Attenuating that comment is the following, as the fed takes 600 billion of liquidity out, its 3 trillion above where it was before the financial crisis. Now theyre not exactly apples and apples those who say that somehow the fed reducing its Balance Sheet is responsible for a massive seizure of liquidity in the market are wrong by 3 trillion to 4 trillion i appreciate the context, steve, but on a relative basis, conditions will be tighter so let me respond to that very quickly. Very quickly if you have three feet of water in your basement, and you reduce the amount of water in the basement by two feet youve still got a lot of liquidity in your basement. Where did the water go . Theres still water in your basement ive had that happen to me. Tightening is tightening. And its a little bit like boiling the frog slowly. So we started with the roll off last year and it was just the u. S. Doing it. By the time we get to the end of 2019 were going to have global tightening you saw the effects first in the emerging markets earlier this year youre starting to see it a little bit in europe the markets here are starting to react to it. Yes, were still at 3 trillion, but its still rolling off we have gotten used to it. Were enjoying it. Its very hard to take it away. I think the fed did certainly the right thing today. I think actually investors should feel comforted theyve got such a prudent patient Federal Reserve. Interest rates are still basically zero the way you prolong an expansion is avoiding bubbles. Do we have a sniff of a bubble at this point across it all if you look at the growth and value of assets, its been going up for 25 years. Thats the biggest threat to this economy. In january we were almost going parabolic. Its important that the Federal Reserve, thats what their job is you take away the punchbowl from the economy and assets markets youve got to allow asset prices to go up gradually but not very fast so im really glad the Federal Reserve did this. We have to leave it there well pick up a little later with more conversation, lady and gentlemen, thank you very much more from our panel coming up. But coming up before that well hear from the fed chairman jay powell as he takes questions from reporters this is where the rubber will really meet the road about the decision what the fed is thinking about next year. First, though, before all of that, well hear from the former ea sy ufao o. Plsetawiths. At t provides edgetoedge intelligence, covering virtually every part of your retail business. So that if your customer needs shoes, hes got wide feet. With edgetoedge intelligence youve got near real time inventory updates. Hell find the same shoes in your store that he found online hell be one happy, very forgetful wide footed customer. At t provides edge to edge intelligence. It can do so much for your business, the list goes on and on. Thats the power of. If your customer also forgets socks you could send him a coupon for that item. This is fun. Breaking news this hour, the Federal Reserve raising Interest Rates by. 25 . Policymakers saying some further gradual rate hikes might be needed the fed also lowering its 2019 gdp forecast to 2. 3 lets get some more reaction now from the former chairman and ceo of wells fargo welcome. Good as always to see you. What do you make of what the fed did and what it said it hit the bullseye did exactly what i wanted them to do and what i thought is best to do. I think one thing that people are forgetting is we have a huge fiscal stimulus as a result of the reduction in the tax laws and 800 billion to a trillion dollars deficit. We dont need anymore monetary stimulus we have to get to neutral. We dont want the monetary stimulus to continue to inflate asset prices which will get into a bubble and burst and weve already seen some of that in the stock market i think that two is correct. I would have them do that in march and june and then wait six months you know, were close. If they did that, youre at 2. 75 for the fed funds rate thats close to neutral. 3 to 3. 5 is neutral. Were close to that. You wait six months and then decide what to do. I think they did exactly the right thing. You get to 2. 75 , they say 2. 8 or roughly thereabouts is the neutral rate what do you make of the fact that the fed voting members if you do a scatter diagram of them, there are six who say three rate hikes next year, five who say two, four who say what, i dont know its a very spread out curve of these governors. Does chairman powell have cat herding to do . Well, i dont think so. I think, you know, if you take the highs and lows and average you get there. The biggest reason for this is no one knows what the neutral rate is. Theres no science to it you dont have to determine that all you have to determine, which i think they have, is that were below the neutral rate we dont know what the high end is yet and data and so forth will help us but, you know, if you know youre below, which the majority of the people, you get to somewhere maybe even cautiously im a 3 to 3. 5 neutral rate guy. I live with 2. 75 and wait for six months, you know theres not a rush you may not wait im just saying you put that into your plan and you let data help you get there the biggest risk we have is asset prices inflating its not inflation we know that an accommodating Monetary Policy inflates assets. Weve got to get to neutral. Lets talk a little bit about banks and bank stocks. How do you think those stocks react to this news what has been troubling them i think certainly banks tend to benefit from higher Interest Rates. So the markets probably a little disappointed that the bank stocks will be disappointed because theyre only going to two increases. The best thing for banks is to have a Strong Economy that doesnt get too hot or too cold. So i think this is good for bank stocks, particularly because theyve been hammered of late. Theyve been hammered, i think, the major reason isnt to do with Interest Rates, its the uncertainty on trade its the Slower Growth in economies in other places and theres issues relative to brexit and italy and so forth. Bank stocks, when theres a lot of uncertainty, bank stocks dont perform very well. But i still think theyre a good investment they have high yields, low pes i think theyre at or close to bottom. Tell me how to think about the dichotomy between what the Economic Data are saying, generally pretty good with the exception of some housing numbers and so forth confidence is good, inflation is low. The economic numbers seem to be saying one thing, but the markets seem to be looking ahead and saying something a little bit different. At least if you were to extrapolate from the stock Market Performance over the past two months how should i think about that . I think there difference between our domestic economy and the rest of the world. You know, can you be an island for years and years . You know, you dont know we have a very strong domestic economy. You see weaknesses other places. And is that a sign we are going to get weaker . You can put your everyone has a difference of opinion. I believe that our economy is going to stay relatively strong. Certainly relatively strong and even strong period i dont see a sign of recession. Then you have these exogenous things the uncertainty of trade for the president to say hed be pleased to shut down the government these things arent helpful. So people are cautious again, i think the fact that the market has fallen as much as it has is getting it to a floor i think youll see more optimism in the market and more optimism as we get the numbers for christmas. Which i think are going to be strong i think its going to be one of the best christmases weve ever had. Thats going to get some momentmoment momentum for the start of the year. We thank you, appreciate it thank you all right. Were just a few minutes away from chairman Powells Press Conference following that rate hike the markets losing their gains following that decision. The dow briefly turned negative, were positive by 80 the nasdaq is negative by. 10 . The small caps barely positive we have nafil thoughts from our panel next as we await to hear from the fed chair himself were back right after this. Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade under two minutes until fed chair Jerome Powells press conference lets get final thoughts from our panel. I think the fed threaded this needle about perfectly they tapped the rhetorical brakes and we know that jawboning is a fed tool. They used it beautifully today i think in this press conference its even going to get better. I dont know, the statement was carefully worded the press conference is adlib, well see if he can hold the goldilocks tone. What question would you ask Jerome Powell . Id actually ask what he thinks the National Rate of unemployment is. In some ways thats the key to where theyre going with rate hikes. It seems that its lower than what it has been in the past and where we are now if theres something discussion that it may be lower, i think there will be a dovish tone to it it means that inflation wont be rising. I wonder if it goes back to the shadow inflation thing to it. Theres something in the employment number thats not quite right. Its not really reflecting whats going on. Because of wages . Its not going up. I would ask that question. David i think next year the fed will stop the cycle and will endenen in a lower level the fed did not have to overtighten to bring the economy into a soft landing. People will say if this is the end of the hiking cycle if the economy doesnt get sick they dont need to fix it. If its ending the hiking, isnt it because were sick . The fed rate cuts didnt they dont help the economic recover, the economy can recover itself we dont have an inflationary spike at the end of a long expansion. That means the fed doesnt have to overdo it. Lets get straight to washington Jerome Powell begins speaking right ow. Thanks very much for being here today over the past year, the economy has been growing at the strong pace the Unemployment Rate has been near record lows inflation has been low and stable all of those things remain true today. Since the september meeting, however, some cross currents have emerged ill explain how my colleagues and i are incorporating these cross currents into our judgment, about the outlook of policy since september, the u. S. Economy has continued to perform well roughly in line with our expectations the economy has been adding jobs at the pace that will continue bringing the Unemployment Rate down over time wages have moved up for workers across a wide range of occupations, a welcome development. Inflation has remained low and stable and is ending the year a bit more subdued than most had expected although some American Families and communities continue to struggle and some longer Term Economic problems remain, the Strong Economy is benefitting Many Americans despite this robust economic backdrop and our expectation for healthy growth, we have seen developments that may signal some softening relative to what we were expecting. Economies around the world has moderated a bit over the course of 2018. Financial market volatility has increased over the past couple months overall financial conditions have tightened that is they have become less supportive of growth in our view, these developments have not fundamentally altered the outlook. Most participants have instead modestly lowered their growth and Inflation Forecasts for next year the projections of Committee Participants released today show growth continuing at healthy levels, the Unemployment Rate falling a bit further next year. And inflation remaining near 2 . The projections also show a modestly lower path for the federal funds rate which should support the economy and keep us near our goals as the economy struggled to recover from the financial crisis and the subsequent recession, the Committee Held our policy rate near zero for seven years to give the economy the best chance to recover and the economy did recover steadily, if slowly at times three years ago the committee came to the view that the best way to achieve our mandate was to gradually move Interest Rates. Today we ranged our target for the shortterm Interest Rates by. 25 . As ive mentioned, most of my colleagues expect the economy to continue to perform well in the coming year. Many participants had expected Economic Conditions would call for three more rate increases in 2019 we have brought that down a bit and now think its more likely that the economy will grow in a way that will call for two Interest Rate increases over the course of next year. We always emphasize that our policy decisions are not on a preset course and will change if incoming data change the outlook. And given recent developments, the statement notes well continue to monitor Global Developments and assess their implications for the economic outlik outlook. Now i will provide some detail starting with review of policy over the last year last december, the Unemployment Rate was 4. 1 and inflation had been running just below 2 participants and many other forecasters were predicting that growth in 2018 would be strong this growth was predicted to push the Unemployment Rate down to near historic lows and the tight labor market was expected to push inflation up to 2 given this outlook, Committee Members judged the appropriate thing to do was to continue gradually withdrawing the support for the economy that had been in place for almost ten years. Thus in december 2017, the median of the projections of participants pointed to three. 25 increases in 2018 which would have left the target at year end at 2 to 2. 25 , still below most estimates of the longer run normal rate early in 2018, it became clear the economic because going to be stronger than we expected. In part because the fiscal stimulus was larger and front end loaded than most had anticipated. The signs of a more robust economy proved accurate and rates have been raised four times this year, counting todays action one more time than anticipated a year ago this illustrates the nature of data dependence we always emphasize. In 2018, the economy was somewhat more robust than expected and this led to a slightly faster pace of policy normalization than had been projected. When the economy has instead turned out weaker than expected, the committee has slowed or paused the pace of rate increases, as we did in 2016 and when the economy has performed about as expected, the committee has generally moved in line with the median projection, as we did in 2017. What kind of year will 2019 be we know that the economy may not be as kind to our forecasts next year as it was this year history attests that unforeseen events, as the year unfolds, may buffet the economy and call for more than a slight chance than the projections released to todtoday. In early 2018, we saw a rising trajectory for growth. Today instead we see growth moderating ahead participants, along with many other forecasters, had long predicted some moderation of growth in 2019 the additional tightening of financial conditions weve seen over the past couple months, along with signs of somewhat weaker growth abroad, have also led us to mark down growth and inflation projections a bit. The median of participants projections shows a growth of 3 this year and 2. 3 in 2019. The Unemployment Rate is projected to fall a bit further to 3. 5 by the end of 2019 inflation in the median projection remains near 2 second, the economy has continued to strengthen this year and given our four rate increases and the ongoing reduction in our portfolio, there will be a smaller boost to the economy in 2019. The target range is 2. 25 to 2. 5 putting it at the lower end of the range of estimates of the longer run normal rate provided by the committee over the next year, if events play out broadly as expected, the federal funds rate will be in a range of which judgments of people inside and outside the fed will sometimes differ regarding whether the stance of policy is modestly accommodat e accommodative, neutral or restrictive. When rates are in this range, policy is made in light of the array of diverse views on the committee. Moving forward, my colleague and i will be watching closely that the indication of stance of policy is appropriate to sustain the inflation near 2 . Its worth noting that the summary of Economic Projections is compilation of the individual projections of all participants. Each participa we believe that the s. E. P. Provides useful information, but the median is not a consensus judgment and certainly does not represent a Committee Plan actual policy will, as always, be adjusted as incoming data shed light on the state of the economy, the outlook and the changing balance of risks. Neither the pace nor the ultimate destination of any further rate increases is predetermined. We will adjust Monetary Policy as best we can to keep the expansion on track, the labor markets strong, and inflation near 2 . We know that our policy decisions affect all American Families and businesses and well continue to make our decisions objectively and based solely on the best information and analysis thank you and ill be happy to take your questions. One of the recent surprises have been fairly tepid inflation data i wondered if you could explain why you think, despite the extremely tight labor market were not seeing pressures in a context of a more data dependent fed, how will the fed respond to further undershoots of inflation moving into next year youre right, sam inflation has come in just a touch below where we expected it to be. Not by a big amount, but by a small amount more broadly, 2018 has been the strongest year since the financial crisis during that period, weve had low employment and strong growth and inflation. Its remained a touch below 2 so i do think that gives the committee the ability to be patient in moving forward. As i mentioned, there is significant uncertainty about both the path and the ultimate destination of any further rate increases. Heather long from the washington post. Today the fed lowered its expectations for Interest Rate increases. Given that, im wondering if the fed has had any discussion of altering the course of Balance Sheet normalization. If you could give us any insight on what might lead the fomc to alter that Balance Sheet normalization in 2019. Sure. If you go back some years, i think we people who were working at the fed in 2013 and 14 took away the lesson that the markets could be sensitive to news about the size of the Balance Sheet and things like that we thought carefully about this on how to normalize policy and came to the view that we would effectively have the Balance Sheet run off on automatic pilot and use Monetary Policy. Rate policy to adjust to incoming data. I think thats been a good decision i think that the run off on the Balance Sheet has been smooth and served its purpose i dont see us changing that i do think that we will continue to use Monetary Policy, which is to say rate policy, as the active tool of Monetary Policy chairman powell, you talked earlier about the ability to be patient. So as you think about your next policy moves, are you inclined to go at the current recent pace to a slightly different destination thats laid out in the projections today . Or does the current environment of restrained inflation maybe allow you to space out your next few moves and take more time to get there . As background, i would point to 2018 being a very strong year and the committee looking forward to 2019 and still having what amounts to a positive forecast we still are forecasting individually growth a bit above its longer run potential, 2. 3 is what were forecasting. Were forecasting that growth will be Strong Enough that unemployment will drop still further and inflation will remain near our target thats a reasonably positive forecast Going Forward, you know, i will be looking in particular to see whether incoming data tell us were, in fact, on that path that the development of the economy is in line with that expectation. That will be the main thing. More broadly, though, i think weve reached the bottom end of the range of committee estimates of what might be neutral i think from this point forward were going to be letting the data speak to us and form the outlook and inform our understanding of what would be appropriate policy so theres a fairly high degree of uncertainty about the path and ultimate destination of any further increases. Mr. Chairman, could you tell us how three things affected the outlook for the economy and rates . The first is how the markets declined affected the outlook for the economy and for rates. The second is trade tensions and the tariff war, how you factor that into your outlook and the third is comments by the president urging you not to hike rates. So as i mentioned, we monitor a broad range of Economic Conditions, including financial conditions, a broad range of financial conditions we took on board the tightening and financial conditions, which not any one condition but broadly speaking financial conditions have tightened since the september meeting. We took that on board in our forecast thats why the forecast for growth and inflation went down a little bit thats in the context of a more accommodating path we took down our rate forecast we definitely did take that into account. As you can see from the statement language, we acknowledge those risks in the clause about monitoring developments were going to be watching carefully to see as those things develop. I think more broadly theres been a sense of concern among Business People and market people about Global Growth you know, that may be partly about trade tensions, it may be partly about a variety of things if you just mechanically drop into a model of the u. S. Economy tariffs, you dont see very large effects. The large effects would have to come from Financial Market changes or losses in Business Confidence those are things that are very difficult to model on your third factor, you know, Political Considerations play no role whatsoever in our discussions or decisions about Monetary Policy. Were always going to be focused on the mission that congress has given us we have the tools to carry it about. We have the independence, which we think is essential to be able to do our jobs in a nonpolitical way. You know, we at the fed are committed to that commission and nothingwill deter us from doin what we think is the right thing to do. Youre about to undershoot your inflation target for the seventh Straight Year. Your new forecasts say youre going to undershoot it for the eighth Straight Year should we interpret that some members of your committee that policy should be in a restrictive range by next year could you help us understand why people would have restrictive Monetary Policy at a time of undershoots . As a committee we do not desire inflation undershoots youre right inflation has continued to surprise to the down side, not by a lot though. Were very close to 2 and, you know, we do believe its a metric its a symmetric goal for us. Around 2 . Thats how were going to look at it. Were not trying to be under 2 . Were trying to be around 2 . I never said i felt like weve achieved that goal yet the only way to achieve that is to have inflation around 2 . Weve been close but havent gotten there yet we havent declared victory on that that remains to be accomplished. Bloomberg news. Following up on that question, i guess if you havent achieved 2 inflation and you dont see an overshoot, whats the point in raising rates again at all so, again, i go back to the health of the economy. If you look at 2018, as i mentioned, this is the best year since the financial crisis you have growth well above trend. Youve got unemployment dropping, inflation moving up to 2 we have a positive forecast, as i mentioned. In that context, we think this move was appropriate for what is a very healthy Economy Policy at this point does not need to be accommodative it can move to neutral it seems appropriate that it be neutral. Were now at the bottom range of estimates of neutral thats the basis upon which we made the decision. We took on board the risks to that you know, we certainly cognizant of them. Youve established for this coming year a Communications Panel to look at how the fed communicates could you talk a little bit about what you expect to get from that panel . Will the dot plot be involved in that at all . How do you think the dot plot is working . Are we dealing with it the way you want us to be handling the dot plot is it something that you might tweak a bit . So this review, what it really is, its coming at the time when the economy is strong and its a good time to take a step back, we think, and ask whether our strategy and our tools and our communications around Monetary Policy are doing the job that congress has assigned us to do on behalf of the american people. And what were going to do is were going to open ourselves up and have a discussion with many outside groups of all different parts of the economy, includinge in june in chicago, and, again, the idea is to, you know, listen to new ideas, better ideas, old ideas. Many of them have been around, and try to assess whether there are better ways we can do things one of the overarching facts that rates have really been coming down overall for more than three decades now we may be in a world where Interest Rates are just lower for the time being, and, therefore, well have less policy space to react to economic downturns, and we would want to be evaluating ideas for again, for better achieving the goals that congress has given us. Were not looking at law changes at all, and were not looking at changing the inflation target, for example. We are looking for better ways to achieve the inflation goal, for example, on a symmetric basis. Thats the sense of that as i mentioned on the do the paradise lost, you asked about the dot plot, i think the dot plot generally does provide useful information about the reaction function of Committee Participants times more useful than others, ill add mitt, but in general i think people sort of have it figured out and understand what it is and what it isnt, but that doesnt mean we dont like to repeat what it isnt. Its not a consensus forecast. Its not something that we vote on its something that each of us writes down, and we always update it as, you know, as data comes in and as we update our outlooks. Mike and then edward. Michael mckeefe from Bloomberg Television the ballot sheet reduction, how much additional tightening do you think comes from that . We note in the markets cost of credit rising, repo rates, the ted spread widening. Do you see any concerns about the availability or price of credits that could slow the markets, and if in 2019 we see the economy start to slow, would you, if you dont adjust the Balance Sheet, be risking too much tightening . So we do watch all of that, but amount of the amount of runoff that weve had so far is pretty small, and if you just run the quantitative easing models in reverse, you would get a pretty small adjustment in Economic Growth and real outcomes, so we dont think you know, things that are happening at the short run, at the short end are driven by many other factors other than the Balance Sheet runoff for example, just very large bill supply has pushed up shortterm rates and pushed up repo rates tightening of the federal funds rate has raised shortterm borrowing costs, so, you know, were alert to these issues. Were watching them carefully, but we dont see, you know, the Balance Sheet runoff as creating significant problems ed lawrence, fox business network. Thank you, mr. Chairman. Weve seen enormous volatility in the markets recently. We know the president said dont raise Interest Rates its well documented the National Association of realtors chief Economist Says its starting to affect firsttime home buyers with the Mortgage Rates going up. When do you think they pauses need to come in next year . Do we need to keep this, as you said gradual, and what data are you looking at for you that shows when the Federal Reserve starts to become the head wind in the economy with the rates . Were watching we have a strong forecast generally for next year. That forecast involves growth, you know, between 2 , 2. 5 , and it involves growth at a Strong Enough level to continue driving unemployment down and inflation near 2 , so thats a pretty positive forecast, so to make further moves ill be looking for data that suggests that thats in fact the path that were on as i mentioned, once you once youre broadly speaking in the range of neutral, i think i think its appropriate to be putting aside individual vimts of th individual estimates of that and the individual outlook, updating estimates of what the neutral rate might be, natural unemployment might be and the state of the economy and letting that lead you to to adjust your outlook and, therefore, your appropriate path for policy that what it means when were data dependant were always data dependant which has a meaning in this particular context hi, mr. Chairman. I wanted to ask, first of all, whether youre worried that President Trumps tweeting and statements might interfere with your ability to communicate with markets and why youre doing what youre doing, and then also i was wondering if you could comment on governor brainard gave a speech recently where she laid out a case for the countercyclical buffer being activated. Do you agree with her analysis is that something that you think the fed should look at doing im not worried on the first question because i know and everyone who works at the fed knows that were going to do our jobs the way weve always done them, and that involves, you know, getting the best thinking together, diverse perspectives every business every fomc cycle we talk to hundreds of people in all different parts of society, not just Business People or market people but people from Community Development organizations. We get survey data from thousands of people, and so we really do have a pretty broad exposure to whats going on in all different parts of the country, and were going to take all of that information in, and were going to make the best decisions we can and nothing will cause us to deviate from that in terms of the ccyb, so the ccyb is a countercyclical capital buffer is a tool that allows us to build capital at a time when vulnerabilities, financialb Financial Stability vunlts are being looked at. I think well be doing that next year and reach a judgment then i will tell you, i recently gave a speech believing that Financial Stability vulnerabilities were roughly at a moderate level, but would i want to leave open my mind open on that and have that discussion with my board colleagues when the issue arises. Youve said policy at this point does not need to be accommodative, but does it need to be restricted as the dots seem to suggest that it will be . Doesnt currently need to be restricted, no, and i dont believe that it is i dont believe that policy is restrictive. The dots suggest it will be restrictive next year. Should it be yeah. I i discussed this a couple of times a very good question i guess i would just go back to this the individual forecasts are not something that the Committee Votes on they are out in the future we vote on the rate incareer, and we write down our you know, our own personal paths, so people have disparate views on what the end point could be. Ultimately its going to depend on what the circumstances are. There would be circumstances in which it would be appropriating to past neutral and there would be circumstances where its wholly inappropriate to do so, so i wouldnt put too much on i mean, it does inform you the way people are thinking about things, but i but i wouldnt take it as a signal about current policy or about nearterm policy paul . Hi. Paul kieran. Thanks for the question. In dallas last month, you talked about the usefulness of speaking with businesses and sometimes hearing things that arent yet showing up in the Economic Data, and i was just wondering if youre hearing anything from businesses that might explain the recent market moves . You know, are markets on to something that, again, hasnt showed up yet in the data . Thanks so if you if you look at the teal book or, you know, we get the teal book in attorney from the reserve Bank President to come in and share their discussions, not just with their directors but with literally hundreds of business and nonprofit, you know, and labor union people around the country, and i personally find it really interesting. I mean, my background is very much working starting with, you know, a small group of people, maybe a company and working out, so that kind of anecdotal data really helps me capture the picture better, so and, you know, what youre picking up now i think is theres, you know, a mood of concern or its a mood of angst about growth Going Forward, if i can just capture it in one thought. Thereto are many reasons given for that, but generally speaking its its a concern about is growth going to be as strong as it was why not . What might it be, but thats the mood out there that doesnt mean it will come into the big data in a real way, but it may or that financial conditions will tighten further. Well just have to wait and see. For now financial conditions have tightened a little bit. Weve taken that on board in the outcomes in our forecast and also in a lower rate path to, you know, to provide some accommodation to to push bark against that tightening. Thats how i think about it. Thank you greg and then nancy. Greg robb from market watch just following up on pauls question, President Trump said recently that you should feel the markets, so when you see the markets, what are you markets telling you . You know, financial conditions, broadly speaking, we dont look at any one market we look at a really big range of financial conditions and what matters for the broader economy is material changes in a broad range of financial conditions that are sustained for a period of time. A little bit of volatility speaking in the abstract some volatility doesnt doesnt probably leave a mark on the economy, so we look for that, and and, you know, what weve seen here is is a tightening theres been a tightening since right around after, a week or so at the september meeting, and we tried to factor that are into our models of thom