i think the fed is underpriced. i don't really accept the notion that that will be an excessive degree of timing. -- fiscale physical stimulus coming through, including the tax cuts but also the public spending will be kicking through 2019 and the fed will be forced to respond to that. in terms of powell, he will try to emphasize continuity, gradualism, but i think he will be hard for him not to sound a little hawkish given the backdrop in inflation and growth. buying,: matt forte bok what is your view mike? the fiscal situation is a big negative for the markets in general. all of the supply and the deficits -- these runaway deficits and the spending and borrowing is a long-term negative. jonathan: what is chairman powell's job? what does he do? thingl: the fiscal creates a boom in the near term but is a real negative for the medium-term, three or four years out. i think that they have to look through that to a large extent. he has to be really careful about over hiking late in the cycle with the enthusiasm continui

i think the fed is underpriced. i don't really except the notion that that will be an excessive degree of timing. we have discussed in us coming through including the tax cuts but also the public spending will be kicking through 2019 and the fed will be forced to respond to that. in terms of power, he will try to emphasize concert -- continuity and gradualism. i do get will be hard for him to not to sound a little hawkish given the backdrop of inflation and growth. >> what is your view mike? mike: the fiscal situation is a big negative for the markets in general. all of the supply and the deficit -- these runaway deficits and the spending and borrowing is a learned -- long-term negative. >> what is chairman powell's job? how does he handle that? what does he do? >> he will have the thing that great a negative them in the near term. i think that they have to look through that. he has to be really careful about over hiking late in the cycle with the enthusiasm continuing to go up and not take away the punch bowl. >> i

we got a slightly more hawkish fed. whether equity markets were going to be able to hold their own, whether they continue to be unnerved, into february, looks as if we are not unnerved by a tightening cycle continuing. msci asia-pacific up 0.4% and s&p futures suggesting we will be higher once again. 0.3%. up by january was the best start to any year for the s&p since 1997. nymex was up more strongly than this earlier on, but we are flat . let's get a bloomberg first word news update. here's juliette saly. the fed has left rates unchanged in its last meeting under chair janet yellen. the central bank paved the way for a march-, saying gains have been solid. it also upgraded the outlook for inflation. will be sworn in as fed chairman on february 5. u.s. oil production has surged about 10 million barrels a day for the first time in decades, marking a profound shift. that comes just weeks after the international energy agency said american oil output would push past saudi arabia and russia this year. new drilling technique

diane: that is something the fed is thinking about. it came out in governor corals piece -- governor quarrel's speech. i think we will see some investment. i don't know how much of it is tied to tax cuts and how much of it is fundamental. tight labor markets on themselves tend to produce more productivity growth, which will dampen and keep those rate hikes holding. an think we are going to see enough productivity growth to eliminate the need, especially that we have an administration that wants to make good on its threats on tariffs. shery: that is where i was going. risk can more tariffs bring to the inflation mix? diane: this is not just the tariffs alone, this is retaliation by other countries. if we were to push these tariffs, we could get retaliation from other countries. candidate would be affected as well because they buy a lot of these goods from us and the retaliation is where you really worry about it. it is hard to estimate from the top line numbers, you get some from that, but you get into this -- if china just slows its pu

new fed's direction. et moreestors will information next week. the newly installed fed chair jayowell will be testifying in front of congress twice. >> i think jay powell has to establish his credentials as the new fed chair. i think part of that is to say something negative about the amount of fiscal expansion and to to mention the fed baludget deficit. ee>> reporter: the januaryng took place before tax reform,d efore a jobs report. earlier, they had found job wage growth to be absent t leadingm to keep their path intact. >> lower dollar and inflation prices are pushing inflation up. i think the feral reserve is becoming more worried about it and you can actually see this in the minutes, is asset prices. reporter: one worry raised by more fed members in january, ba nces in the market thanks to high valuations and high levels of corporate debt. for "nightly business report" i'm caylaausche n washington. >>> why was the stock market reaction to the minutes from the federal reserve meeting so intense and so

pressures on the fed? >> well, it's a risk it's not a near term risk i would say. let's, i just would mention of course that we are now in the process of normalizing our balance sheet and shrinking it and so we're moving back to a more normal level balance sheet and i think we'll be there in three, four, five years. >> one thing that's puzzled me is that target 2% inflation rate as a layman and looking at this, and the suggestion seems that's benign you mentioned about 20 years if you have 100 bucks 20 years ago and 2% every year, the purchasing power went down can you educate us about this 2% target because my count, $10020 years ago at 2%, it might cost about 150 bucks today. >> so this was a big debate which was settled around 2% as opposed to zero for central banks to aim at. it's now become a global standard around the world. central banks are aiming at 2% the reason why that was pickeded over is is that it gives us more room to cut real interest rates. if the interest rate, if inflation is zero, then

has beennow the fed paid a price over the fed funds rate. paying over libor. it is currently paid one hundred 50 basis points yet our constituents typically receive about 10 basis points on their savings account. what does the phrase "above the usual level of short-term market interest rates" mean? in your 2012 role-making that ioer, it allowed the rate to get pegged to your primary credit rate, but that is your administrative rate which meet you can set it where you want to set up. so, legally is 30 cap to the interest rate you can pay in ioer? mr. powell: issue suggested, the languages the general range of short-term interest rates. something like that. i would look at that and see a martial paper, wholesale deposits, short-term interest rates, money markets, things like that. less than a year. i think the whole idea of ioer is to move rates like that around. >> but you consistently pay 150 basis points. constituents are getting 10. mr. powell: they generally come up with a lag. >> time has expired. we recognize the gentleman from massachusetts. >> thank you

fed, the fed's benchmark interest rate below 2% is not normal. so you could call this normalization. the stock market had a very good run. it is also more normal to have a little volatility in the stock market. it can't go up every day. trish: yeah. >> so we're seeing some volatility right now. trish: maybe people are taking profits as they they had into the weekend. these losses are accelerated, off 530 on the dow. you say it's a buying opportunity. why? >> i say it is, trish, and i'll tell you what. what happened today is extremely good, wage growth. people are making more money. thank goodness. more people are working this is so positive, trish. what ultimately happens, people will realize 15% earnings growth as people make more money is way more powerful than the fed raising rates by one percentage point over the course of the year. it is an economic growth story but what happens is, you have to adjust your thinking. that is what we're doing today. we're adjusting our thinking. we had the best january stock performance in 28 years. we're givi

that the fed would have to step in with the so-called fed put. he was pretty adamant they wouldn't. >> wall street overreacts to everything. we overreact to the upside and the downside. we cannot make policy based on market blips up and down. we have to focus on the long-term economic outlook and the mandates congress has given us. michael: kashkari is with the middle of the pack, i would say, looking for data of what's going to happen and open to the idea that the fed has to move if we start to see an outbreak of inflation. lisa: did you talk about this idea that because you are seeing higher 10 year yields that gives the fed more room to be more aggressive on the short end? michael: he didn't talk about that. he did talk about the idea that maybe at this point the markets are beginning to catch up to the fed. beginning to see what the fed has been concerned about. the idea that down the road, we will get something -- if you are regular ande predictable and slow, gradual moves are the best thing for the economy while we wait to see what happens

with the market projects the fed projects. the opens up a whole lot more through 2020, how are those spreads? >> the fed is projected three hikes this year, two in 2019 and two 2020 until they get to 3%. we think that is the high end of is the high-end, zero is easy at three is tied, so if they get to three i think you will see economic data roll over and the curve to flatten and get inverted if they go that high. >> i absolutely agree, and if you look at what we expect a fed to do this year, hiking three times or four times, you're talking about real policy rates that are on the verge of type territory already. at this stage you expect the inverted,e not to be but flat, but we are to philly on board with the flattening we are fully on board with the flattening trade. jonathan: what we do the economic logic, is it something we can get? >> the only way you can get that is if you get a surge in productivity growth, and we haven't seen opportunity slowing down for years. globally. a u.s.ot just phenomenon, it is global, so the fa

in the fed? >> i think we're committed to being as transparent as we can about monetary policy and regulation. i think if i remember what it was like when i was undersecretary of treasury in the 1990s, the fed didn't publish a post meeting statement. now, you look at the massive number of things we publish, we're much more transparent. i think we can continue on that path, we're never done with that. in regulation, i think it is important that we be transparent. we are working across a broad range of issues, stress testing, transparency regulations, and in general it is appropriate for us to always work on that. >> one last quick question. i have 50% fewer banks in north carolina today than in 2010. do you foresee fed policies that would entrance and assist community banks in particular? >> time of the gentleman expired. a very brief answer from the witness, please. >> it is a long running trend. we don't like to see it, don't want to make it worse. i would be happy to continue this with you. >>

pressures on the fed? >> it's a risk, not a near-term risk i would say. i would mention we are now in the process of normalizing our balance sheet and shrinking it. we're moving back to a more normal balance sheet and think we'll be there in three, four years. >> one thing that's always puzzled me is the 2% inflation rate. as a layman and looking at this. the suggestion seems like that's benign. if you 10020 years ago and 2% every year, the purchasing power went down. can you educate us from your perspective about this 2% target? $100, 20 years ago at 2% might cost $150 today. >> this was a big debate, which was settled around 2% as opposed to zero for central banks to aim at. it's now become a global standard all around the world. central banks are aiming at 2%. the reason that was picked over two, in essence, it gives us more room to cut real interest rates. if inflation is zero, then interest rates possible in the sort of one, two, three range. and then when a recession comes we would have very little t

d think she deserved for more years at the fed? >> i thought she has done an outstanding job and is an a plus public service. at the end of the day, it is the president's call and every president gets to make his own appointment. i think the president made an outstanding choice in jay powell. i've had the privilege of working with him for the past two years. he is not an ideologue. he's very pragmatic. he is a consensus builder. i think he will do a great job. >> we have gone for about 15 months without a 3% correction. that is historically unusual. that has been a very abnormal period. i think there is obviously some market mechanisms that probably need to be looked at in hindsight, but i think more volatility in the markets may be addressing some of the excesses and imbalances in the markets by having more volatility. that is probably a healthy thing. i will be watching carefully to make sure it does not transmit to tighter financial conditions that spill over to the economy. at this point, i would be optimistic that it would not

look at our own fed and think about how diverse. what do you think about this? >> have been involved. this is the 7th process to select a reserve bank president that i've been involved in since 2012. i'm very familiar with the way the process works and so we always insist and we always insist there's always a highly diverse candidate pool and they're given serious consideration and chance to become the participant in that process. we will always have diverse candidates and always have a fair shot.

in the fed? >> well, i think, you know, we are committed to being a transparent as we possibly can about monetary regulation and if i remember what was back then when i was secretary of the treasury, the fed didn't publish post meeting statement and you look at the massive number of things we publish, we are much more transparent. we will continue on that path. we are not done with that. in regulation, i think it's important that we be transparent, in fact, we are working across broad range of issues there including i would point out stress-testing, a package of transparency regulations and in general, i think it's appropriate for us to always be working on that and -- >> one last quick question. i've hat 50%, fewer banks in north carolina than in 2010, do you foresee fed policies that would enhance and assist community banks in particular? >> time of the gentleman has expired. a very brief answer from the witness, please. >> it's a long-running trend and we don't like to see it and we don't want

that will complicate the fed's job as well. it will be up to the fed again to save the world. powell put out a video today, that's the first time any fed chairman has done that, right? yelena: i haven't seen one like that. it was very straightforward, up to the point. shery: can we in for anything from that question mark is he saying that continuation best there will be a continuation of communication? is he saying there will definitely be fed increases in the rates? yelena: i think that the purpose of that was to portray the sense of continuation of policy from the yellen fed and calm down the markets, saying that this is what we are going to do, we are going to continue the same type of policy, this is our dual mandate and this is what we are here for. the same time, we have so many new governors. the people coming in could be so much more hawkish yelena:. yelena:one of the most hawkish said that he's not going to pursue the position, right, that he was considered for? i think, you know, mainly there will be economists and the names that were there, they are economists. they

trish: certainly not the fed. >> not -- trish: certainly not the fed. they're, surprisingly pessimistic but the market likes that let me ask you this, the president is having these meetings right now with union leaders on trade. one of the most remarkable things i think about this administration its ability to cross over into areas really dominated by the left and by democrats. richard trumka is there at that meeting today. he has had on and off again relationship with the president, positive relationship occasionally going negative but for the most part i think a lot of these union members are very receptive to the idea of america first what is it we need to do, congressman, to be more competitive with the likes of china we don't turn into france and? >> i think difference is today, the president who is businessman, not a politician. he knows the numbers. he knows reality. he knows what will work. he can sit down and not allow these union folks to overwhelm him. he understands what's reasonable, what can be done, what can assure american markets are op

let's talk about what we heard from the fed. watching the market reaction it seemed as if at first the market took it at face value, positive assessment of the u.s. economy, and the second order started to hit home and market started to stress at that hikes. did anything move for you, did the dial get moved by these minutes yesterday? >> [indiscernible] in terms of economic growth and , we are seeing a regime shift. this can last two or three months and during that time, we could have some concern about inflation, especially the federal reserve in terms of communication and interest hikes. arounds the regime shift higher inflation dynamics or the leadership of the central bank? >> in a way, both. we have a shift in the economy. this is a tough situation for the federal reserve. of course the name of the game is not to be high the curve for the fed. approach for especially the fed today is to be behind the curve or to tie the monetary -- aiding the economic growth. difficultared for a way to change monetary policy. a negative imp

would we see a return to the markets leading the fed as opposed to the fed leading the markets? it is not top of mind for me to worry. , what youdisruption would need to have this last munication. i think the communication has overshot in terms of calming investors. vonnie: do you think we will get that from jerome powell? less communication? sebastian: no. i think he is a student of janet has embracedhis the notion that he should talk to the markets as much as possible. when you go back and look at the fomc transcripts from the lake greenspan time, when ben bernanke had persuaded alan greenspan around two dozen for it was a good idea to communicate a lot, it sent a miracle each meeting, i would say, well, we raised markets and the -- we raised interest rates, and the market was calm. it feels great until there is too much calm that incentivize is much leverage. you have to prime and mint the spiral, where traders have a fixed advertised risk. if you de-risk policy for them, you are going to take more risks by leveraging up. i think that is what we face now. time somest industri

no question after the fed minutes are released that what they heard, the comments that the fed can afford to be patient with interest rates. clearly this is of a peace of fed chairman, not from the current fed chairman, and influence on the federal reserve, but i think the issue of interest rates is clearly a headwind for the market, but unfortunately, we don't know where the tipping point is, and i don't think we're close to it. but at the end of the day, liz, the fed, the 800-pound gorilla in the room. will corporate earnings trump what the fed does down the road? that remains to be seen. >> it's the fed, we just turned negative. ira. the dow is down 14 points, the low of the session here. i'll say what the fed said in case people missed it at 2:00 p.m. eastern. stronger growth than previously forecast. further gradual rate hike. inflation will hit 2% in the intermediate term. tax cuts near-term are positives. haven't seen the effect just yet. upside risk, things are stronger. ira, why suddenly an hour after those minutes came out did we go from up 303 points to now down 23? >> high-fre

beis the fed still going to on track? has this made you rethink your view of the fed? >> know, we still think the fed will hike four times this year. and of course, that could change but what we have seen to date has not changed that picture. the basic reason is that even with the downturn in equity prices and the tightening in the financial conditions we have seen, that has only brought us back to where we were at the turn of the year in terms of overall financial conditions. i thought that was consistent with an expectation of good growth and gradually tighter monetary policy. one hike per quarter. that is where we are at the moment. >> we are obviously not in a bear market. it has been a correction. if we were to slip in a more radical selloff in the market, with that be something you have to re-factor into your forecast? >> it certainly could. if we had a much bigger decline in equity prices, widening of credit spreads, more evidence that the turmoil is spilling out of the equity markets into other financial markets, then that would be -- that would mean broader ti

the main one is how the fed will the main one is how the fed will manage the next crisis. because powell will most likely preside over the next downturn in the economy. in the previous extension, the fed raised rates by 3.5% and 4.25%, then they lowered rates to combat the downturn by 5.5% and 5.25%, so big moves. they don't have a buffer this time around. they will probably have to play with unconventional monetary policy tools and this will be up to the new fed chair to manage. >> yellen's final act, the federal reserve slapped wells fargo and their board with a cease and desist letter after the close of trading on friday. the vendor had its rating cut by three analysts and felt by the -- and fell by the most in two years after the fed banned the bank from growing until a -- it convinced authorities it is addressing shortcomings. this is a harsh order and unique. >> the fed itself called it unprecedented. typically you see the fed talk goodtypically you see the fed talk about board oversight, but the asset cap is what was unique here, saying wells fargo can't grow its as

burr, talked about in terms of trying to figure out where the fed, how the fed is going to balance things when we look at unemployment for the general public, i guess i am wondering if, if we continue to have 2% as our inflation rate, is thatin fact sort of discouraging toward getting some of those groups like african-americans mobilized and moved toward more full employment do you take any guidance from some suggestions that perhaps the target inflation target ought to maybe be 2.5% >> i think we're pretty committed to our 2% inflation goal over time, the level of employment in the economy is not a function of, you can't increase it by increasing the inflation rate so we're committed to having a sm se metric 2% goal so we're persistent >> okay. well, you know, given that, i'm wondering what your thoughts are about the increased income inequality we see in this country. according to united nations repertory report, united states is on track for being the most unequal, most inequality in the world. and given the recent tax bill, where we see despite what mr. barr has indicated about all th

i was impressed by the fed chairman, fed chairman's ability to explain that one, this is not the fed's responsibility. the fed's responsibility is to keep inflation in check, to keep it to 2%, keep the economy moving forward, to ask that not be questioned about daca, and to be questioned about five, six, seven times, to be able to say, okay, finally, if you take 700,000 people out. equation, all things being otherwise equal it will probably have some damage to the economy but you and i would have had a hard time finally not saying enough. >> i was watching that you forgot the but, right? yes, temporarily you will have a little bit of a pull back in productivity. you know what it actually would be? rather healthy for all those people, i talk about the hourglass economy, all the time, dennis. all the people on the bottom that have been slipping as our middle class is squeezed. >> they have been. they have been. trish: they have a shot getting a higher wage because they're not competing with the other labor force. anyway, this is, an interesting -- we'll keep discussing this. i have a pan

are you saying the fed should ignore that? >> the fed should not ignore it. the fed is focused on the yield curve. we see the yield curve steepening. that is an issue. a few weeks ago we saw the you curve flattening and were concerned about what that meant for recession. the fed is always looking for signals in markets. the fed has to be focused on the supply-demand dynamics and the yield curve, but we have some skepticism about this narrative of supply increasing. since the tax bill has been know how, the markets much supply will be coming through. that should be priced in. i think the bigger driver will be surprises on the economy, inflation, and fed policy, more so than supply outlook. >> how do you construct a portfolio in the midst of this? >> we like to take a long-term view. volatility, like today, equities get skittish when yields are rising, but has ,ou look over the long-term fundamentals of the economy are strong. rising, butes are coming off a low level. some ofin the speed of these yield moves are keeping markets on hedge, but i don't get signals

brar talked about in terms of tryin to figure out where t fed, how the fed is going to balance things. when we look at unemployment, for the general public, i guess i am, i am wondering if, if, if we continue to have 2% as our inflation rate is that in fact discouraging getting some of those groups like african-americans mobilized and moved toward more full emplment? do you take any guidancerom to may be 1/2%?terhaps >> i think we're pretty committed to our, we're strongly commitd tohe 2% inflation goal. over timehe tevel of employme in the ecomy is not increase ity increasing inflation rate. so that we be equally concerned with undershoots, persistent undershoots of 2% and persistent overshoots. >> okay, well, given that, i'm wondering what your thougs are about the incased income inequality we see in this quality? according to the united nations report, united states is on track for being the most unequal, having the most inequality in the world and given the recent tax bill where we see, despite what mr. barr has indicated about all the bonuses and wage increases, that about 43% of

so a big call on cnx from tph or dnoe tyler. >> thank you >> call it a fed duet. we heard from the new fed chairman earlier now we'll hear from his predecessors ben bernanke is about to interview janet yellen about the state of the economy and the challenges ahead they will both take questions after that e tcnsenr tethrry it live from thhuhe cteafr is at holiday inn express, we can't guarantee that you'll be able to contain yourself at our breakfast bar. morning, egg white omelet. sup lady bacon! fruit, there it is! but we can guarantee that you'll get the best price when you book with us. holiday inn express. be the readiest. we have three big stories all happening right now. number one, a meeting of former fed heads janet yellen sitting down with ben bernanke for a friendly q&a, we'll bring it to you live we're also watching the markets. following jerome powell, the new fed chairman's testimony, the dow is down about 100 points and moving away from the fed-a--palooza, comcast making an offer for sky in the uk, challenging 21st century fox's bid for that satellit

third fed official to speak. the other two, kaplan and dudley said they were not particularly concerned about the down graft because it didn't have much effect on the economy or on fed policy >> steve, looking at the outlook numbers from evans, are you surprised he is so dovish? >> i am very surprised he is all about this idea of what they call the symmetrical inflation goal of the federal reserve. translation, if inflation ran cold a little while under that 2% target, not a big deal to run hot awhile he sees the economy or resources being strained by the better growth from the tax cut. he just doesn't appear to think it is a big deal and big reason to change policy outline >> steve, always great for your thoughts steve liesman. >>> spacex defying the odds, successfully launching falcon heavy rocket yesterday what's now the most powerful rocket in operation in the world. we were there, adding to history making, the space up start also successfully landing two of the rockets, three boosters, amid side booms, four

this is huge action from the fed. and it comes 17 months after the original wrongdoing with no new information found. the company was clear to show that, it's not that they've uncovered any new wrongdoing you could say eight or nine months from the extra developments as opposed to the months where they increased the fake accounts. but the timing very interesting. and actually framed by some analysts over the weekend, does this now spark more action from some of the other rergtss. whether the san francisco fed. the regular state regulators, the occ, they haven't acted yesterday. certainly with the timing given they didn't find anything new, the timing you would also say is a big blow to the company who have continued to talk about the changes they've already made and yet the fed thinks it's necessary. >> and is this a janet yellen i'm leaving and i'm going to do this now, by the way, i used to be in san francisco, because i don't believe that jay powell will do anything like this >> again, i think the timing one has to

that is the message from the fed today. don't look at the fed to make a lot of changes. we are on a course here. we will watch the data and adjust if necessary. an upbeat view of how the economy is progressing. he says it sets the stage for possibly doing more. vonnie: monetary and fiscal policy may come into conflict this year. does powell addressed this in the question-and-answer session today? michael: i think you've got both right -- he will address it today. he will say we will wait for the data. he said the fed will strike a balance between keeping the economy from overheating and pushing inflation up to 2%. they want things to loosen up as andployment keeps falling inflation keeps rising for their target. they don't want it to overheat. a lot of people think you will get a much faster pace of growth that will increase inflation. going to be interesting to see how far powell wants to go. pledge anyfor him to additional rate increases today. vonnie: hang on. let's bring in marcus in our london studio. is there anything that trips powell up today that will cause mark

are the hands of the fed it tied at the moment -- fed tied at the moment? michael: i don't think so. mr. powell spoke yesterday. the fed can do what ever it takes. there are a number of tools they have and they have invented new ones. i don't have any doubt the fed would step in if it had to. shery: how will the fed and take what has happened in the last couple of days? will debate eight -- be a relief, given that we have taken the froth out of the market? michael: when people keep talking about healthy corrections, the more you have sick you get -- healthy you get. we have taken several percentage points over the last few years. i don't see this as a major deal for mr. powell. david: if you take a look at earnings, and interest rates, what are you looking at in equity markets for the rest of 2018? michael: i prepare foresee prices -- i prepare for surprises in the upside of those areas. we are watching for changes in the marketplace at think -- as things that have -- as things have unfolded over the last few months. we could end up with higher earnings tha

. >>> welcome back to "the halftime report," i'm scott wapner fed fears. why one firm says five rate hikes could be in the cards this year what that would mean to your money, even as stocks resume their rally to highs as we speak. joe terranova, pete in addition jarria jarrian. stocks are higher this hour, dow jones industrial average higher by nearly 350. yields are falling today it is those continued concerns, though, about rates that remain front and center joe, i go to you first did the market overreact yesterday to the fed minutes first they were dovish then all of a sudden they were hawkish, stocks were up, then they were down what happened? >> yes, they did overreact, absolutely and i did a poor job, as many others have in the wake of february 9th, not saying that that was the bottom, and that it was time to get back in again, because clearly when you have a market that is -- >> yesterday they said we were going to retesting >> okay, but you have a market being driven back on this rebound so powerfully by growth momentum stocks. and that is just not

a drop of dawn and grease is gone. >>> fed fallout. stocks under pressure after the fomcgave the green light for more rate hikes to come. jeff staley talking earnings and the overall markets. we have his comments ahead >>> and the big war breaking out tween two of the world's biggest yogurt makers. details of that ahead. it's thursday, february 22, 2018, you're watching "worldwide exchange" on cnbc. >>> good morning a warm welcome to "worldwide exchange" on cnbc. i'm wilfred frost live from london let's check in on the global market picture yesterday a big intraday turnaround a 450-point spread on the dow's moves during the day tended down 0.7% the s&p down 0.5%. the nasdaq down 0.2% markets focusing on the prospect of possible further rate hikes given a slightly hawkish set of fet minutes. we're lower today, down about a 45 points on the dow ten-year treasury note yesterday hit a four-year high, just off those highs today, 4.924 we saw rises in rates yesterday following those fed minutes. the 30-year hit a three-year high asian equiti

our expectation is the fed could do more. is where weto 2.5% expect the fed to be. the market is pricing pretty close to where the fed is after a number of years were there was a bigger gap. david: do you put a greater factor in for uncertainty? chair, a new fed, a new new members. on the other hand, we have a somewhat different fiscal regime as we have tax cuts coming in. we also have the budget deal, increased deficits. does that increase the uncertainty of what is coming next? andrew: yes, i think it does. , a powell being appointed bit of continuity with the yellen fed, but having this much stimulus this late in the cycle is pretty much unprecedented. it raises issues around the inflation outlook, of course. then we have the big increase in supply. a lot of options this week, an increase in supply in the u.s., big increase this year. the market has largely priced this in, we think. some better economic data as well as the supply, fiscal boost. year starts to look interesting, we think, but you have a new federal reserve chair. the first few months have been made

and the fed was quite concerned about what was going on. we tried to insist on larger controls and we had our regular quarterly meeting and he said janet it's been terrific to be supervised by you. you guys are really on top of your game and we really appreciate all of the valuable advice that you have given us but we realized that we don't need to be a bank holding company. we realized that we both are. so we are changing our charter and, indeed, they did so and decide it would be nice to be supervised by the office of supervision that is no more. so that gave me a sense of what was, what was happening. beyond housing, the banks are absolutely throwing money at us. never seen anything like it. you know, for anything and one day i met with a member of my advisory council that was a principle in a major private equity fund and he told me a story that simply i found terrifying and i'll tell you how it goes. so he says, you know, there's a well-known company i won't mention the name of. there's many big private equity companies that are compet

new incoming fed chair by all by this this was baked in the cake either janet yellen. baby steps just as greatest band did until adding bubble finally blew up did the same thing under yellen so what's going to happen though here this is the question max if we get an asset bubble if stocks are falling and more importantly of commercial real estate and all prices start falling again what second to do the bank profits last second to do their gallery then we're going to become banks are going to become capital parents we're going to be in the same situation or similar situation we were an in two thousand and seven asset prices by no one wants to buy loans borrow money so. what's the fed going to do during the current rates that's how i see it and actually if the asset bubble gets big enough i actually think we're going to see outright deflation so do they fed's move members to appropriate deflation or what's going to cause it ripen right after that many times they. fed's attempt to fight deflation actually causes deflation and de bread flour all this jumps and on twitter a

the market tests new fed chairs. think about it when the fed chair took over, i think it was on a monday, think about the day we saw that day. down 1,000 dow points, obviously we had a crazy week that week. i'm looking to hear how hawkish this fed will be i don't think they could thread the needle as neatly as the market wants them. yes, fundamentals matter, but right now i think fed speak and inflation data are going to dictate where the market goes. >> guy, you're likely not the only trader out there thinking the same thing thank you. >> i'm not the only one, but i'm a fun one, let me tell you something. >> you are a fun guy a guy that we love guy ada ma ashgadami, thank youh thank you very much for joining "worldwide exchange. >> later, team. >>> shares of lending club were down big after the company reported their results landon dowdy joins us now with more >> good morning. shares of lending club are on the move following weaker than expected fourth quarter results showing operating expenses rose 52%. they posted

just like the fed minutes. what is interesting is even though inflation is rising, they are not getting alarmed. they do see the economy near or above employment. at the same time, they no labor shortage is in the economy, but they are particularly concerned. this is typical of the language they use. although employers report having more difficulty finding qualified workers, it raises. which shortages, which brought up out wage increases that have been evident to date. they are downplaying wage inflation. i will just call up eight chart here. 899 is a chart i am sure they're looking at. it illustrates this perfectly. you have the earnings of production workers, this does not include bosses and supervisors. this number is flat around 2.4% for the last several quarters, even though it has unemployment so low. testimony the two day is tuesday in the u.s., wednesday in asia. dates you will be thursday in the u.s. and friday in asia. certainly on friday there are a lot of fed speakers. they seem on board with what t

that's something the fed is looking for. they did say that the tax cuts are a near term positive though the effect isn't quite seen yet. it will be early stages. they said the increased growth forecast is partly because of the tax legislation being enacted. this is the first meeting after the law was passed and put into place. they said regional business contacts site the tax law as a positive several members saying there is uncertainty about whether the savings would be channelled into further business investment. but a couple noted that the allocation of savings is just beginning. i want to point out though that several members, a higher number of members this month than at the last meeting raised some red flags about market factors and asset valuations this time saying elevated asset valuations and increased use of debt by nonfinancial corporations could potentially provide some imbalances in the market so they are basically cautious on asset valuations and the leverage outside of the financial sector saying that's potent

getting the service that the fed will be aggressive in the fed hike price. this further means of a different than gradual, but this is out of date because we have a new fed going forward, this is the last of janet yellen. is an excellent question, and even more than usual -- the first point is exactly what you said. it is a new fed with jay powell taking over, these are the last minutes from janet yellen's time as chair. crazy market moves since this meeting took place, and we have seen budget deals that is going to be stimulative. i think it is going to change the game for the fed going forward, and i think -- david: pick up the second point of budget deal, they're going to take on more deficit than we thought there were going to have come up at the same time these indicateons -- does it that they are showing up yet. but there has been a lot of focus here and elsewhere on the auctions this week. what is important to realize is that this is not going to go away, the auctions will get bigger from here on out because you have to cover widening budget deficits.

don't believe that atlanta fed number. economists that watch that thing but basically they come up with a new estimate every week and it goes up and down. that is an estimate what they think first quarter growth will be and we're only one month into the quarter. we have not been growing at 5.4%. david: no. >> they basically read the high institute of supply, ism number -- david: without getting into those number, peter, we haven't seen full effect of the tax cuts. we haven't seen all the money come back. we're expecting probably as much as a trillion, if not more so in terms of repatriated capital. once that starts churning in the economy, won't that lead to greater growth and more stock buybacks and higher stock values >> certainly will. i wouldn't count a lot of that money coming back. they will pay taxes but leave it where it does the most good. after pell has a flush balance sheet. they don't need more money here. david: hold on a second. peter, we know they already paid off a lot of those, the taxes on that foreign ca

and partly that we have a new fed chair. and we don't know that much about him and how he will react to economic data. this is jay powell as you talked about. and so we don't exactly know how he'll react. how much he'll feel the need to slam on the brakes and -- and respond to the numbers that we've seen recently. and then the third thing so keep in mind is that we have had a huge amount of fiscal stimulus happening in the form of the tax cut that passed in december and we may have more fiscal stimulus down the pike in the form of an infrastructure package, building a wall, building up military and our nuclear arsenal and the fed may see the roll as offsetting the fact that we have this huge fiscal expansion happening so maybe the fed needs to say, you know what, we're going to pull back and respond. because normally you would not have a stimulus at this point in the economic cycle. so that -- >> this is interesting. >> so all of those things -- yeah. so all of those factors combined may make investors worry about how aggres

. ♪ manus: the fed feels confident. u.s. central bankers send a strong message on growth, as the auction armageddon is averted. the verdict of barclays -- revenue plunged in the fourth quarter but ceo jes staley says 2018 started well. anglo american reports an earnings miss for the full year, but reinstates the dividend for the first time since 2015. the ceo joins me live in this hour. just under 30 minutes to go until the start of the trading day. europe is setting up for a slightly lighter opening, perhaps an understatement, down 0.8%. good news from the fed, that is the core message, what does that mean for rates? a couple themes. the fed is optimistic, equities lower, dollar is higher. bond armageddon has been averted. european's equity markets -- where you see the big themes coming through. the nikke down over 1%, following the turnaround at the end of trade in the united states. volatility is above 20 for the 13th session in a row. you have these other equity indices playing catch-up. keep an eye on the yen, getting a

i do not believe in an opec fed. i believe in a transparent fed, and the fed committed to that, but we are left transparent on the wind down sheet because right now they have insufficient mortgage-backed securities on the schedule they put out. it is still unclear after today's hearing what the size, much less the composition of the balance sheet is. the fed is not supposed to be in the credit allocation business. they are supposed to be in the money supply business, but by purchasing mortgage-backed securities they have been in the allocation business. we want them to wind down those mortgage backed securities. we want to wind up with a treasuries only balance sheet, but i do not think that is where we are headed and that concerns a number of legislators like me. kevin: summary things came up in the hearing -- one of the things that has gripped the investment community is whether the economy can handle public-private partnerships on something like infrastructure. the white house said that could contribute, in their

the new york fed president dudley and boston fed rosengreen disagreed and thought the quantitative easing was effective. my question to you, do you think the fed's quantitative easing program was effective? and should the feds keep this tool in its tool box for future challenges >> i do think our post-crisis policies were effective. and i have not carefully study reports, particularly the fed announcement, and price that into what was in the market. and this paper takes a different way of doing that and comes up with the answer it comes in. overwhelmingly, it studies advance this through the term premium. and so i would say that that is very likely. >> thank you, my time is up. >> time of the gentle lady has expired. and now the chairman of the institution subcommittee >> thank you and welcome, chairman powell. congratulations. and it is nice to see a banker being the chief banker of this country instead of an economist. to me, we get to look at different policies andthink we have a different perspective and think that's healthy so i just want to start by talking about leverage lending a

the fed. we had janet yellen and the fomc notes and the press conference from last year set the path there would be 3, 4 interest rate hikes this year and continuing on that path in the next year. not because they are behind the curve or they have missed out, but because growth is strong and robust in the u.s. and inflation , which is what we would pinpoint the market volatility fears because of the wage growth numbers from friday, mark is thinking inflation has gone to quickly and will be fed rerate their interest rate plans for the year? that is an appropriate level where the 10 year treasury is now, priced in the fact that the fed will view those three hikes, for hikes this year which was set long before the change of leadership. mark: on the subject of inflation, you are confident, inflation in the u.s. is moving towards targets? >> towards targets but not overshooting as some may have feared with wage growth numbers from friday. inflation -- core inflation is the u.s. is below the 2% targ