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

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

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

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

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

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

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 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

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

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.

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

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

i think the fed is underpriced. i don't really except the notion that that will be an excessive degree of timing. we have this deal -- fiscal stimulus coming through. 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 think it 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 is a long-term negative. >> what is chairman powell's job? 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 b

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

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

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

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

i went to the fed. i thought the research i had and the background i had were reasonable basis to contribute to monetary policy. during the time i spent there, and i'm sure you've had this experience, i learned a lot about the other responsibilities of the fed, including supervision and regulation, and some of the operational responsibilities that the fed has. i was delighted to be offered the opportunity to do it and learned a lot when i actually assumed the job. ben: when you were there, it was peak greenspan. what was it like working with alan? janet: i did work with alan. i went in 1994 and moved to the council of economic advisers at the beginning of clinton's second term in 1997. i didn't really know alan before i went. i really was impressed with his intellectual strength, which is originality, no one knew the data and understood the idiosyncrasies and could make better use of it to provide insights on the economy then alan could. i thought he was a very original thinker. i enjoyed talking to him

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

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

not just the fed talking about here. the fed itself, they don't want to runaway inflation so a little is healthy. >> we have our producer prices out today on the heels of the cpi yesterday. both of them showed some inflation to the upside. inflationary pressures. that first spooked our markets. we did see strong gains in the cost of gasoline and health care. that shows that the economy is growing. so you are going to see interest rates creep higher as well. here is a look at the dow, up 197 points. 25,091, a fifth day in a row of feigns. we don't have 500 point swings. look at apple, up over 3%. this is after warren buffett's berkshire hathaway announcing that they upped their stake in apple. it is at 172.50, folks, helping to lead the major averages. some of the other winners, united technologies, proctor & gamble. to the downside oil is 61.10. it had moves today. exxon and chevron are in there with price target cut on chevron over at hsbc. a quick peak at technology overall which is a good-performing group today. you s

yet, we know that the fed has been paying a price over the fed funds rate paying over libor and certainly currently paying 150 basis points, yet, our constituents typically receive 10 basis points on their savings account. what doesurious on the phrase above the usual level of short-term market interest rates mean. in your rulemaking that ioer, it allowed the rate to get pegged to your primary credit rate, but that is an administrative rate. legally, is there any cap to the interest rate you can pay in an ioer? could you pay 400, 500 basis points? chairman powell: as you just did, we are not permitted under the law to pay above the general level of short-term interest rates. i would look at that and see commercial paper and wholesale deposits and short-term interest rates, money market funds, things like that. it is a tool set, to move those interest rates around. >> you are paying 150 basis points. our constituents are getting 10 basis points. chairman powell: retail deposits are sticky on the way up. they generally come up with a lag. >> the time of the gentleman has expired. the chair

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

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

and fed conundrum, what does the fed do with tightening conditions? welcome to bloomberg. with the day after or maybe not. day threee day two or or four. let's get a check of what's happening in the markets after selloff in very steep the s&p yesterday. worst day since 2011. dow e point, you had the crashing over 1,000 points. now, s&p futures are down by 26 points. we had flirted with positive territory earlier in the session but now we've rolled over again, continued selling off by 1%. euro dollar flat. 2.7%.ar yield trading at you saw some safe haven buying come in yesterday. safety board. big buying happening in germany. 0-year yield is down by seven basis points as that seems to be where traders

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

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 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? 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'll have to put you into boxes

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

. >> fed minutes in a couple hours. let's get to the judge and the half >>> and welcome to "the halftime report," i'm scott wapner. our top trade this hour, beware of the retest. why one halftime regular says stocks are about to fall sharply again, even as the comeback from the correction continues today with us for the hour, joe terranova, steve weise, aaron brown, rich sapperstein. let's get to the call from the chief market strategist, tony dwyer. with us today from new york. he says history is not on the side of the bulls. that stocks will retest their earlier lows and all of it could happen within days tony, good to see you. >> hey, scott. thanks for having me. >> we keep moving away from this bottom why are we going to have a shock drop once again, as you put it >> well, it's a great question so most of these indicators are absolutely useless over time the ones that actually work are the ones most correlated by extremes in human nature in other words, you get a human nature extreme and inflect so what happened thi

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

odds of fed the hikes. those have come down now a little bit because the thinking is, if this goes deeper, it needs to be part of the considerations of the fomc. how much of a wait will this have? when will we see the leadership addressing this selloff? hans: i can ssurassure you, the fed will not do anything before checking the bloomberg terminal first. the financial economy drives the real economy. it is the case of the tail wagging the dog. market selloff of this magnitude, which could carry further, will definitely get the attention of the fed. they may well step back from the balance sheet reduction, which last week was relatively intense. so far, that has been in baby steps. they will look at this and possibly change the outlook for the rate hike for the year as well. yousef: so, where is the bottom here, hans? when do you start adding exposure? where is the red line for u.s. 10 year yields, where it becomes a little bit dangerous? hans: first of all, you mentioned 10 year yields. we think with these

this was his first testimony as new fed chair. there was some concern that his tone was a bit more hawkish and he is perhaps prepping the market for a more aggressive fed going forward. equities did not react well to that bond yields sold off about 5 basis points jay powell said the economy is powering forward in his first appearance before congress, he was confident that inflation is on the way to hitting the fed's 2% target and supportive of a gradual rate hiking path he said the fed is carefully watching the impact of tax cuts and more stimulative fiscal policy some investors are pricing in four rate hikes this year rather than the three in the fed's most recent projection. what we've seen is incoming data that suggests a strengthening in the economy. seen continuing strength in the labor market we've seen data that will, in my case, add some confidence my view that that inflation is moving up to target. also seen continued strength around the globe and we've seen fiscal policy become more stimulative. each of us will be taking

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

do think she deserved four more years at the fed? >> i thought she has done an outstanding job and is an a plus public servant. 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. i think he has great experience. 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 woul

do think she deserved four more years at the fed? >> i thought she has done an outstanding job and is an a plus public servant. 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

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

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

when looking at the fed model. with sterling, interesting this pits in it dropped 64 one minute but quickly recovered and was trading flat. not it is higher, up 2/10 of 1% but below 140. 1.390. brexit may have something to do with it. vonnie: breaking news, the president has stopped his speech but left the headline for last. he talked about imposing the heaviest sanctions on north korea. this is new information. the heaviest sanctions on north korea even as members of the -- administration and his circle are in north korea for the liv-ex -- olympics. kevin cirilli is at the convention center for cpac and saw the speech. heaviests this, sanctions on north korea? >> he just announced the sanctions and calling it the strongest sanctions ever. later this morning, cabinet level officials and administration officials will discuss this, cutting off revenue portrayed businesses and shipping company assisting the north koreans. the speech was largely vintage campaign trail donald trump where he discussed a wall, made fun of

the fed has a loose backdrop. it can afford to tighten a little bit. >> let me tell you what i am watching. credit spreads. investment grade credit spreads, high-yield credit spreads. other financial products to see whether, for example, are credit spreads widening, is there volatility in other markets? so far, i do not see that. it is something i am watching for. the fact that i have not seen it is notable to meet. -- notable to me. >> we track fx volatility. it really has not shown anything despite the four-year high in yields. >> that tells me that this may well be a stock market event, it may have been accentuated by some structural issues in the market that probably need to be looked at. this is six days in and i have found that it pays to take a little more time and be vigilant. i will be watching for that in the days ahead. ramy: without question, the return of volatility to equity markets was the dominant business story and bloomberg was able to get exclusive perspective from some of the financial industry

so you can see the fed doing modifications. he said more will be coming, and things like the volcker rule are up to congress but he did think that's going to get changes as well. shery: mike, thank you. michael mckee, bloomberg's international and foreign policy correspondent in washington. david: we want to welcome one of the lawmakers who was asking questions of mr. powell, congressman james french hill. was more confident in inflation and you and your questioning were more emphatic, calling it a fee that actually takes from the paychecks of americans. did you come out of these hearings more confident that inflation will remain under control? congressman hill: growth is not incompatible with low inflation. this is one of the economic myths. i think the fed should stay andsed on stable prices, their 2% target is certainly adequate. chairmanconfidence powell stay focused on that because inflation is the biggest thief for working people across the world. david: as we create more goods and pay people more money, the thing that pe

you know what the fed could do? they could go ahead and downsize their scheduled reduction in holdings of treasury bonds. that might relief some of the worry whether or not you have enough buyers for treasurys at current interest rates given the combination of treasurys being released by the fed and -- david: that is very interesting suggestion. we did have a statement from one fed member, bill dudley, who came out today and said this is small potatoes. that was before we had a 4% plus drop on the dow. do you think we have another 5% he would change that tune? >> you drop the market by another 5%, small potatoes turns into a hot toe pate toe -- potato the fed will want to get rid of quickly. they responded in comparable manner in 1987 amid very strong profits growth. don't be surprised if the fed is compelled to change their strategy toward less accommodative monetary policy. david: not just the fed, john. as you well know it is happening all over the world. central banks everywhere are unloading the stuff they boug

this time tomorrow we're going to have the fed minutes from the fed meeting. a lot has changed but there's pressure and speculation on the fed right now. they could be the crux of another sell-off, if they really start to clamp down, raise the interest rates, they haven't done it yet, they've been timid, i'm going use that word, but that could change. >> it can, exactly. and if you remember that fed meeting was janet yellen's last meeting. a new guy in charge right now, so the market, you would expect, based on what's happening in that world of the last fed meeting that everything was hunky-dory and the path would be very clear for aggressive interest rate increases, and now the fed has set the stage for that right now because they say listen, as soon as we start to see the employment picture get better, as soon as we see signs of inflation, we're going to have to act. that's what the market's been seeing and what we're fearing today. what's interesting today. all the bad news about walmart and that was out early in the day. the stock was down, seemed to shake

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