Continues to climb. Tom that is the backstory and we touch on that today. Lets get to our top friday headlines with vonnie quinn. ,onnie we start right there how events will affect u. S. Economic growth. The fed decided not to raise Interest Rates for the first time in nine years. Janet yellen says most policymakers still expect to raise rates this year, but first they need more convincing on the economy. The committee continues to anticipate that the first increase in the fed funds rate will be appropriate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 objective over the mediumterm. Vonnie futures contract imply a 44 chance the fed will raise rates in december. A flood of refugees has led croatia to close almost all its borders to serbia. In about two days, 30,000 refugees have entered croatia from the serbian side. They turned to croatia after hungary used force to push them away. General motors has agreed to write two big checks over those faulty ignitions. , andll pay 775 million the 1400 civil suits. Gm announced it would pay 900 million to settle a government criminal investigation. In japan, shinzo abe is on the winning a legislative battle to expand the role of the military. The move could and seven decades could end seven decades the military would take a bigger role in international peacekeeping. Scoredfootball, denver twice in the last minute for a comeback win over kansas city. With 36 seconds left, Peyton Manning tied the game with his third touchdown pass of the night, a 19yarder to emmanuel sanders. And then the recovery of a fumble for a 21 yard run for the win. Those are the top headlines. Were you watching, tom . Brendan . Tom i cannot believe how Michael Mckee has used the stream over the last 10 days. You were in denver sunday, got back michael it would be great if i could do Something Like that. Tom has Peyton Manning lost a step . Michael probably a little bit. But in the second half he came back. Brendan when you and i were out west, we talked about the fan race for the broncos, and they are deeply appreciative of john elway and what he has done. Tom we will get to Michael Mckee on the fed. He is our arch Denver Broncos expert. Futures negative seven with a new rate structure, the 10year i am not paying attention to. Im looking at the twoyear. Euro,escenzi, the stronger the eurodollar stronger, weaker. Mentioned,greeley dollar brazil gets my attention. At 3. 90 on brazilian real is a huge deal and a giant story for reading over the weekend. As we get smarter into october already. I doubt the german twoyear with a very negative yield as well. Lets go to the monitor redux. Here are the fed meetings, here is the trend that we have seen of the twoyear yield, and what we actually observed from before 2 00 was to revert to the mean. We have come right back, giving it all up, if you will. Brendan such a shallow slope of inflation longterm. Tom you are dead on in that. A guy ask a brilliant question at a press conference yesterday on the glide path. It is the morning after. We will give you perspective from those who agree and disagree with what the fed did. We we look forward to the impact we will look forward to the impact. We begin this morning with Anthony Crescenzi of pimco. He is truly one of the world pot experts on shortterm paper. , our broncos well expert Michael Mckee, who sat in the front row yesterday. I thought mr. Applebaum of New York Times of the New York Times had a terrific question about inflation dynamics. You followed it up with the glide path. How did the glide path of the central bank change yesterday . Michael the fed decision made sense, but the explanations fell short. Janet yellen, as we saw in the sound out in the soundbite, said we are waiting for further improvement in the labor market and for signs that inflation is coming back. Show theyforecasts expect further improvements in the labor market, and no inflation. So why are they talking about raising rates at all . They are suggesting still, according to the dot plot, a raise increase a read increase in december. Tom brendan, we got. Plot into the show. 06 09 it is 0 6 06 09. Do they even get there with their path of inflation . Janet yellen made it clear that they are really concerned about where inflation goes. This inflation is the theme of disinflation is the theme of the day. She also has the markets worried because the fed has now put china front and center. Tom we are going to talk about that. Brendan has a great moment on that in the next hour. Anthony presents a Anthony Chris enzi is the author of a translate this from your mortals. Ben bernanke in his meetings with pimm has told us about some president simply making a statement. This is widely known. Brendan it is a tool. Tony they do it in the meeting itself. Something is set in the meeting, it is believed, to get the statements in the minutes. But the chart behind you on the twoyear tom did i do ok . Tony crescenzi likes my chart. Lets bring it back. Drops,ach time the yield the reason is because the Bond Investors want to play the socalled carry game. It could extend to the high yield bonds or anything with high yield. The twoyear yield the oneyear maturity yielding. 4. That means in a year the twoyear yield will fall down to the point for and the price will rise. T is a carryplus prices rise as yields fall. They are playing the carry game for a short time. Me crying onsee the show yesterday echo my former intern with that killer question . It is a very hard question. It made me proud. When does this tony that is what the chart shows. The most important thing to dot. About is the sixth. Likelyth dot is highly janet yellen. It is position for the fed to hike rates at the next meeting where this press conference happens. That means janet yellen, the next meeting with the press conference in december will be a rate hike. Tom lets pause on this chart for a moment. This looks like something out of a jodie foster movie about going interplanetary. Brendan it does. Like a videogame from the early 1980s. I remember them well. Mike, the dots of course cluster the farther out you get into the future. Dots time i see those cluster, it feels a little lazy to me. Sometime in the future everything will be the way it used to be. Can we still assume that we can cluster around 3 . Tony 3. 5 . Halfway through 2016. They adjust them all the time. Their level is still above the level that the market sees the rates at, but the exact number, they move around. Tom tony, what does this mean for retirees, what we deserved yesterday at what we observed yesterday at 2 00 p. M. . You said the inflation distortion continues forever. Do you continue with that statement . For europe, the ecb probably will have a policy rate 1. 20 . Nd pimco thinks it will probably be somewhere in the twos or so by 2020. Income will not be rising meaningfully overtime. Michael it is just laziness. There is a signaling function that if the fed came down 2 right now, everyone would say what is wrong with the economy, we will not grow at all. It gets to the question yesterday, are you ever going to get out of this zero rate world . It is going to be a very long time. Vonnie the rate did come down from 1. 5 from 1 to 1. 75 . Tony where we do not want to push on the break on the gas on the break or on the gas pimco says the neutral rate is 2. Tom bloomberg surveillance a great start to. A great start to bloomberg surveillance. Michael mckee, thank you so much. We launch a twitter question today, a very john lipskylike twitter question. Should janet yellen be the central banker to the world . Wasnt that a conversation yesterday . Stay with us. Worldwide, bloomberg surveillance. Tom it was 2 00 a. M. Yesterday in hong kong. They noted a fed meeting of import this morning. Hong kong and the rest of the world recalibrate and adjusts to what we see off of the fed meeting. Our theme today at bloomberg surveillance. Here are top headlines with vonnie quinn. Vonnie the vatican is not happy with the white house guest list for pope francis welcome ceremony wednesday. The white house has invited a transgender activist, a gay the vatican, and worries that the popes photos with those guests could be seen as an endorsement. The search for an offshore tax chief the federal judge says there is a john doe summons on two u. S. Banks. That indicates the suspects made americans may be using it to dodge taxes. The first eight months of the year smash Global Records for heat. Forecasters say this year is almost certain to beat 2014 for the hottest on record. Tom we have missed this because the northeast was lovely this summer. Brendan that is part of what el nino does preview get a wetter, cooler is coast, and a hotter, dryer west coast. Tom we have been remiss on that story. New york city this summer has been spectacular as we go into a perfect september. Onnie, what are we doing now . Innie continued volatility the oil market, prices fluctuating by as much as 1. 50 repeatedly driving the day. Opec says he will graduate to 1. 20 by 2020. Joining us, peter publican, and still with us, tony chris enzi. Peter pulikkan, let me go to you first. To bel market had watching janet yellen yesterday with an impact on the dollar. Peter any kind of increase would have driven the u. S. Dollar higher, which would put pressure on oil prices. Vonnie so opec is saying oil will rise by five dollars a barrel by 2020, and still you have this you have strategists saying we need lower oil. How do we solve this conundrum . Punchline of a recent report is that their current strategy is actually working. U. S. Production is starting to fall, and in addition to that, demand elasticity is kicking in and we are seeing higher demand. On the supply side for 2016, they see supply as being flat and demand growing 1. 3 Million Barrels. The net impact is that the oversupply is actually contracting, which is a positive for oil prices. Brendan every time i hear and opec forecast, i think if wishes were dreams tom that is an important point. How much of this is wishes . Peter a lot of it is unknown. Saudi is being the dominant producer. Tom tony chris enzi, you do bonds but you can do tony crescenzi, you do bonds but you do oil as well. Rate fora new terminal local commodity pricing. Are they linked . Tony absolutely. I sit feet from our commodities desk and our tips desk. We have a former nasa scientist on that desk and we analyze. Tony ut are they linked . Absolutely. Has been in 2015 a shadow rate thatby the Federal Reserve substantially influence the Financial Markets globally. There has been the anticipation of a fed rate hike. It has always been a few months out, a few months out. Markets think there is a hike coming, whereas they think the ecb will be providing more accommodation, same for the bank of japan. The diversions is pushing up the dollar. Tom which affects your market. Tony it has affected commodities, the emerging markets, china. Howw much appears many basis points is filtered into the fed call . Tony it is likely already priced into oil. We believe the price will rise next year because despite demand, the balance will be fixing itself. Chinas growth is slowing. Maybe under 6 growth in the next year, 5. 5, 6. 5. Demand will go up one Million Barrels a day. Youre seeing the rig counts plummeting. Rig that shameless plug on go. There are fewer of them. Thank you so much. Coming up in our next hour, john lipsky will join us, formerly with the International Monetary fund. And torsten slok will join us. Yellen,look at janet the central banker to the world. Your terminal value is to watch bloomberg surveillance this friday morning. Tom say what you will, ray dalio hit the ball out of the park a few days ago on the fed call. If you look at what janet yellen said yesterday, it is literally what mr. Ray dalio framed for us a few days ago. Thanks for your comments worldwide on our one hour with ray dalio. We have the morning must read right now. Here is vonnie quinn. Mustreade morning comes from a home, writing comes from mohamed elerian, writing that is what i love about mohamed elerian. How does a guy like that out of oxford know what a culdesac is . He nails it. Vonnie essentially he is calling out the fed on his can on its communication strategy. Hass saying that the fed been responsible for volatility suppression, and now it might be responsibility it might be responsible for being less honest. Aims it is one of the key since the Global Crisis began in 2008. Its responsibility now isnt it the responsibility of National Governments to take over, take the ball, and start to take action to help economies . This is what janet yellen wishes would happen, and mario draghi. Brendan this is exactly what he said, which is when we asked him a couple weeks ago what is the source of instability in the future he said central banking is exhausted. We have done a lot. Everybody else is going to have to start doing it. After mohamed elerians point, every time i hear credibility , i amfed tom i a hearing that the fed is not doing what i wanted to do. It has been irresponsible for quite some time. It has had to worry about managing money as it vanishing money as it did during the great depression. People go to the bank to repay loans, but if those loans are not replaced with new ones, that money will vanish from the financial system. Tom which is critically a i have had. Tony, we have to come back. Pimco. Escenzi with for a global perspective to get us started, you are particularly on the brazilian real. Stay with us, worldwide in brazil. Bloomberg surveillance. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Tom good morning, everyone. The guests are what matter on bloomberg surveillance. John lipsky, Abby Joseph Cohen, and on short notice, mr. Gross will join us this morning as well. We are thrilled they are giving us perspective on international markets, on equity markets, and of course, bill gross with a linkage into maybe how we have a Retirement Plan to retire with in 10 or 20 years on. Lets get the top headlines with vonnie quinn. And othernet yellin fed policymakers need more convincing before they raise Interest Rates for the First Time Since 2006. They are concerned that global turmoil could hurt growth and keep inflation from reaching their targets. Still, she made it clear that policymakers are close to a liftoff. Et yellen do we cut rates domestic spending appears robust, then an argument can be made at this time. Vonnie on capitol hill, there is more fighting over abortion in both chambers. Senate republicans plan to take up a bill that would outlaw all abortions after 20 weeks. Meanwhile, the house has advance legislation that would end government funding for planned parenthood or that could complicate budget talks and lead to a government shutdown. Some details have come out about the new contract between Fiat Chrysler and united auto workers. A 3000are looking at bonus if the deal is ratified in coming days. At the same time, the deal calls for some productions to be moved to mexico. Donald trump may have he did not challenge an audience member who said president obama is not an american. There is a problem in this country caused called muslims. Is one. A president who brewingTraining Camps where they want to kill us. When can we get rid of them . Donald trump we are going to be looking at a lot of different things. And a lot of people are saying theyre a bad things out there. We will be looking at that and plenty of other things. Vonnie the Washington Post asks him about those comments. The Obama Administration is waging war against christians in this country. Tom i want to give a massive to the New York Post this morning. The post nailed coverage of this moment. Our job is not to opine on it with the remote in my hand, stunned that mr. Trumps comments. Brendan those of us in the News Business take for granted that people watch us, listen to us. When i hear him talk, what it tells me is that there is an alternate source of news. People get their news through email, through friends that we are not a part of. That i think is a challenge for us. , onealso the distinction of our producers said today, of mr. Mccains response to a similar question. It was radically different. Vonnie i do not believe the Trump Campaign has given up his birth certificate yet. Tom do they want my birth certificate . Dovish andsays a dithering of thestrations fed should hike now before helicopter money becomes a conventional policy. Is it the policy or the communication going against the fx market . Kit i think the question to some degree is, if not now, then when. The economy is trundling along, but it is not clear that we will get employment growth. What is going to change the sense you get from markets is that each meeting there is another reason to wait a little bit longer. If we wait long enough, we will not get rates up in this cycle. I am not sure that zero rates are really particularly safe for the global economy. We are miss allocating we are miss allocating capital badly. Think the time to have acted, if not now, was some time ago. We are waiting again and it is the fed that is in charge. Make to theo you risk of china . Pimcos view is that there could be three scenarios regarding its currency. To is that it is continuing let it float but slowly, ahead of xi jinpings meeting this weekend. Managed flow, where china lets its currency the value slowly, but more than perhaps the final preflow, which is the least likely. For a lot of scenarios, and a great deal of uncertainty, and janet yellen would not