Median the long one remains unchanged at 2 1 2 . The economy is very much the same as it was in fact, i dont have any changes at all Economic Activity rising at a moderate rate. Job gains solid on average Unemployment Rate remained low the only weak spot there and inflation running below the feds 2 target. The fed used to morninger Global Developments and inflationary pressures. Those two things animating fed policy, very much on its radar there in terms of what is behind or motivating policy right now finally, a little bit on the Unemployment Rate. They lowered the Unemployment Rate forecast to 3 1 2 from 3. 7 and in the long run, down to 4. 1. Thats a sign that the fed at the current rate is willing to tolerate a lower Unemployment Rate thats a number that ases now over the years has come down and down and down. Tyler . Ill pick it up from here, steve. No, its okay do not worry about it, listen, man. You got your hands full there. I love these word counts, back from the old days when i covered the Federal Reserve, i like to go in and compare the old statement to the new statement and search for words like strength and expansion theyre all the exact same i havent been able to do it completely, i wonder is this statement almost or exactly the same literally just faxed it in its quite a bit different, tyler. Its different in that this is a statement in which the Federal Reserve is signaling that its on hold. Its from an economic point of view how its describing the economy, its exactly the same as i reported. But what is different i hear is that the language you want to key in on is where it says the current stance of policy is appropriate. Appropriate to what . Appropriate to sustaining the expansion, and bringing inning nation back up to 2 thats a new sort of term of art. Also assess, and uses that term, it will assess the appropriate path from the last statement description of Economic Activity, youre right its exactly the same some new language where the fed is signaling to the market, these are the new q words, the market has to get used to, where the fed is signaling its on hold, i think the word appropriate is one you should have at the top of your dictionary heres my question, since the decision coming out of this is largely what you expected and what you told us we would hear yesterday, what will be the burning question you want answered from the chairman you know, i dont think my question this month is different from the question i would have asked last month, which is, we continue to probe what the parameters are for a change in policy i get a feeling here the fed is hunkering down being on hold for a while here the chairman has used phrases like a Material Change to the outlook. Talked about a significant rise in inflation i think we want to know how close the fed is so heres what we want to know and why we want to know it what i want to know is when an Unemployment Rate comes in, higher or lower. Jobs number comes in, i think this is what the market wants to know this is why we do these things to begin with, when it comes in and we cant ask powell a question, we want to know how he and the committee will react its called the reanswer wen watt to know how policy would function given a new piece of data. The questions are going to surround what would it take to change policy and come off of old. I think another question we have is about the repoe rate. The repo market, the overnight lending market is ready. And theres sufficient amounts of cash in there for the end of the year, which is always a bumpy ride i want to get to that issue mona, first, what should it take for the fed to consider taking action you know, i think theres a couple things on the table there. We have u. S. China trade like we talked about still out there december 15th is a kui date. We dont know clarity or have clarity around that. Its interesting since they last met, we have the shift in Market Sentiment that perhaps were in this process in the economy. Last year well see a mid cycle inflationary story i wonder if the fed is also alongside the rest of us, watching to see if the data proves that out. We talked about pmis earlier. Well be watching to see if those stabilize in the u. S the fed is watching the u. S. Global economy trade just like the rest of us, and any material deterioration will cause them to move going back to that fed survey, we saw confidence in even a limited trade deal falling. It was 83 in september, 54 in december how crucial is trade to what we will see unfold over the next year i think its very crucial the best we can hope for here is a gradual ceasefire lets read the problem, Global Business is holding back from investing, because we dont know what the rules are going to be around trade. I think the administration seems to think if the markets go up, thats a positive. I think the real positive is uncertainty around that. I think thats going to be an anchor on both global Interest Rates frankly. If you look at these go ahead. Im going to say, most people i talk to think theres mostly down side risk on trade. In part because they think the damage thats been done to the economy from trade is already done and the question is, does it become worse the expectation that contessa was talking about, most people i talk to dont think theres too much economic benefit of that, other than eliminating down side risk a limited trade deal that means the damage has been done for 2020. Weve had those tariffs down for two years . When do you start thinking this is the way things are. The definition of insanity is doing the same thing over and over again and hoping for a different outcome. We talked about the repo a little bit some people think its nothing some people, a couple people think it could be everything where do you stand i stand closer to everything than nothing it is something. For sure, i think its absolutely critical. A former Federal Reserve strategist whos now a strategist at Credit Suisse put out a note saying that its going to spike yields and its going to screw up the effects market, which is going to send stocks crashing. Well, if things arent addressed, that can happen it could. Right you agree, those things could happen thats where the dollar is going. Liquidity, it all starts in the repo market, if you cant get financing, which is the base rate of the market, that creates problems thats what the financial crisis was all about. We talked about something here, i want to change course a little bit im uncomfortable with this fed statement, even in the way things are being addressed right now. Effectively, what the fed is saying, theyre going to let the economy run high that sounds great, im a fixed medication investor, what does that mean for me does that mean we allow Interest Rates to move higher it means youre a wimp. If fixed income investors have been wimps for a long time you do not ask for inflation compensation, you continue to buy u. S. Bonds at real negative rates. And you will take what youre given i think is what the u. S. Government is saying, and whats been happening here. The fed, i think, is following the market on this and i mean no disrespect, im just kidding around here the market has been taking down a trillion plus of u. S. Debt and a negative yield not demanding inflation compensation the fed has followed this, and the ideas is that it doesnt see the inflation out there. Neither does the fixed income market we have Investment Grade which is up 14 right now. This is a great year for treasuries a lot of that is because the fed had this mid cycle reset and pushed rates down. Which i think is great and its appropriate. What about next year you mentioned financial conditions earlier and what the feds reaction function is what if, for example, we dont get a 20, 25 basis point move higher in yields that ufrn ralphs what the fed has done this year, in terms of easing financial conditions. Yes, the bond market, were big boys, we can take it, but i think a lot of passive investing thats in the markets right now are going to be very upset and disappointed and given the fact that equities and fixed income have become highly correlated if we remember back to this time last year. The fed was nervous if when the equity markets started to fall i would argue that if Interest Rates move high enough, that would cause that domino effect to start to move i think within the band if rates go up 20, 25, 30 basis points, no big deal, we can handle that. If its 50 or 75 basis points, it becomes more of a system wide problem across Financial Markets. I dont see it that way, the problem is, these bonds are valuable if rates are falling. Once you set this miserable yield, its all but below cpi inflation. If you dont see it come downwards onraits, i think thats going to continue to funnel money to the u. S. Equity market, theyre not making money in cash or blondes, theyre scared of the rest of the world. Thats whats behind the lift in the u. S. Equity market all the year long. That continues if rates go up, that starts to if listen, with all due respect to everybody i like everybody, which is this a year and a half ago, everybody on our desks on every show all day long said that the 10year was going to be with the exception of a couple people, they couldnt have been more wrong now the Federal Reserve and their dot plots is their projection materials they see a 1 to 1 1 2 increase in their rate in two years, which should put ten year yields at the aforementioned 3 to 3 and a half percent am i wrong again i think these demand for u. S. Tenyear bonds. Demand from where why . Pension funds, there are people out there, investors out there that need these assets when the yield starts creeping up, you have this huge influx and that caps your yield thats one factor thats happening. The other factor were seeing, theres this long term inflationary depression cycle going on thats due to structural factors like globalization and the aging demographics theres structural factors that are keeping yields low i dont see the ten year going back to 3 if you look back 18 months, what didnt we get we didnt get the administration was serious about this trade war. Everyone knows that tariffs kill the Global Economy tariffs kill the u. S. Economy. If you want to take one point. They havent yet. They killed the Global Economy. And this u. S. Economy. Given how manufacturing data is Getting Better in parts of europe better from a very low level. Think about how much stimulus we put into a full employment economy. We should have been roasting at 3 gdp growth which would have caused higher inflation and higher Interest Rates. These tariffs rained on the economic stimulus, thats whats changed. I think people just didnt realize were going to have this on again trade talk. And were beginning to get warnings that the tariffs could affect the u. S. Consumer, which Everybody Knows is we had those warnings for two years. I hear them as more serious now than they have been. Just real quick, the phrase Global Developments is a catch phrase of everything you guys are talking about. The chatter around here, the skerngs with the tariffs, december 15th, this sunday theyre going to happen, and if they do, we might see a market that begins to price in more aggressively a rate cut in 2020. Well see, but the chinese have been eating a lot of this on their supplier ended i wonder how much of any of that is trickling down to the American Consumer at all well thats the thing. What i can tell you, brian, is that we went into this year last this time last year, we were at a 3 tenyear rate, we were expecting a fed fundses rate that was going to approach 3 this year that has all changed and david kelly has in my opinion, it precisely right. Delta is what happened with the trade war, and that trade war is the surprise, and its like saying brian, everything was okay, guess what rate cut, rate cut three of them. 75 basis points lower in addition to not the rate hikes we were going to have. About 200 basis points of additional stimulus in the system today fair enough theyre up 15 steve thank you very much. Lets get a stock markets rate its like the white whale, the blue whale of the stock market s p probably about 5 points very good reason were not doing anything right now. No real signs of any rate hikes. This move here, mostly industrials and texts that you saw. Caterpillar, 3m move up. Bank stocks not moving much, flattish on the yield. Down just a little bit in the last few minutes will nothing very good. One thing that was interesting, not a lot of changes in the individual Interest Rate sectors. The fed said the new line here, they will monitor muted inflation pressures. A lot of Central Banks would like to see it drives a little bit. Youll see that tomorrow from christine la guard i dont think given this comment about muted inflation pressures we are monitoring, the fed would reject to rates going up a little bit higher. I think the key here putting off addition altar is for december 15th, that would take risk off the table. It may not make a lot of difference necessarily in some of the earnings pictures those tariffs went in, it would certainly impact some Technology Companies overall. Lets see how this picture evolves. You see the dow industrials moving. How the bond market responding to the decision lets start out with what is moving more. It isnt the bond Market Making new lows, right before and continually after the feds statement. Open the chart up for 8 or 9 sessions and you see how important this is we havent closed below in quite a while. And the dollar being heavy, does make sense lets get back to the fixed income you can see that we are now hovering on new low yields, if you open the chart up to a week, its important, not as important as a violation of 160, theres a bit of a cushion look at the ten year ten year also flirting with the new low yield on a day it was 180 on the statement. If you open that chart up, you can see how important this mark has been finally, how do you wrap all this together . Listen, i remember in the last administration were all looking for green chutes at the end of the day, you can say what you want about uncertainty. Its kevlar un certainty coated. Well said, rick santelli. Thank you very much. Lets thank our panel, by the way, david it was a good discussion appreciate it coming up, much more reaction to todays Federal Reserve decision and we are just minutes away from the News Conference what Jerome Powell is going to say about the economy in 2020. And what the fed is likely to do next year. That really is, guys theres a couple new voting members aselmu wl ch were back right after this each day our planet awakens with signs of opportunity. But with opportunity comes risk. And to manage this risk, the world turns to cme group. We help farmers lock in future prices, banks manage Interest Rate changes and airlines hedge fuel costs. All so they can manage their risks and move forward. Its simply a matter of following the signs. They all lead here. Cme group how the world advances. Welcome back, no surprise for the Federal Reserve. Everybody expected rates to be left unchanged stocks are mostly higher, thats not all the story. Joining us now is former Federal Reserve board governor good to have you back on. Youre not going to get to say, Nothing Happened at this fed meeting. There is a lot to discuss. What would be topic number one for you . I think the issue is going to be worrying about uncertainty. The second issue is, whats going to happen with inflation the feds making a bet. They decided to cut rates from a point of view of where the economy is i think the concerns about uncertainty,they acted more preemptively im not sure that was the right thing to do but there is an issue that inning nation is low it never seems to show itself we have wage gains, tariffs, all these things that should be inflationary arent there. Its clearly a puzzle, one of the key things about successful policy is to admit when you dont know the reality is, were not sure what that number is i tend to worry more about this issue than running an economy, this type of economy could cause problems at some point in the future what kind of problem . Theres a view that clearly stated that phillip seems to be dead the tight economy is not producing any inflation. That view may be not quite correct. That has a lot to do with how the fed has operated in the past and theyll continue to do so in the future on the other hand if we havent seen the rise in inflation that wed like to see, from that viewpoint the fed thats the real concern its justified they want to spruce up the economy a little bit. There is some expectation that the fed in this meeting would have discussions about whether they should change the target inflation rate. The Federal Reserve right now is doing an extensive strategy the issue of changing the inflation target is not the right answer the way you do the target is a big issue. Think have to say that there are times when youve been undershooting the inflation target, we should be happy about overshooting on average, theres an inflation target by gones are by gones, we still shoot for 2 theres been a lot of talk about this, the reasons why it solves some problems, but can create others greenspan got it right, when we worry about inflagsz, it starts to affect inflation. We have a moment, jump in there, guys. We think the language around symmetry, makes a lot of sense from the feds perspective, its been running cold fo