D. C. Good afternoon, everybody, and welcome to a beautiful Nations Capital today. I think its no exaggeration to say that today the biggest, most consequential decision, the one that will affect the most americans in the most immediate way is being made right here today in washington in the building behind me, the headquarters of the Federal Reserve where the men and women of the open Market Committee have been meeting. Mandy . Will today bring the first rate hike in nine years . That is the big question. In less than one hour from now the feds decision will drop. Where do policymakers stand right now headed into the big decision . Senior economics reporter steve laesm liesman is also in washington live. What are you hearing . I think its worthwhile to go back and say how did we get here . How do we go into a meeting of such consequence without really being sure whats going to happen. 50 50 on both sides. You heard at the top of the show some of the brightest minds are disagreeing. I want to show you some critical fed comments made thats led us here. Lets start with september 4th, the beginning of this month where John Williams came forward and said i do worry on both sides of the ledger. We dont want to wait too long. We dont want to undermine the recovery. Hes a centrist there. And jeff lacquer, one of the hawks on the committee, gave a speech that same day. The case against further delay. Go back a week earlier where two of the most senior officials of the Federal Reserve within two days gave conflicting comments. Stan fischer telling me, when the case is overwhelming, if you wait that long until youre totally confident, you will wait too long. That was two days after bill dudley said the decision to begin the normalization process seems less compelling. That was amid the market volatility. The question for dudley is whether things have calmed down enough. And then the last comment made by janet yellen on Monetary Policy. She said we now think the economy can not only tolerate but needs higher rates, but that was before all the concern about chinese economic recovery. It was before all of the market volatility. So we go into an absolutely historic meeting, guys, with pretty much historic uncertainty about the fed. My guess is that they dont do it, but they signaled theyre going to be hawkish about perhaps doing it in the next month or two. If they do do it, i think the idea is that they will tell us or signal that theyll wait for a little while and see how it plays. I will pick it up from there. Well be getting back to you. Its an exciting day. Just to reiterate, steve was saying personally hes in the no hike camp. As for stocks, theyre Holding Steady with minor gains ahead of the big fed decision. Lets look at the numbers for you with the dow up by 24 points, the s p up by 4, and the nasdaq gaining by 18. We saw stocks pick up after the philly fed index went negative and that maybe is adding to some people feeling it lessens the chance of a rate hike today. Lets find out what techs are up to. Bertha coombs is at the nasdaq and bob pisani is on the floor of the nyse. Its about as steady a state as you could possibly imagine and generally the minority opinion is the fed will hike. I have been in that Minority Group for a while. Look at the s p 500. About an 8 point trading range, thats half of the normal days trading range. Were essentially sitting at the highs. But this is a very narrow range. The market this is the middle of the day, you dont get a market any more steady than this one. The breadth is dead even. The volume is light to moderate. Theres nothing blowing up. The volatility is essentially flat. This is a steady state market right now. In terms of the sectors, nothing is up more than a half a point or down more than a half a point. There is your health care, moderate gain this is health care and energy and financials. Materials, energies, industries are on the downside at this point. Fairly steady state. Take a look at the vix, the volatility index. We are at 50 on august 25th and weve been trending downward since then. Lets call it sideways in the last day and a half. Nobody is making any big bets right now. A lot of traders did tell me yesterday their position since theres so many divided opinions, mandy, essentially go to the sidelines. The s p is up 2. 5 in the last four or five days. A lot of people have made money, so lighten up and youve won, move to the sidelines, declare victory and see what happens after the market settles out after the fomc decision. That seems to be what a lot of people did yesterday essentially. Potentially safer there on the sidelines. Thank you very much, bob. Well get to you as well, but dominic chu, you have a market flash. So here is one stock where the corporate fundamentals mat a little more than the fed story. Were talking about eli lilly hitting its best levels of day so far on new data, trial data showing one of its type two diabetes drug was shown to redun deaths by a third from cardiovascular disease. One Health Care Stock thats up regardless of whats going to happen with the fed. Well see if it stays that way this afternoon. Eli lilly up 30 this year. Thank you, dom. Bertha coombs at the nasdaq, what are you watching . Lets keep on the health c e care dragging there. Chin component maker the biggest decliner in the chip sector in reports its in talks to be acquired by china electronics. Media names though are among the biggest gainers on the nasdaq. A bit of a halo effect on that cablevision acquisition and we do have a biotech ipo braving fed day. Reje regenxbio. Gold has been pretty steady but Oil Continues to be under pressure after a nice move up yesterday. Jackie deangelis is at the nymex for us. Good afternoon. Oil may have gotten a little ahead of itself on some of those headlines we saw yesterday. So its not unlikely to see some profit taking today. This sort of fits in with the pattern weve been seeing in oils wild swings at this point, but having said that, the dollar is a little weaker and commodities would be supported by that, but theyre not today and that is because all eyes are on the fed, what action it will or will not take, how that will impact the dollar and that will probably slowly start to trickle in. Gold not getting a bid either. Traders tell me they dont like it either way, whether we get a hike or we dont get a hike because even if we dont get it today, its imminent, its in the cards, and, of course, that would not be good for gold prices. Back to you. All right. Thank you very much, jackie. Our next guest thinks the fed should act right here, right now, today. Hes scott mather of the bond fund jind pigiant pimco. Welcome back to power lunch. Theyre a siren going by. A lot of dignitaries moving about town this afternoon. You think they should move. Why do you say that . Good afternoon, tyler and mandy. We do think they should move, probably less than a 50 chance they move at this meeting. We think they should move because the economy doesnt need an emergency policy rate. We should remember were at zero rate setting for almost seven years. Meanwhile, were almost at full employment. So, you know, you can easily make a progrowth story out of a rate hike. Its really the best chance we have of prolonging the expansion. So beginning to normalize rates now is over the medium term certainly probably good for growth and we think its time to begin moving. The reason not to move, of course, is because of market volatility that weve experienced in the past month or two. But theres always market volatility. Theres always episodes, always things going on elsewhere in the world, so that in and of itself cannot be a reason to perpetually put off beginning to normalize rates. Thats it. If they wanted an excuse not to hike, im sure they could always find one. Im wondering when you say things happening around the world, how much would concern about whats happening in the worlds second largest economy, china, how much would that factor in thor eir decision if y do not hike. Theyre taking notice of International Developments more than ever, but from our perspective and many students of the chinese economy would also admit this, chinese growth has been slowing down for years. Financial markets didnt really wake up to that until we saw this massive run up, the chinese stock market bubble run up and then run down dramatically. That seemed to catch peoples attention but that probably doesnt have too much to do with the underlying rate of growth in china. So our view is china has been structurally slowing. Its perhaps been as slow as low Single Digits for some period of time. So once again, from the worlds perspective, what that does to world growth and world demand is probably probably hasnt changed much. We think people are making the mistake of mapping Financial Market developments onto the real economy, and we would argue as we get further and further away from the financial crisis, little wobbles in the stock market, wobbles in Financial Markets have less and less of an impact on the real economy because they dont Impact Business or Consumer Confidence in the same way they used to and because much of the debt that was our chief concern during the financial crisis has been trimmed out and refinanced at lower levels and locked in for a long period of time. So thats another reason why we wouldnt expect a small move in Interest Rates to have much of an impact on the real economy or on inflation. So, scott, its no secret that an awful lot of the volume of trading on any given day is driven by algorithms. My question is what do you expect the algorithms are going to do whatever way the fed moves and what are the odds that the market throws a hissy fit either way, whether the fed moves or doesnt . What are the odds . Well, whether they go or not, its likely were going to have increased volatility for some period of time. We have to get past the point where rates weve gone the rate hike process for volatility to settle down. And youre certainly right that a lot of the algorithmic trading, a lot of the value at risk strategies and other trendfollowing strategies are sort of exacerbating the market volatility. Thats why its important to look through that. Thats what were always doing here at pimco, focusing on the fundamentals and investing for the medium term, to not allow ourselves to be taken off track by the shortterm developments. Look at them as opportunities. All right. Scott mather, who says fed take a hike. Scott mather, the cio of pimco. Thank you. Just over 45 minutes before the feds decision. Will we see the first hike in nine years . Is the economy Strong Enough . Former fed economist will be joining us. Youre watching a special report, fed decision. Do not change the channel. Im watson. And today hundreds of companies are putting me to work. Im teaching watson to help your vet speak dog. Youre a dog, right . Im teaching watson to help you make healthy choices. Im teaching watson to help design a vacation around your personality. Dont judge. Im teaching watson to answer endless questions. How big is infinity . Where do babies come from . Why cant i have chocolate for breakfast . Im watson and im ready to work with you. Welcome back, everyone. We have some news concerning American Airlines. The faa saying that a ground stop is in place until 2 30 p. M. Eastern time for American Airlines. American confirms that they are having some issues. They say they are working to resolve technical issues impacting several airports and theyre working as quickly as possible. So we dont really know exactly how widespread this is, but once again the faa saying that there is a ground stop in place for American Airlines until 2 30 p. M. Eastern time. Hopefully it wont snarl all that much traffic, mandy, but you never know. You never know with these things. As we stand were at 4392 for American Airlines shares, up by 2 . Thank you very much, sue. Its a big day here. Jon najarian, you were actually in the hike camp until you heard something just a few moments ago that made you potentially change your mind. Whats happened . Well, mandy, what happened was a very large trade went off about six minutes ago in the tlt. This is, of course, an etf for the bonds for 20year bond, but nonetheless, somebody put on an awful lot, 50,000 options is 5 million share equivalent. They either got very nervous ahead of this news and decided that the fed is just going to sit or something leaked, one or the other, because this is a very big bet. Its 5 million share equivalent in the tlt. Its a big bet that the fed does not move today and rates go back down because thats why the bonds would be rallying. Is there a way of trading this you can win either way . No, you cant win either way with this bet not this specific bet but are there trades youre making potentially that can help you win either way . No. I was basically happy with positions i had on but i did think they were going to move. Based on this move now that i have just seen, i think the fed is not going to move. Well have to see in 40 minutes. Exactly, yes. Less than 45 minutes. 43 30 to be exact. That countdown is on. Thats a very interesting finding or observation, jon. Thank you very much. The countdown is on, about 45 minutes until that fed decision. Janet yellens News Conference 30 minutes after that, and well be there for every second of it. Will the fed raise Interest Rates for the first time in nine years . You saw what that options trade suggested. Should they raise rates . We want to hear from you. Is the economy Strong Enough for a rate hike. Head to cnbc. Com vote and let us know what you think. And joining us now, allen blinder, former vice chairman of the Federal Reserve and economics professor at princeton and marty feldstein, economics professor at harvard. We got harvard, weve got princeton, and we have two gentlemen who know washington inside and out. On the one hand, you think the fed wont raise rates today and shouldnt. Marty, you basically think the fed wont raise rates today but should. Marty, you make the case first. Well, the economy is certainly able to take a rate increase. Weve got an Unemployment Rate which is what the fed regards as full employment, 5. 1 . Weve got the core cpi inflation rate at 1. 8 , close to the 2 . The only reason that the broader measure of inflation is much lower is that Energy Prices have collapsed in the last month, but if you take that as a question of whether the economy can stand it, theres no doubt that the economy can. To me the reason why it would be good for the fed to move is that Interest Rates have been so low that investors and lenders are taking substantial risks, risks that could lead to financial instability, and i think at some point the fed has to start normalizing rates, and now is as good a time as any. Allen, thats an interesting argument that marty makes there, that raising rates would increase in a kind of backdoor way stability in the marketplace. You argue they shouldnt raise and wont. Why do you say that . Well, first of all, i do want to say its a close call, so there are definitely coherent arguments for why the fed should go right away. Indeed, should have gone a while back, but there are also coherent arguments on the other side. They start with saying, yes, the economy has come a long way back but its not quite there yet. Although its getting close for sure. Secondly, inflation has been consistently below the feds target, and i do agree we should look at core inflation, not headline inflation. Nonetheless, the pce inflation rate at 2 , which is what the fed has been targeting for some time, hasnt been seen in a very long time, and theres not the slightest indication that were heading back that way. Thirdly alan do you want me to stop there . No, no, finish. Im sorry. It could be that the economy has considerably more running room. This period reminds me a lot of 1996 when received wisdom was telling Alan Greenspan we were up against the stop sign and couldnt keep growing fast and greenspan looked around and said, you know, i dont think so, and the fed held the Interest Rates, and the economy did, indeed grow quite a bit more. But theres no question about going back to the normal level of Interest Rates. Remember the fed says a couple of years from now the fed funds rate, which today is essentially zero, should be at about 4 . So its got to get there over a considerable period of time, move gradually, but if youre going to do that, you got to start some day. You do have to start some day and i think the fed is probably going it start in december, and, you know, the truth is macroeconomically theres not a lot to choose between now or december. I think this is probably like a threeyear process of normalizing Interest Rates, so, yeah, we do have to start sometime and i just think the fed is not quite ready to do it. All right. Gentlemen, thank you very much. We appreciate your perspectives today. Two guys who have been on the inside where these kinds of deliberations take place. We appreciate it, gentlemen. Mandy . Thank you very much, ty. Lets lock in the vote. Is the economy Strong Enough for a rate hike . 49 say yes. 51 say no. Its worth noting whats been happening in the markets over the last few minutes. We are extending gains here. Lets bring up a board of the s p 500 and show you that were now back above 2,000. Its currently up by 7 points. Was just poking its head above the 2,000 mark but its interesting the way the market seems to be extending gains going into this decision and i do believe the major averages will have gained for the second straight week if, indeed, we keep on gaining. Everything just comes down to what that Interest Rate decision is. Were counting down. Will they or wont they . And also, how bond traders are positioning themselves ahead of the big announcement. Im sur