37.86 the quote there. the ten year note, right there, hovering just below 2% at 1.9. let's get to steve liesman. >> for a meeting, not much is supposed to happen, we're looking for a lot to happen. we're looking for signals about rate hikes. smoke signals, verbal signals, hand signals, some kind of signal about where the fed is going. fed expected to stand pat today. let me look at the keys to the federal reserve here and the statement that is coming out as well as the press conference. looking for something of an upgrade to the economy. perhaps the risk becomes balanced again. remember in january, in the statement, the fed said it couldn't judge if the risk to the upside or downside -- which way they were because of the uncertainty in the global environment. does it drop those global concerns from the statement? we're looking for the fed to bring down its rate forecast, the average fomc member looking for four rate hikes this year. the market looking for two or even fewer than that. we'll see if they come down to three and have a meeting of the minds between the markets and the federal reserve. tyler, the key will be the data the fed will say 100 times. what we're looking for is continued strong job growth and inflation for the market has centered around this notion of a june rate hike, where 70% of the respondents of the cnbc fed survey see that happening. but possibly as early as april or may if those inflation numbers keep coming in strong like they have in the past two months. >> what would be the surprise to you if either obviously action would probably be the biggest surprise here, but what would be the surprise in the commentary? >> i don't think the fed is this hawkish, but i think that if they said something like they did earlier when they did really signal that rate hike, they said in judging whether to increase interest rates at the next meeting, that would be a huge hawkish comment in the statement, really saying it would be coming up. i don't think the fed is that close. i think it wants to see the data. i think it wants to judge the weakness. and don't forget what the european central bank did a whole cavalcade of new policy measures that really if the fed were to hike would bring the fed further apart from the other two major central banks. >> wording like at the next meeting. >> yeah. >> like that. i don't expect it, but what i'm looking for are the more subtle signals out there, tyler, upgrading the economy, saying that inflation is firming, those sort of things would say, the fed is in a normalization process, and it is time to begin acting sometime soon. >> fantastic, steve. bring it all to us at the top of the hour next hour and there for the press conference half hour past that, right? >> let's bring in now former dallas fed adviser danielle dimar tino booth. i almost said "squawk box." >> three days in a row, brian. >> what time is it? where am i going? is the fed boxed in? >> the fed is boxed in at this point. peter put out a note earlier saying the last six months we have seen 235,000 in job gains and this morning's core cpi report, up 2.3% year over year. >> do you think they'll raise rates or is it too late but this put aprils on the table? >> they're not in the business of surprising markets. they won't surprise the markets today, absolutely not. >> when will they react, do you think? >> they're not going to do anything without a press release. so i think -- i would agree with -- >> you mean a press conference? >> i agree with where the markets are now, a june rate hike. >> in case they don't know, they only do a press conference every other meeting. >> i don't get it. >> if they're going to make any moves, they need to communicate it. you'll recall after last september's meeting, jeffrey lacquer dacame out the next day calling on a press conference after every fed meeting to give them more flexibility in their decision-making. >> that's really interesting. you lock it into four or five meetings in a year. >> the ecb -- the ecb does one every single -- >> to their credit, absolutely. >> we go into meeting with the narrative out there is a battle between the hawks and the doves. >> follow those dots. >> and that's absolutely true, you think? >> i don't think there is -- there is any doubt at all if they're true to their mandates, it is time to hike rates. time to hike rates today if they're true to their mandates. >> let's talk about credibility. there was a poll -- >> i saw that poll. >> 63%. 2 to 1 saying the fed has lost its -- i'm not sure what credibility means in that context. but tell me do you agree with that, and in what sense have they lost their credibility if you think they have? what does it mean, number one. and do you think they have lost it? >> i do think that they have lost the faith of the investment community at this juncture. if they are theoretically data dependent, the data are dictating that they need to have already moved. >> is the dollar part of the data, because if they move and nobody else does, the dollar surges -- >> we're not supposed to talk about the dollar. sorry, sometimes i'm still -- >> you are in the words of delegates unbound, you can say what you want. >> i would think they're paying very close attention to the fact that in this de facto currency war we're in, moves by the ecb, moves by the bank of japan aren't moving their currencies, aren't weakening their currencies like they want for them to. >> ten years, working with richard fisher. answer this question, how much is the discussion about what happens around the world, when they get into a room, is it data, data, data, china or do they pay a lot more attention than we think to what goes on in belgium and dhchina and everything? >> i don't think they want to talk about what is going on outside of the united states. but i think -- >> they are a federal reserve. >> we do have the world's reserve currency, right? >> absolutely we do. we have a responsibility. i get that. >> after china's move last august, i think that the fed has been dragged into this whether they want to be or not. they have to have what is happening in the rest of the globe part of the formal discussion. >> clearly they do. they said as much in september. and -- >> that was the first time that they really acknowledged, hey, this is part of our -- >> it stayed their hand. it stayed their hand in september. >> it did. look what it did in january as well. >> the reason i -- i understand they have to. the reason i ask that, tyler, is that if there is no sign that things are going to calm down in europe as you well know sometime soon. no sign things in china are going to slow down. if they could use the world as an excuse to stay dovish for a long time. >> forever. >> exactly. forever. >> and the markets tend to force their hand anyway. if the markets true ly believe there is a hike coming, they tend to throw a tantrum. and that ends up putting the fed back on hold for reasons of not wanting to disturb the markets. >> so circular. >> danielle dimar tino booth. thank you. dennis garman says hi. >> hi, dennis. >> hi, dennis. does that work? >> he heard you. >> valeant's ratings on negative watch. among the big losers here in terms of the investor side of the equation, activist investor bill ackman. ackman pledging to take a more proactive role to protect his investment and he's not the only one betting on valeant. >> a lot of people bought it 150, 250, astronomical levels. our first purchase was below $80, we don't have all that baggage. 93% of revenue s really aren't the issue here. this is a real business. >> that was patrick hayes, portfolio manager at brandy wine global on march 1st. patrick joins us again now. this is not quite working out the way you thought it might be working out at this point. you bought 350,000 shares of valeant yesterday. why do you go deeper into this bad trade? >> so there is two ways it look at it, the bad trade and clearly i'm not one to go run and hide when a stock goes down. we think the trade has been wrong. that's clear. earnings guidance was a disappointment. what are we left with? we're left with following our process and analyze businesses and value businesses. and when we look at valeant, the underlying health, yes, it is worse than we expected. we thought maybe $10 earnings was the worst case. we're pretty much there on guidance. but at this point, you're at $35 stock roughly give or take. $10 of earnings, clearly no one believes it. you don't get a 3.5 pe unless people think you have no credibility. a statement a minute ago about the fed, they lost all investor credibility and i thought we were going into the valeant segment there. but the underlying business is still produce ing cash. they still have real revenues, real products, so it is a question of what is being priced in the stock and what do investors fear at this point. >> right. that's true. there are a lot of analysts who simply do not believe what management has to say anymore. they don't believe the guidance. and they say, you know, this is a management team that communicated with investors since december, has not issued clear guidance. michael pierson, the ceo, he came back to work, he held numerous calls, individual calls with analysts on the street. this is just a few weeks back, communicating what his vision is for valeant, what he sees on the horizon and yet here we are with the street yesterday caught completely off guard. do you believe management at this point and why would you do so when they communicated to investors numerous times and obviously have not sent out a clear message? >> it is obviously a fair point that management hasn't met anything on their score card they gave us in december as to how they want to be judged. we're not in denial about any of that whatsoever. so at this point, what we do is we look at prescription trends, drugs like syfaxan are showing good growth. we can see what is going on there. but more importantly, it is -- you get back to what the stock is being valued at, the assumptions you have to make to justify the current price. it appears investors are worried about debt default. i don't think that's realistic because they are still generating cash, they have a lot of good assets, will be able to get the wavers they need in term to cure the late filing. so you're down to just people just don't believe. they have given up. they suffered so much pain and a lot of times giving up is not the right answer. people are fearing the debt default, fearing that managed care will drop them. i think they're fearing locusts and boils and plagues and all those things. some fears are rational. but you can analyze the business and we really do believe and i think we're not alone in those that are still the big holders in believing there is a real business here with real cash flows, real assets. this morning i updated the parts analysis -- >> patrick. i'm glad you brought that up. i want to follow on what you're talking about there. when people hear a company could default, they start to worry about the stock going to zero. this would not be a classic case of default. this is not a cash flow problem. they violate potentially a covenant. have you worked within their debt rules, but have you worked out if the worst case scenario were to come, they don't get the wavers, so they're in a default and somebody starts calling a bond on them. what is left over that the stock might retain some value. have you been a worst case scenario on what would happen to the stock price. there is some value there. i'm not sure the stock is above or below that at this point. >> there is a couple of things. as you go through the default price, you need 25% as you probably know the bond holders to issue that notice of default. the company gets more than 50%, i think it is to wave the notice of default, you're still good. let's suppose you go to a default situation. at that point, i imagine what would happen is you have asset sales to try to start getting out of that situation. you have -- you work with your lenders. i don't think it is in the best interest of bond holders from what i've been told in talking with various members of credit teams to issue the notice default. that probably drives the price of the bonds down more in the near term and that's not something -- >> is there a worst case scenario, patrick, in your analysis, or thinking it is not in the best interest of bond holders so they're not going to call bond on them. >> so the worst case scenario is this. let's suppose you had to liquidate the company and you had to sell all of the assets. we value those assets using in general discounts to what they actually bought them for, in many cases discounts to comparable situations. we come up with $70 a share in the worst case. and that's selling bausch & loam, that's selling salex, selling the germtology business, neurology business. >> double where the stock is trading right now. >> that's where we come up with the sum of the parts that we think is conservative. >> thank you for coming back on and updating us with this trade. patrick kaiser. >> based on that rational, you want them to go bankrupt. >> exactly. unlock the value somehow, right? maybe that's the best way to unlock value. >> i think steve had a $65 valuation, they came out with this morning. there is a big interview on the closing bell. james grant of grant's interest rate observer, grant will sit down with kelly today. that's an interview you won't want to miss. now to dom chu. regeneron opening for trading, down half a percent. the stock was halted ahead of a jury verdict. the jury decided against both sanofe and regeneron. they plan to appeal the verdict. they were up 2%, 2.5% before the halt happened at 11:44. shares now down as well. sanofi and amgen as well. house speaker paul ryan sounding off on the 2016 election to john harwood. hear what he has to say. and we're counting you down to the fed's latest decision on interest rates, right at 2:00 p.m. eastern time. we're seeing big moves in the market ahead of the fed. the dollar is hitting highs of the day. "power lunch" will be right back. (son) pa, i know we settle for cable... but directv has been number one in customer satisfaction over cable for 15 years. (father) how 'bout over 15 satisfying years with that woman over there boiling your clothes. her layers and layers of...layers. hair that i've rarely seen because it's always under that bonnet. and how she fought off that grizzly and made him into these slippers. that's satisfaction son. (vo) don't be a settler, get a $100 reward card when you switch to directv. man 1: i came as fast as i man 2: this isn't public yet. man 1: what isn't? man 2: we've been attacked. man 1: the network? man 2: shhhh. man 1: when did this happen? man 2: over the last six months. man 1: how did we miss it? man 2: we caught it, just not in time. man 1: who? how? man 2: not sure, probably off-shore, foreign, pros. man 1: what did they get? man 2: what didn't they get. man 1: i need to call mike... man 2: don't use your phone. it's not just security, it's defense. bae systems. welcome back to "power lunch." i'm michelle caruso-cabrera. president obama nominating merrick garland to the supreme court of the united states. judge garland currently sits on the u.s. circuit court of appeals for the district of columbia and the chief judge of the washington appeals court. mitch mcconnell has already vowed a no vote on the president's nomination. meantime, house speaker paul ryan speaking about the 2016 presidential race to cnbc's john harwood. an important guy in the gop. what did he say? >> he is, michelle. we have got two presidential contests in both parties that are barreling toward summer conventions. hillary clinton moved closer to wrapping up hers last night. so did donald trump. but the anti-trump forces still think there is a chance that they could deny trump a majority of the 1237 delegates he needs to be nominated in cleveland. and i asked the speaker yesterday what he would do if a deadlock convention turned to him. >> when people talk about the prospect of a convention that is indecisive, you are suspect number one for who could be -- >> take a sip of guinness. >> who could be drafted. have you categorically ruled out accepting that if you are asked to do it, if the convention asks you to do it? >> i think you should run for president if you're going to be president if you want to be president. i'm not running for president. i made that decision consciously not to. i don't see that happening. i'm not thinking about it. i'm happy where i am. so, no, you know, this is -- >> don't intend to do it. you're not making a sherman statement about that, though. >> i haven't given any thought to this stuff. people say what about the contested convention. i say, well, there are a lot of people running for president. we'll see. who knows. >> two things have happened since we first aired the clip of that interview. first of all, politico reported that john boehner at a speech in florida said that if the convention is deadlocked after the first ballot, no one has a majority, he would be supporting paul ryan for president. second thing was, paul ryan himself called politico to say more definitively than he did to me yesterday, i will not be the nominee. we can keep watching and listening, guys. >> very interesting. let me turn to the supreme court nomination. michelle just reported that mr. mcconnell, the senator from kentucky, the majority leader, said he would -- would get a no vote from him. vowed a no vote. i thought that the statement was that they weren't even going to hold hearings on this. has that changed at all? >> i believe that what mitch mcconnell is saying that there will be no vote on -- >> will be no vote. not that there will be a no vote? >> i believe that's what he's saying. he has to hold that line, democrats and the president will try to put maximum pressure on senate republicans to -- by saying it is unreasonable for them not to consider this nominee who the white house characterizes as a moderate democratic appointee. now, one thing we need to keep in mind, tyler, it is a different world once we get past the november election, we will then know who the next president is going to be. if it is a democrat, there is a better chance that the republican senate, which itself may have lost its majority in the election, may be willing then to say, okay, we'll support this nominee. >> any reaction from -- any reaction from you or folks you talked to today, i don't know if you saw that interview on "squawk box" with two unbound gop delegates. we were going to talk to them about the process. one of them shocked everybody and, by the way, it has 4,000 comments to the story on cnbc.com, he said basically, we're going to pick the nominee, doesn't matter who the primary voters vote for, it is our convention. this is a delegate. and basically becky said to him, why hold the primaries? he said, exactly. your reaction or is that getting any traction on capitol hill? we were all shocked. >> that doesn't really work in any large scale for the republican primary because rendell gapublican delegates ar. they don't have a choice. what happens is after the first ballot, if nobody has a majority, delegates start to be shaken loose by rules and available for some sort of brokering or deal-making. there may be some -- a small number of delegates who are unpledged on the first ballot, but very few. the democrats have a lot. that's what the super delegates are. republicans don't have that system. >> donald trump's deal-making p prowess may be put it the test. he bragged about it a lot. another thing on the president's plate besides the supreme court nomination, going to cuba next week. ahead of that, the second cuba opportunity summit kicks off tomorrow at the nasdaq. i'll be there to bring you the latest. cnbc is the sole carrier, television network, that is covering it. >> only place you can see it. >> exclusive broadcast partner. >> of the cuban government. >> nicely done. >> we'll be live there 1:00 to 3:00. >> how do you get to cuba by 1:00 tomorrow. >> at the nasdaq. >> two hours of sleep. we got an all-star lineup coming your way as we count you down to the feds. we're all primed and ready here. we have bill gross, scott minor, david kelly, bob dole, all on deck. keep it here. "power lunch" will be right back. you're an at&t small business expert? sure am. my staff could use your help staying in touch with customers. at&t can help you stay connected. am i seeing double? no ma'am. our at&t 'buy one get one free' makes it easier for your staff to send appointment reminders to your customers... ...and share promotions on social media? you know it! now i'm seeing dollar signs. you should probably get your eyes checked. good one babe. optometry humor. right now get up to $650 in credits to help you switch to at&t. hundreds of crash simulations. thousands of hours of painstaking craftsmanship. and an infinite reserve of patience... ...to create a vehicle that looks, drives and thinks like nothing else on the road. the all-new glc. the suv the world has been waiting for. starting at $38,950. hii'm here to tell homeowners that are sixty-two and older about a great way to live a better retirement... it's called a reverse mortgage. call right now to receive your free dvd and booklet with no obligation. it answers questions like... how a reverse mortgage works, how much you qualify for, the ways to receive your money... and more. plus, when you call now, you'll get this magnifier with led light absolutely free! when you call the experts at one reverse mortgage today, you'll learn the benefits of a government-insured reverse mortgage. it will eliminate your monthly mortgage payments and give you tax-free cash from the equity in your home and here's the best part... you still own your home. take control of your retirement today! let's get a check on the bond market ahead of the fed. much like the equity market, we have seen quiet trade in treasuries as we await the fed's decision, and janet yellen's press conference afterwards. here is the one we want to watch when we hear the decision and the press conference. the yield at 1.99, just below 2%. we're going to want to see what happens after the meeting and whether or not that moves. you see it in the short end of the curve too, the ten-year we focus on the most. keep it here. we're 30 minutes away from the fed's latest decision on interest rates. "power lunch" is back in two minutes. the lexus command performance sales event is on. with extraordinary offers on the visionary ls, the generously appointed es and the new, eight-passenger lx. ♪ this is the pursuit of perfection. in new york state, we believe tomorrow starts today. all across the state, the economy is growing, with creative new business incentives, the lowest taxes in decades, and new infrastructure for a new generation attracting the talent and companies of tomorrow. like in rochester, with world-class botox. and in buffalo, where medicine meets the future. let us help grow your company's tomorrow - today - at business.ny.gov hello, everybody. welcome back to "power lunch." i'm sue herera. here is your cnbc news update for this hour. we're watching a developing story out of paris. nbc news confirms three men and a woman have been taken into custody in a suburb. the group allegedly suspected of planning a terror attack in paris. republicans are coming out swinging against president obama's supreme court pick merrick garland. mitch mcconnell adding the republican controlled senate will not vote on the president's nominee. want to kick your smoking habit? go cold turkey. a new study says smokers who stop all at once are more likely to be successful than those that cut back gradually. pay by selfie? it could be coming to amazon, filing a patent that would let shoppers make purchases by taking a photo of themselves instead of using a password it sign into their account. i guess it recognizes your picture or something. that's the cnbc news update at this hour. back to you, melissa. what if you have a bad hair day? >> something wrong with your eye? >> exactly. exactly. >> is there a duck face discount? >> are you going to chime in? >> there should be. >> blue steel. >> let's take a check on gold prices now as with many asset classes ahead of the fed decision, ahead of the fed conference, afterwards, all is pretty quiet here. gold at 1230 an ounce, down a fraction of 1%. palladium, platinum, palladium is up 1%. bottom flat. copper and silver trading lower now. 28 minutes from the fed's big decision on interest rates. maybe it is a nondecision. but there will be words surrounding it, worth watching. the dow is up 6% since the fed last met. so can this rally continue? the steens are here. welcome. i know both of you are stock pickers, right? how much does the fed play in what you do? is it a nonfactor? a marginal factor? a significant factor? >> for us at jensen it is very much a small factor in what we do. our process has always been about trying to mitigate what we see are the risks that investors face every day, mitigating business risk, mitigating pricing risk and we build our portfolio from a bottoms up perspective. what the fed is doing is really not a concern from a short-term perspecti perspective. we look at the long-term -- from a investment horizon. >> is the fed similarly a minor factor or almost a nonfactor in your portfolio decisions? >> the fed is becoming more of a factor. couple of things, this year, central banks are a source of market volatility. so we have to consider that. secondly the effects on the dollar was something we were concerned about coming into this year. the dollar has gone the other way. but as we work with our clients, the fed is becoming more of an issue as are all central banks. >> i think one of the things that is important about that is that while it is not an issue for us from the standpoint of how we make decisions, volatility that john talked about, that's something that we use and look for as -- it is a benefit to us because when there is volatility, when these issues are present for investors, knowing what you own in a portfolio becomes part more important than when you're just riding indexes, which certainly is something we look for because it is a better environment for stock pickers when that happens. >> john, make me some money here. what do you like going into the rest of this year in terms of equities. i know you have large cap choices among others. i believe lockheed martin. >> couple of things on our mind. the we can wiequity teams try t with some teams. we haven't heard defense come into the political discourse co. we think a lot of folks will be hitting the road this summer on trips with these gas prices. >> that helps a refiner like valero. >> the hotels -- >> it helps mcdonald's. people are on the road, they'll be stopping, they'll get their breakfast all day long. >> travel usa. >> how about you? what are you buying? >> we're buying companies that have very good returns on capital. that's a big part for us. you have value creation. you think about companies like a tjx or becton dickinson. >> my favorite company tjx because of home goods. >> and because of that off price retailing concept matters as consumers still -- they have more dollars, but they're still cautious about how to utilize them. tjx -- >> love to spend saturdays at that home goods, man. that's a good place. thank you very much. appreciate you being with us. go to powerlunch.cnbc.com now to see how the large cap picks from john and eric -- that's powerlunch.cnbc.com. a news alert. take it away, whoever is alerting us. john? >> i think that's me. tyler. in washington, we just have gotten confirmation that the fox news schedule debate for next monday on the republican side has been canceled. donald trump indicated he wasn't going to show up and john kasich said if donald trump doesn't want to show up, i'm not going to show up. this is a sign that donald trump is trying to shut down the competition for the republican nomination. he's got a clear lead in delegates. he's on a path to potentially getting a majority. anti-trump forces are trying to stop him. he's still going to have to go out and win primaries in order to make that happen and the next primary up is next tuesday in arizona. that's winner take all, like two of the primaries yesterday. see how donald trump does then. >> we will, thanks, john. the brazilian real down driven by a number of things. the former president named chief of staff. lulu was charged with money laundering in connection with the scandal involving petrobas. hurting the real more, a new report flaft hour saying b the s has come out and said lulu's role is negative for the country's debt. on deck, morgan stanley's top bond man tells us and you what he wants to hear from the fed and janet yellen will join the show in one hour's time. we're back right after this. here at the td ameritrade trader group, they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade. if you're wondering what stocks benefited or hurt since the fed rate hike on december 15th, you've come to the right place. the three biggest winners of the s&p 500 since that rate hike, console energy, cabot oil and range resources. the biggest losers, endo pharmaceuticals, williams company, issues and deals, and regeneron. >> look at what is happening in the broader market since the last rate hike. the dow is down 1.5%. crude is up 1%. the dollar index down just over a percent. gold is up 16%. the yield on the ten year note has fallen 12%. let's bring in morgan stanley's top bond guy jim karen. good to have you here. >> thank you. >> which is the most significant to you and what do you think the fed is watching the most? i assume they're watching the markets. >> what matters the most now is the dollar. i think the interest rate move is obviously interesting given they're going to probably do nothing today. but they still have to signal that they're probably going to leave the door open for maybe one or two more hikes. but the dollar is really the issue here. if they speak too hawkishly and the dollar gets too strong, that creates problems on a global level. if we think about the dollar over the past 20 months, we had about a 24% appreciation on the fed's trade weighted index. that's tightened global finance conditions, partly responsible for the decline in oil, and clearly it hurt credit spreads and everything else and that's what the fed needs to avoid. >> the armchair economist at home would say wait a minute, the fed is supposed to be focused on inflation. instead, it is focusing on the dollar. your argument is that dollar is acting as a tightener. >> that's exactly right. the dollar is not part of the mandate, right? and i think -- >> they're not supposed to talk about it. >> which makes their -- >> which is going to make their statement all the more important. what can they really say, right? they don't move in march. they probably move the dots down to reflect there is three hikes. the door is open for three hikes this year. the market never believes that anyway. what they need to do is stay away from too hawkish of a rhetoric such that people believe the dollar strength is too much. >> seems like the odds are against them in terms of walking the fine line. there is the risk of reward of the situation here with yellen speaking to the world is to the downside at this point. >> yeah. i mean, you're absolutely right. it is a very, very delicate balance at this point. how do they open the door to more hikes, but not speak overly hawkishly about the economy? they have to do a mark to market. they have to recognize inflation -- >> here's what i think. i think they're going to move in june and in december after the election, period. >> and i'm in line with that. i think it is one to two hikes this year. if it is going to be one to two, it is june and december. >> do you believe, like our previous guest who worked at the dallas fed for ten years said they're not going to move, not going to raise without a press conference. do you agree with that? >> i do. >> if they don't raise today, there is only three more meetings here -- >> we can narrow it down. >> the most they could raise would be three. >> right. that's what the dots will reflect. the dots will reflect exactly that, but the markets never really believe the dots in first place. >> people who don't know what we're talking about, dots, the whole matrix, the dots, they used to have one or two data points they were very focused on, now there are many data points they're focus ed on and those are the dots. >> it is ridiculous. do you like the dots? only good dots to me are the gummy candies in the yellow box. they're delicious. do you like the dots? >> it adds confusion but it also is another communication strategy. >> okay. so in that vain, how do you manage? we argued on this, i argued about this vociferously, the fed in a noble effort, they care at transparency and have made everybody more confused. at least me. that's easy to do. what do you think? >> i think what has been making things more confusing for the fed is that what is influencing the u.s. financial markets is a lot more to do with global financial aspects. so, you know, the fed has to care about domestic factors, but that is moving the ten year note the most, not domestic inflation numbers, not domestic jobs numbers. it is all about the global factors and the global situation. >> german ten-year dragging it lower. >> negative rates. oil prices and things like that. more things are impacting the u.s. economy today, not domestic factors, mostly global factors and the fed has to respond to that via the way they talk about financial conditions. so it becomes very, very opaque and nobody knows exactly -- that become a challenge. >> well, we're going to try to delve into the opaqueness this afternoon. thank you so much. we're seeing a big move higher here in oil. look at this trade here. wti is up about 4% and the ten-year yield, this is where the action could be, once the fed issues its decision. it is sitting just below 2% ahead of that decision. stick with us. "power lunch" will be right back. our cosmetics line was a hit. the orders were rushing in. i could feel our deadlines racing towards us. we didn't need a loan. we needed short-term funding fast. building 18 homes in 4 ½ months? that was a leap. but i knew i could rely on american express to help me buy those building materials. amex helped me buy the inventory i needed. our amex helped us fill the orders. just like that. another step on the journey. will you be ready when growth presents itself? realize your buying power at open.com welcome back to "power lunch." 12 minutes, 29 seconds until the big fed decision. let's bring in bob dole, chief equity strategist and jim kelly. i can assume you can nod your heads that neither of you believe the fed will raise interest rates today. just nod, if you agree. nodding yes. what would surprise you in the statement today if anything? >> well, they have to walk the fine line as you talked about earlier. and that is they have to indicate the things have gotten better. i hope they talk a little bit about inflation, core inflation, wage rate inflation beginning to move up, satisfying what they're trying to get done. we got to hope they're not too hawkish, that would be a surprise. too dovish would be a surprise as well. i would love for them to say less. i think the fed is being too transparent and confusing us. i wish they would step back a little bit. the air of transparency when things were fitting the fan and the crisis made sense. i wish they could walk that back. >> sounds lu s like a tall orde. do you have confidence the fed will be able to walk that very fine line? >> i agree with bob. what they're going to try and do, they have to justify not raising rates in march. i think they'll do that by saying, well, the global economy is looking weak and uncertain, we would like to get more data on the strength of the global economy before they move. but i think janet yellen will have to sound a little hawkish. the truth is, the federal reserve panicked over the summer and didn't raise rates when they should have done it in september. they have now panicked over the first quarter and thus are not going to raise rates in march. i agree with bob, they need to be less transparent. they need to be less transparent between meetings. they have set this up now by panicking and some of the statements over the last few weeks, they set market expectations so people would not be surprised if they raised rates and that's taken the ability out of their hands. let them say their peace now. i think they should be a little quieter between now and the next meeting. >> interesting point that brian was making. and i reference hamilton, which i saw last night, and the advice to hamilton was talk less, smile more, and never let them know what you stand for. there is a danger in too much talking that it defeats the very purpose of transparency, which is to be unconfusing. >> absolutely. think about the last couple of months, we have a former fed governor around the turn of the year, talking about preparing for four, five increases. and then a month ago, janet yellen talking about negative interest rates. those extremes very low probability of either and it just takes the world's confusion to a higher level and puts people from one end of the boat to the other. please quiet down. i love it, talk less, smile more. >> we can -- you can hope for that. let's say they sound hawkish, either through the statement or the pretss conference. what happens to the rally we have seen from february 11th lows in your view. >> in the short run, there may be concern both in the bond market and in the stock market, the federal reserve really is setting themselves up to raise rates, maybe three more times this year. i think june september and december are more likely than not. but in the long run, i think it is fine. i think within a few days both -- the stock market ought to recover because really the problem has been uncertainty holding markets down. if the federal reserve would say we think the economy is strong enough to absorb three rate hikes, shouldn't be any problem here. it would build confidence and more money to go into equity. we might get a negative reaction. but i don't think it will last. >> gentlemen, thank you, both. bob dole, david kelly, we appreciate you being with us. less than ten minutes until we hear from the fed. and when we do, we will be there. meantime, "power lunch" will be right back. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ with extraordinary offersmance on the stylish, all-new rx... and the dynamic nx. ♪ this is the pursuit of perfection. when a moment turns romantic why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical 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not expecting a rate hike today but you would like to see one. is the fed behind the curve? >> brian, i got to tell you, that is the real question at this point. >> i ask the questions, you're supposed to answer. >> i'm avoiding answering. the truth is, right, that the fed in this ultra low interest rate policy is creating all sorts of distortions of the economy. and we're starting to see it. we're starting to see it in commercial real estate, we're starting to see it where there is the beginning of bubble starting to form. >> where? >> well, look at commercial real estate, the activity there. look at the rate of appreciation. you got eight class properties that are returning -- >> i'm shocked you say they're starting. i feel like you look at the unicorns, look at what happened to the market, a lot of bubbles in a lot of places. >> some of them have come crashing down, credit bubble has. >> so if i'm hearing you right, we have spoken and our viewers know you well. the fed kept rates too low for a long time, forcing money into things that produced some sort of return. probably too much money. the unicorn, commercial real estate, now people say well, the fed can't raise rates because they'll destroy the economy. the fed created this asset bubble but they can't back out of it because they'll pop the bubble. >> they let the air out slowly. >> tyler hit the nail on the head, during the massive financial or liquidity easing the fed did, how do you reverse a policy like that without inducing a financial accident? and a financial accident means you got to be willing to tolerate a recession. and the policy makers will not tolerate -- >> why should we believe these bubbles will be the same as the housing bubble, the impact will be the same? i would imagine that the lending standards are tighter for all the commercial real estate activity . it is not the same as when people are getting no documentation loans for instance. >> i agree. i'm not saying -- i don't believe we'll go into another financial crisis. but the longer we go on with the story, it is like the old mark twain line. history doesn't repeat itself, just rhymes. the longer we allow these distortions to build in the economy, the bigger the adjustments are going to take. >> here is the thing. the whole rational from the central banks was what they were doing was going to get the economy to grow enough and faster so that way it would be easy to do what tyler wants it to do. >> wouldn't have to worry -- >> it hasn't worked. are we getting to the moment where everybody realizes they got nothing. >> to be honest with you, i think the world hasn't really woken up to what you said yet. p but it is a matter of time. look at sweden. overnight rates are negative 50 basis points. they have all kinds of debt binge going, a real estate bubble going. how they're ever going to reverse this without some hard correction, and -- >> i thought sweden was the perfect country. >> yes. >> let's move on from that and talk about it is not too late. here is the weird thing. there is sort of -- i don't want to call it a superhero, could be a super villain, and that's the bond market. the bond market has the power to do what the fed won't do, why hasn't it done that yet? >> because the bond market is being propped up by masses of liquidity. and by the way, brian, it has -- look at junk bonds, look at high yield bank loans, asset backed securities like clos. those securities, there are double b, triple b, yielding 10% to 15%. these were credits yielding 4% just, you know, a year ago. >> your bold call is ten-year yield goes to 1%. we're just under 2% now. how does the fed -- or what happens with the fed to get us to the 1% level. how does today fit into that forecast? >> i think at some point, i don't think we'll get the rate increase today, at some point, the fed or the market is going to begin to start to discount the next rate increase. and exactly what danielle was talking about earlier today, the market throws a tantrum. when the market throws a tantrum, all of a sudden all the money floods into safe assets. when you take that and layer on the massive increase in liquidity coming out of central banks in europe and japan, the size of the ecb balance sheet is going to double within the next 12 months based on what mario draghi told us. >> guys, scott, sit tight, we're approaching 20 seconds away from that decision. here is the setup now. the dow, down 25. the benchmark ten year yield 1.99%. crude oil, up 37.78. stocks aren't moving much. the bond market, everything is on hold, waiting to see what the federal reserve does. not an expectation of an increase, but you never know. and to steve liesman with the fed decision in washington, d.c. >> the federal reserve leaves interest rates unchanged. no change in interest rates, leaving rates unchanged at 25 to 50 basis points. the federal reserve slashing its forecast for future rate hikes, now seeing two rate hikes this year, down from four. and slashing 50 basis points off of the forecast for next year. pretty aggressive there. slightly upgrade its assessment of the current economy, current inflation. but seems to upgrade its concern or worries over global concerns saying global economic and financial developments continue to pose risks. and it did not provide a balance of risk assessment for the u.s. economy. the vote was 9-1 with the dissent from kansas city fed president ester george, who preferred to hike 25 basis points. on the labor market, the fed said a range of recent indicators including strong job gains point to additional strengthening of the labor market on economic growth. they said it is expanding at a moderate pace key ddespite the developments. inflation, says it picked up in recent months, however still below the committee's 2% longer run objective. the housing sector it says improved further. net exports and business fixed investment were soft. i don't know if you have the chart of the -- now with the new fed forecast for the funds rate, but let me give it to you. it is down 50 basis points for 2016 to 0.88. down 50 basis points for 2017 to 1.88. it is down almost 40 basis points for 2018 to 3%. and the longer run now 3.25, down 25 basis points. much closer to where the actual market is right now. modest downgrade for growth in 2016 and 17 and reduced headline inflation for this year by a lot. pretty much unchanged on the core level. final two elements, the federal reserve says it will reinvest the balance sheet over the next several months and gradually increase rates only gradually when it does so. brian, back to you. >> steve, i know they didn't raise rates. the headline generally might be fed does nothing. i don't think so. i think we are witnessing a complete change in the fed in a sense that they're basically saying the u.s. economy is going pretty well, strong job gains, their term, as you noted, they upgraded their forecast for the american economy, but they have admitted, maybe for the first time, that what is happening in china and europe, these, quote, global concerns, are going to dictate u.s. federal reserve policy no matter how the u.s. economy is doing. >> i wouldn't go that far, brian. i think you're right to point out what i said, which is that they did upgrade their concerns about global developments. i don't think it is dictating it, but it is pretty -- it has been raised in importance for sure. i think if those concerns went away, the federal reserve would not elevate it so much. what i hear, global economic and financial developments continue to pose risk. that tells me they're not yet satisfied with what happened in january, what happened in august is not -- we're not out of the woods from the concerns yet. once we are, i think the concerns will be -- >> the dow is up 72 points in the wake of this. >> i think this is overall -- this is overall pretty dovish, i think, especially now that the fed has gone more than halfway, i think, in meeting the market expectations for the forecast. that's the one thing that looks like we're going to have somewhat better growth and the fed does not look overly exercised by the recent rise in inflation we have had. we had people who said, you know what, how can the fed not hike given what happened to the inflation numbers the last couple of months. >> so two rate hikes in 2016, not four, and half point lower on the trend in 2016, 2017, 2018. >> 2018 is down by 40 basis points. that's a lot of -- look, tmarke was ignoring it anywhere. there is the chart we're looking for right there. you can see -- >> half point. >> 50 basis points. 40 basis points over the long run. our long run from the cnbc fed survey is quite a bit lower than that, tyler. we'll see. >> let me ask a question now. reading this, just hearing what is going on, it sounds to me like the fed just downgraded their long-term concerns about inflation in favor of continuing stimulus for some period of time. meaning the idea that 2% inflation might, you know, be where they're really targeting, that they're maybe thinking 2%, 3% would be just fine if it would keep order in the financial markets around the world. >> i think it is interesting you say that. i don't hear that. if the market takes -- they didn't say that for sure. if the market takes from this statement that it has less concern with inflation, that's very interesting. it is a question worth asking the fed chair here. you're right. what i remember fed governor lael brainerd saying to me, imagine if we get another round of inflation, another strong jobs report, i wouldn't rule out any he particular increase. i think the idea of an increase in june is still a pretty good possibility. maybe earlier if those inflation numbers tick up. this statement is very neutral. what is dovish about it is the forecast for rates this year. >> steve, thank you very much. we appreciate that and for being there for us and we'll see you in half hour or so. to problbob pisani to see how ms reacted. they did by 75 points on the dow. >> and well they should. two points we were bringing up that were very important. the fed acknowledging economic conditions have improved somewhat since the last statement back in january. they said the economy has been expanding at a moderate pace. prior comments were economic growth slowed last year. that was the january comment. there is number one. they got what they wanted, modest acknowledgement that the economy is improving. the second and trickier one was lowering their interest rate forecast, remember, they were expecting four back in december and as you heard from steve now, essentially two rate hikes. that is the most important part of the entire announcement right there because there was a lot of concern that they may not do it as aggressively as the street was expecting. they didn't change much on the inflation forecast, but as we have been saying, core pce prices, 1.7%, that's up a little bit. that gives them a little cover as well. the bottom line here is what happened is the fed has come to the street's position. and that's why you're seeing a rally despite the implication that there may be rate hikes down the road. the street has already essentially tried to price in two rate hikes. so overall, this is exactly what the market was anticipating and you could see a fairly favorable reaction at this point. >> we want to be clear to the audience, the fed is not saying in the press lease, we will raise rates two times. it is 0.9%. you take a -- projections can change. they don't have to do this. they can change it next week. >> that's what the street is expecting. the fed has come to the street at this point. that's why you're seeing this kind of favorable reaction. it is already discussed. >> that's the underscore part of what you said. meeting the street expectations and that's why we are seeing a -- i would say a muted reaction on the street in a very quiet on the dollar front, that's what we would have seen, the extreme reaction should the fed have been too dovish or hawkish. now the dollar index is lockstep with where it was trading before. >> i think they would be relieved to see the market response. >> it is the goldilocks response. >> exactly. >> one thing, when you consider that they have just violated the data dependent forward guidance they gave us. they have said that as we approach full employment, as we -- as inflation rises, we have to normalize rates. and -- >> they're not doing that. >> they're not doing it. to your point, it is the party's on. buy risk assets, we're just going it keep -- >> free money for a much longer time than we thought. >> bob pisani, thank you very much. to rick santelli with bond reaction. the ten year at 1.99 as we headed in. now my last look was 1.94. rick, take it away. >> absolutely right. i like to start with the foreign exchange because we're in this policy contagion phase, yeah, we have full employment, stable prices, you are right. welcome to the table. maitre d' takes good care of us. you're saying everything the traders have been saying for years. those forces are now our policy because we recalibrated the world first, and they all stepped in line. it is hard to do it -- look at the dollar index it is going down. big sigh of relief, positions don't look so bad. debt is cheaper to repay. we jumped the handle. now the ball is in their cord. they'll probably kick it back. let's get to rates. two-year, two-year dropped at about 7 or 8 basis points to low 90s. if you look at 10s, i pegged it pretty much going in, 199, 198, now at 192. it settled to 227 at the end of the last year. nowhere close to unchanged on that, even though the one market, the main focus, let's call it the hong kong amoco transmission. equity for the marketplace. the fed isn't painted into a corner anymore. it is in a safe that is painted into a corner of a room with no doors. back to you. >> rick, you're close. in a safe in a room with no doors in a basement at the bank of china, apparently. >> under the water. under the english channel. i think we just about got it. >> rick santelli, thank you very much. bill gross, you probably heard our comments, rick's comments that it seems the world -- as it should, i'm not saying the world shouldn't dictate the economy but at the same point do you think our fed has backed itself into a hole and perhaps is now a little overly beholden to what happens around the world? particularly with the dollar? >> i think the world is the focus for the fed. the fed is the global central banker, if you will. and so they have to be cognizant of global conditions. i know that the statement itself spoke of that, and i know the statement as well spoke to improving labor market conditions. the fed is focused on the labor market and employment. but let's look at some of the other numbers. let's look at retail sales down for the last month. let's look at industrial production down today. and down for the last 12 months, which is indicative of a potential recession ahead. let's look at weekly earnings from 3% down to .5%. i'm talking about nominal wages and that six-year low. this economy is not doing it well. >> to underline that, there is a lot of people who had on the show already who say, gosh, of course they should have raised interest rates, but you're saying there is enough data points where they're justified in having not done so. >> i think so. domestically, though they hesitate to speak to that, their focused on employment and the jobs have been coming in. but the earnings and the production from u.s. manufacturing has not. and so i think in combination with the global condition that the statement spoke to and the domestic condition, yes, the dots are down by 50 basis points and beginning to reflect a more realistic condition in terms of what the fed can do going forward. >> you think they were relieved -- remember when the japanese went to negative interest rates, the yen went the wrong way, the ecb does what they're going to do, the euro went the wrong way, the dollar appears to be going the right way for what the federal reserve would want. do you think that holds? do you think they're deep there i deeply relieved? >> i think all of the central banks, michelle, you know, the fed with other major central banks has been engaged in a series of monetary policies since 2009 that produced subsan dard economic growth and 40% of major sovereign bond markets, i think capitalism in a finance-based economy cannot function well when savers pay banks to hold their money or earn next to nothing on high quality bonds and risk assets. >> bill, these are -- these are smart people at the fed. they must know that. why -- not even the fed, the ecb, the boj, whatever it is, why are they allowing this to -- why are they making this happen? >> not to contradict, but central banks are focused on history and models are historically based for the past 20, 30, 40, 50 years. to the extent that interest rates have come down to zero, and in many cases are negative, to me, the rules change because savers, you know, the savers, which are a foundation for capitalism, if you don't save, capitalism can't borrow and expand, the savers begin to pull back their money and so i think central banks have been following a model historically aged and need to come into the 21st century. they're still in the 20th century. >> brian, you know, one thing i think, you know, listening to bill and talking about central bankers, remember, it was ben bernanke that told us that the subprime crisis was a contained crisis. it was alan greenspan who told us that there was no bubble in the stock market, right? central bankers are notorious essentially for getting it wrong. and i think it is because, you know, being exposed to them a lot, they get into a group think academic kind of world. but the question i have and i would like to hear what bill thinks about this is, you know, if we're now going to tolerate higher levels of inflation, for the sake of lower unemployment, that sounds like the kind of philip curve trade-off we were doing in the 1960s and 1970s and granted, you know, inflation is not high today, but if you perpetuate this policy over the long run, you start to see price increases build over the course of a decade or two, which is another form of attacks on people who save. >> i wouldn't disagree with that. but i think that the fed and other central banks have a problem. what they're really pointing towards is inflation, yes, plus real economic growth and we have a sense and they have a sense that economic growth because of structural changes, because of productivity changes and lower rates like productivity growth that economic growth in the u.s. at best is a 2% number and so prior debt and prior investment levels have been predicated upon 5% to 6% nominal gdp. unless you expand real growth, which seems to be the problem, then you need inflation and in order to validate the current structure in terms of financing. otherwise, you know, we have bankruptcies such as we're seeing in the oil patch and we'll ultimately have, you know, problems in pension funds and insurance companies and so on unless they can get that inflation rate and the growth rate, nominal gdp up 4% to 5% levels at least. currently it is below 3% and has been running below 3% for a number of quarters. >> i took the under on the mention of philips curve. thank you, scott. before i let you go, i want to -- there is so much going on, philips curve, everything, cpi, ppi, whatever it is, what is the number one most important thing to bill gross now from when you make an investment in the decision, what is the data point, or the report or the speaker what is number one that you will stop everything and pay attention to? >> i think it is nominal gdp unless central banks can get up their nominal gdp growth rates, inflation and real growth, to acceptable levels to relatively historical levels, then we're going to see, you know, continued erosion in terms of the financial marketplace, continued bankruptcies, continued problems with pension funds and insurance companies. i look at the nominal gdp growth rate which includes inflation and needs to be 4% to 5%. central banks know that. they won't admit it. >> they won't. thanks, bill. bill gross is sticking around. that's not all we're waiting for. we have janet yellen's news conference, maybe get some answers to the global concern. hopefully some of the folks out there will ask what is on some of our minds here, which is how much is global really running the show here. that's going to happen in 12 minutes. 2:30 p.m. eastern time. 11:30 out west with all you crazy negative west coast guys like scott and bill. stocks giving back much of their gains. the dow is up a staggering 13 points. the e-class has 11 intelligent driver-assist systems. it recognizes pedestrians and alerts you. warns you about incoming cross-traffic. cameras and radar detect dangers you don't. and it can even stop by itself. so in this crash test, one thing's missing: a crash. the 2016 e-class. now receive up to a $3,000 spring bonus on the e350 sport sedan. advisor and team who understand where you come from. we didn't really have anything, you know. but, we made do. vo: know you can craft an investment plan as strong as your values. al, how you doing. hey, mr. hamilton. vo: know that together you can establish a meaningful legacy. with the guidance and support of your dedicated pnc wealth management team. check of the markets and the aftermath of the fed decision and before the fed's press conference. we have given up most of the gains on s&p 500 in terms of sectors. worst performing sector financial, no surprise here, if you look beneath the financials, the regional banks are doing poorly after the fed's decision. these are the banks that have a bigger lending book. so flatter yield curve does not help them. where we're seeing the strength, telecom materials, energy utilities, that shows the bid to safety go on in the markets. also the same action in the bond market. look at gold. gold is probably the biggest gainer off the fed's decision, now higher by 1.4%. 1248.50 an ounce. let's bring in diane swonk of ds economics, scott minor is still with us. how do you interpret what the fed just did? >> i see this as a victory for janet yellen, who consistently argued she was willing to overshoot on inflation. and deal with some regaining of the ground lost to the great crisis and the subpar recovery that followed. she wants to see wages sustained and she's willing to say the inflation target is symmetric. this is also on the flip side of it a loss for stan fisher who really remembers the 1970s and is much more worried about the idea that inflation move above 2% for any length of time. i think it also really reveals the underbelly we have seen in the economy revealed by the political environment we have seen, obviously things aren't as good as sometimes the fed would like to characterize them in labor markets or we wouldn't see such anger out there. >> labor markets is the key. i'll come back to you, scott. do you get inflation if you don't get wage growth picking up? >> you don't get a wage price spiral. so commodities can carry inflation up. >> right. >> food costs, energy costs, other -- but when you push unemployment down to the levels where you're essentially run ing out of workers, then at that point you ignite a wage spiral. and so, you know, janet yellen has always had a bias toward being sympathetic to labor. and i think diane is right in that this is -- >> a lot of workers like to see a wage spiral. >> right. a wage spiral that bleeds into a price spiral hurts -- >> accompanied by inflation usually. >> i say that lightly. but you know what i'm saying. wages aren't moving very much even now. >> right. >> that's something that i think, you're right, scott, janet has a bias towards labor. she's a labor economist. her husband is a labor economist. this is important to her. i think what they see out there is they're finally seeing what she sees within reach, sort of smells it from the '90s, the re-engagement in the labor force. the idea some people are throwing their hat back in the ring that were missing, men in their 30s and 40s and 50s. we have seen that re-engagement still way too low. and she he ises ths s and she he ises thees that as a starts move in terms of the wages. they are participating in the election and they're angry. this is an an acknowledgement role that politics is playing. really the fact that the fed was turning a deaf ear to the global economy and to wall street at the beginning of this year and the pain they were having, it really was a -- to main street as well. >> it is kind of sticking in my crawl. want to get your perspective on this. they're highlighting global worries as one reason for backing off their rate hike expectations. in the last commercial break, i went through the fed statements for the last three years. in 2013, they mentioned global once, in january, in 2014, they mentioned it none. last year they mentioned it twice in the september and october statements, but not in december, but then they did again in january. they skipped december, talking about global. my point is, it feels like it is becoming a very convenient excuse for remaining overly dovish. >> i was just -- i was just going to say that, you know, reality is that global growth has been marked down since the fed last moved. it is much more important today because we're now -- we can't be an oasis. we would like to think we're an oasis of prosperity but we're not. the more reality is that we still face a lot of turbulence and we are in a turbulent world. in fact, the situation abroad has gotten significantly worse, even though financial markets in the u.s. have gotten better since the fed last met. i would delineate a bit there. i also think it is important for the -- >> since the last fed rate hike in december, the trade weighted dollar is down 1%. i think the fed is very pleased with that. they know that if the dollar starts to appreciate, that's going to put more pressure on emerging markets and commodities and they're being very sensitive to that and going to run the risk of having higher inflation if they have to do that to protect -- >> i guess i'm not making my point. here is the connection i'm trying to make,wise a global wo world, right? if china could manipulate the currency enough to permanently keep commodity prices low, which would permanently keep inflation low, which means that we may never get rate hikes, if all we're going on is that global view of lower inflation, especially on the commodities side, it means we are beholden to china's policies on its currency. >> i hear what you're saying. i want to tie back to tyler. until you drive down the unemployment rate so low that wages start to spiral, and then it feeds right back into the real economy and starts driving prices. >> there is where the demand comes from. it pushes price up. >> the fed feels they have wiggle room on that. this is the issue of absolutely we don't -- we are not controlled by other countries and the fed has gone to great lengths to say we act on our own national behalf. that said, let's face it, we are the central bank to the rest of the world. what matters here does not stay here and can come back and bite us. that's the last thing the fed wants to see happen at this stage of the game. we don't have a lot of wiggle room if we slip into a recession. >> the reason they pay attention to the overseas is because it drives the u.s. economy in some way, therefore it is part of their mandate. >> can't not take into account. you can't not. >> exactly. >> that's not what i'm saying. >> i got it, man. >> we got it. you're clear. you said it. we're there. we got you. haven't mentioned it a lot. >> what smoeis the most importa question to ask now? >> i want to hear about the philips curve. >> that's two. >> the curve. >> you're just torturing me. >> if you awere the first perso to ask the question, how long would it be? >> how long and hawaig how high you allow inflation to go. >> we're talking about cpi most recently at 2%, right? >> 2.3, running hot, baby. >> there was a time that looked really -- whoa! >> some of us remember that. >> interesting issue, interesting issue is how much stan fisher vice chair of the fed, who really talks about the '70s, he's mentioned the cpi was there in washington with him when he was talking about it last week. he's talked about the cpi quite a bit lately and it, you know, maybe isn't the worst target in the world. the fed targeted pce, which is lower, runs a little cooler than cpi inflation. i think it is interesting this was a loss for those kinds of hawks to stan fisher hawks. >> we heard so much about this battle that supposedly is happening between the lael brainerds and stan fishers of the world. what we learned with the transparency is you get 12 economists in a room and none of them agree. we already knew that. and now it is just revealed to us. >> now we're seeing the sausage being made. that's why i like to work with less economists. five in a room is my limit. >> diane, thank you. 30 seconds, good investment idea now is what? how can we play everything? >> gold. >> no. >> i know you hate it. >> i know. >> but, yeah. look -- >> great call this year, by the way. gold is up. >> you think of it like a currency, the only way it makes sense to me. >> it is a currency. that's what it is. did you see the new thing, the thing caughted bit gold. you can now pay for your transactions with gold. >> soon an etf based off bit gold. and then a double inverse etf based off the etf based off gold. >> if you don't like gold, then the place to go, really is -- the place i'm putting my money, high yield bank loans. >> scott, thank you so much. now, to fed chair janet yellen in washington, d.c. >> good afternoon. today the federal open market committee decided to maintain the target range for the federal funds rate at .25 to .50%. our decision to keep this policy stance reflects our assessment of the economic outlook and the risks associated with that outlook. the committee's baseline expectations for economic activity, the labor market, and inflation have not changed much since december. with the appropriate monetary policy, we continue to expect moderate economic growth, further labor market improvement, and return of inflation to our 2% objective in two to three years. however, global economic and financial developments continue to pose risks. against this backdrop, the committee judged it prudent to maintain the current policy stance of today's meeting. i will come back to our policy decision momentarily but first let me review recent economic developments in the outlook. the labor market continues to strengthen. over the most recent three months, job gains averaged nearly 230,000 per month. similar to the pace experienced over the past year. the unemployment rate was 4.9% in the first two months of the year. about in line with the median of fomc participants estimates of its longer run normal level. a broader measure of employment that includes individuals who want and are available to work, but have not actively searched recently and people who are working part time but would rather work full time has continued to improve. of note, the labor force participation rate turned up noticeably since the fall with more people working or actively looking for work as the prospects for finding jobs have improved. but there is still room for improvement. involuntary part time employment remains somewhat elevated, and wage growth is yet to show a sustained pickup. the improvement in employment conditions so far this year has occurred as economic growth appears to have picked up from the modest pace seen in the fourth quarter of last year. household spending is expanding in a moderate rate, supported by continued job gains and increases in inflation adjusted incomes. in contrast, business investment has been weak. in part, reflecting further reductions in oil drilling as a result of low oil prices. net exports also remained soft as consequence of subdued foreign growth and the earlier appreciation of the dollar. looking ahead, the committee expects that with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen. ongoing economic growth and additional strengthening in labor market conditions are important factors underpinning the inflation outlook. overall consumer price inflation is measured by the price index for personal consumption expenditures, stepped up to 1.25% over the 12 months ending in january as the sharp decline in energy prices around the end of 2014 dropped out of the year over year figures. core inflation, which excludes energy and food prices, has also picked up, though it remains to be seen if this firming will be sustained. in particular the earlier declines in energy prices and appreciation of the dollar could well continue to weigh on overall consumer prices. but once these transitory influences fade, and as the labor market strengthens further, the committee expects inflation to rise to 2% over the next two to three years. the committee's inflation outlook rests importantly on its judgment that longer run inflation expectations remain reasonably well anchored. however, the stability of longer run inflation expectations cannot be taken for granted. survey based measures of longer run inflation expectations are little changed on balance in recent months. though some remain near historically low levels. market-based measures of inflation compensation also remain low. movements in these indicators reflect many factors, and therefore may not provide an accurate reading on changes on inflation expectations that are most relevant for wage and price setting. nonetheless, our statement continues to emphasize that in considering future policy decisions, we will carefully monitor actual and expected progress toward our inflation goal. this general assessment of the outlook is reflected in the individual economic projections submitted for this meeting by fo mchl c participants. as always, each participant's projections are conditioned on his or her own view of appropriate monetary policy, which in turn depends on each person's assessment of the multitude of factors that shape the outlook. participants projections for growth of inflation adjusted gross domestic product or gdp are a such lower than the projections made in conjunction with the december fomc meeting. the median growth projection edges down from 2.2% this year to 2% in 2018 in line with the estimated longer run rate. the median projection for the unemployment rate falls from 4.7 at the end of this year to 4.5% at the end of 2018. somewhat below the median assessment of the longer run normal unemployment rate. the median path of the unemployment rate is a little lower than in december. in part reflecting a slightly lower median estimate of the longer run normal unemployment rate. finally, with the trancetory factors holding down inflation expected to abate, and labor market conditions anticipated to strengthen further, the median inflation projection rises from 1.2% this year to 1.9% next year and 2% in 2018. the median inflation projection for this year is a little lower than in december, but thereafter the median projections are unchanged. since the turn of the year, concerns about global economic prospects have led to increased financial market volatility and somewhat tighter financial conditions in the united states. although financial conditions have improved notably more recently, in addition economic growth abroad appears to be running at a somewhat softer pace than previously expected. these unanticipated developments, however, have not resulted in material changes to the committee's baseline outlook. one reason for this is that market expectations for the path of policy interest rates have moved down. and the accompanying decline in longer term interest rates should help cushion any possible adverse effects on domestic economic activity. indeed, while stock prices have fallen slightly since the december meeting, and spreads of investment grade corporate bond yields over those comparable maturity treasury securities have risen, mortgage rates and corporate borrowing costs have moved lower. of course the committee will continue to monitor the developments closely and will adjust the stance of monetary policy as needed to foster our goals of maximum employment and 2% inflation. returning to monetary policy as i noted earlier, the committee decided to maintain its target range for the federal funds rate. this decision partly reflects the implications for the u.s. economy of the global economic and financial developments i just mentioned. in addition, preceding cautiously and removing policy accommodation at this time will allow us to verify that the labor market is continuing to strengthen despite the risks from abroad. such caution is appropriate given the short-term interest rates are still near zero, which means that monetary policy has greater scope to respond to upside than to downside changes in the outlook. as we indicated in our statement, the committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate. the federal funds rate is likely it remain for some time below levels that are expected to prevail in the longer run. this expectation is consistent with the view that the neutral nominal federal funds rate defined as the value of the federal funds rate that would be neither expansionary nor contraction if the economy was operating near potential is currently low by i had storal standards and is likely to rise only gradually over time. it may be due to a range of persistest head winds including developments abroad, a subdued pace of household formation, and meager productivity growth. there is considerable uncertainty regarding the evolution of the neutral funds rate over time. however, if these head winds abate as we expect, the neutral federal funds rate should gradually move higher as well. this view is implicitly reflected in participants projections of appropriate monetary policy. the median projection for the federal funds rate rises only gradually to .9% late this year and 1.9% next year. the median rate rises to 3% by the end of 2018, close to its longer run normal level. compared with the projections made in december, the median path is about .5 percentage point lower this year and next. the median longer run normal federal funds rate has been revised down as well. in other words, most committee participants now expect that achieving economic outcomes similar to those anticipated in december will likely require a somewhat lower path for policy interest rates than foreseen at that time. i would like to underscore, however, that the participants projections for the federal funds rate including the median path are not a plan for future policy. policy is not on a pre-set course. these forecasts represent participants individual assessments of what appropriate policy would be given each person's own current projections of the most likely outcomes for economic growth, employment, inflation, and other factors. however, considerable uncertainty attaches to each participant's forecast of economic outcomes. hence, their assessments of appropriate policy are also uncertain, and will change in response to adjustments to the economic outlook and associated risks as was the case between december and now. also, it is important to note that the committee makes its decisions on a meeting by meeting basis, and does not and need not decide on the likely future path for the federal funds rate. indeed, the future path of policy is necessarily uncertain, because the economy will surely evolve in unexpected ways. as we note in our statement, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data. finally, the committee will continue its policy of reinvesting proceeds from maturing treasury securities and principle payments from agency debt and mortgage-backed securities. as highlighted in our policy statement, we anticipate continuing this policy until normalization of the level of the federal funds rate is well under way. maintaining our sizable holdings of longer term securities should help maintain accommodative financial conditions and should reduce the risk that we might have to lower the federal funds rate to zero in the event of a future large adverse shock. thank you and i'll be happy to take your questions. >> steve liesman, cnbc. madam chair, as you know inflation has gone up the last two months. we had another strong jobs report. the tracking forecast for gdp has returned to 2%. and yet the fed stands pat while it is in a process of what it said it launched in december was a process of normalization. i have two questions about this. does the fed have a credibility problem in the sense that it says it will do one thing under certain conditions but doesn't end up doing it? and then frankly if the current conditions are not sufficient for the fed to raise rates, what would those conditions ever look like? >> well, let me start -- let me start with the question of the fed's credibility. and you used the word promises in connection with that. and as i try to emphasize in my opening statement, the paths that the participants project for the federal funds rate and how it will evolve are not a preset plan or commitment or promise of the committee. indeed, they are not even the median should not be interpreted as a committee endorsed forecast. and there is a lot of uncertainty around each participant's projection. and they will evolve. those assessments of appropriate policy are completely contingent on each participant's forecast of the economy and how economic events will unfold. and they are, of course, uncertain and you should fully expect that forecasts for the appropriate path of policy on the part of all participants will evolve over time as shocks, positive or negative, hit the economy that altered those forecasts. so you have seen a shift this time in most participants' assessments of the appropriate path for policy and as i tried to indicate, i think that largely reflects a somewhat slower projected path for global growth, for growth in the global economy outside the united states and for some tightening in credit conditions in the form of an increase in spreads. and those changes in financial conditions, and in the path of the global economy have induced changes in the assessment of individual participants in what path is appropriate to achieve our objectives. so that's what you see -- that's what you see now. i guess you asked me also what would we need to see to continue raising rates. and i think it is worth pointing out here that the committee most participants do continue to envision that if economic developments unfold as they expect that further increases in the federal funds rate will prove appropriate over time. most participants anticipate that. and the pace will be gradual. as i emphasized, most empirical work attempting to assess what the equilibrium level of the fed funds rate is a level that would be neither expansionary nor contractionry, those assessments are low at this time. there is a accommodation in this stance of policy. and we do expect over time that neutral rate to move up, but, you know, we're not -- we're not positive what rate -- what the pace of change of that will be over time. but given that the economy is now close to our maximum employment objective, you know, hopefully inflation is moving up. i mentioned as you mentioned recent readings i want to warn there maybe by factors influencing that, but certainly our projections are for a gradual increase in ash and the committee, at least most participants continue to expect that if we follow along this course, that some further adjustments in the federal funds rate will be appropriate but gradual. . sam fleming from "the financial times." the numbers have been taking up, as you said somewhat at least, and you said also we're at the point where we have quite close to full employment. . there a risk of an overshoot, and the symmetry that the fed has been flagging up, a greater tolerance for a modest overshoot, particularly during the long period of under-shoots that we've been through. >> our inflation projection is 2% and we're projecting a move back to 2%. we are not trying to engineer an overshoot of inflation, not to compensation for past undershoots, so 2% on our objective, but its a symmetric objective. we certainly don't seek to overshoot or objective but some overshoots and undershoots are part of how the economy operates, and our tolerance for those is symmetric with respect to under and overshoots. we did take note in the statement of the fact that inflation has picked up in recent months. i see some of that as having to do with unusually high inflation readings, in categories that tend to be quite volatile without very much significant for inflation over time so i'm wary and haven't yet concluded we have seen any significant uptick that will be lasting in, for example, in core inflation. but we note -- the committee notes, as it did in december, that we continued to monitor development trends and developments closely, and that would include both the fact that recent inflation readings have been on the high side, and as i mentioned on the other side, that readings on measures of inflation, compensation, and some survey measures have been on the low side. in that sense, there are risks around the inflation forecast in both directions. >> lindsey duncemuir with reuters. your statements did note that inflation has picked up and still seeing it going back to 2% over the median term, yet policymakers have downgraded gdp growth for this year and one of the inflation measures. so that to me would indicate a weakening economic environment. i'm wondering how, in that environment, you justify the possibility of two rate hikes this year. >> there has been a slight downgrading of assessment for economic growth this year, but nevertheless growth is expected to run in somewhat in excess of potential, so that the labor market is expected to continue to tighten, and by the end of the year even edge below levels that -- of the unemployment rate that are estimated to be longer than the normal run president inare inflation is expected to gradually move back to 2% overtime. we still have weighing on inflation the influence of earlier declining in energy prices and a prolonged effect from the appreciation of the dollar, but we do expect those transitory influences to fade, and with a continuing improvement in the labor market, i think we'll see upward pressure on inflation, and in that context, the committee sees it appropriate to if things unfold in that way, to have some further increases in the federal funds rate. it remains accommodative. as i indicated in december, the committee indicated in december we want inflation to go back to 2% but we also want to be careful not to see some overshoot and potential be face with a need to tighten in a very rapid fashion later in a way that could undermine the sustainability of the employment gains we've had. but we do see some continued tightening in monetary policy to be appropriate in that event. >> peter barnes with fox business, cube more specific about the developments that continue to pose risks to the u.s. economy? you did mention the strong dollar a second ago, and slowing global growth, but are you specifically concerned about, for example, china? the emerging markets? and the eu? could you expand on the risks? >> there has been by many forecasters, a slight downgrading of forecasts of global growth over the coming years. the imf have slightly downgraded their forecasts as other agencies as well. chinese growth hasn't proven a great surprise with anticipated that it will slow over time, and it seems to be slowing as well. japanese growth in the fourth quarter was negative. that was something of a surprise, and with respect to the euro area, recent indicators suggest perhaps slightly weaker growth. so there's been a number of emerging markets, as you know, were suffering under the weight of declines in oil prices that are affecting their economic activity. our neighbors both to the north and south, canada and mexico, are feeling the impacts of lower oil prices on their growth so our projection for growth is slightly lower, not dramatically lower, but enough lower to make some difference to our forecast. as i indicated, i think that's part of the reason along with the associated increase we have seen in some spreads that are involved in -- enter into corporate borrowing rates and can affect investment decisions. it's a reason to think that a slightly lower path for the federal funds rate will be appropriate to achieve our objectives. so what you see here is a virtually unchanged path of economic projections and a slightly more accommodative path that most participants are writing down for what's necessary to achieve that. thank you, kate davidson from "wall street journal." madam chair, you have emphasized repeatedly that every meeting is a live meeting. you have a meeting next month. is it possible you could get enough information between now and then to, you know, get you comfortable with raising rates again in april? what would you need to see? >> so i will say again that every meeting is a live meeting. april remains a live meeting, and we will be tracking incoming data. it's a slightly shorter period, we have six weeks, but there will be additional information on the labor market and on rare cruz factors that pertain to inflation -- various factors that pertain to inflation, and that certainly is a live possibility. two questions. the lower oil prices i think a lot of people expected to lead to more consumer spending. how do you see and explain that that hasn't worked out the way a lot of people expected? >> also if oil prices were pop up to, say, $50, not that high by some standards, what impact would that have on inflation? would you be paying more attention to the overall inflation rate? or would you look to the core rate to determine what the fed's policies would be? >> so let me start with the impact of oil prices on quiter spendi -- quiter spending. it's difficult when you look at patterns of consumer spending. there are many factors that influence it. to definitively say that lower oil prices have not boosted consumer spending, um, i'm not sure we can really arrive at that conclusion in any rigorous way. the typical, the average household

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