Elizabeth warren will be here in the next 90 minutes to weigh in on the fed, the banks, and the big debt ceiling shutdown. Before that, lets get todays markets with about an hour before that decision. Dominic chu live at the New York Stock Exchange hi. Kelly tish, tyler, i will teu its a tepid market but not unsurprising in the fact we have a major catalyst in the fed Rate Decision for the time being we are seeing general positivity it had been mixed in the session but not much up or down. Generally speaking were kind of tilting towards the highs of the session. The nasdaq up about 1 p the s p 500, 4131, up about 0. 3 the dow up 0. 1 . 33,723 the last trade. One place to keep an eye on, is whats happening with certain parts of the oil market. Demand may be an issue if theres an economic pullback if you take a look at oil prices wti crude is down about 4 on the session. 68. 63 were on a 60ish dollar handle, below 70 right now over the last year weve lost a third of its value keep an eye on oil prices. That economic narrative and slowdown pricing in there. Interest rates a check on those as we head into the Rate Decision right now the six month tbill, 5 , 10year benchmark dropping to 3. 39 and the 30year long bond 3. 69 as well. Kelly nailed it, the regional banks part of the story. Earlier in the premarket session they were all down markedly and theyve rebounded and stabilized nicely on a relative basis pac west up 7 , western alliance up 4 , bank of hawaii and zions, western regional banks in play and the s p 500 etf ticker kre, up 2 right now. Well see if the gains stick as we head towards the fed meeting. Send things back over to you. Thank you very much and with less than an hour to go now, the Market Pricing in a near 90 chance of a quarter point Interest Rate hike, but could investors be getting this one wrong . Steve liesman, just a few miles away at the Federal Reserve with what to expect hey, steve yeah. Maybe people think the fed is getting this wrong the fed expecting to hike for the tenth straight time amid unusual and strong opposition to this move from former fed officials and observers and a lot of concern in markets over regional banks heres what you might call the cause for a pause. A couple exfed Bank President s saying dont hike, the cnbc fed survey, 59 say a hike would be a mistake, banking stocks saying theres trouble ahead and the fed staff and minutes saying theyre looking for a recession because of banking concerns. The case for a hike the economy running hotter than the fed would like, the job market a surprise pause could spook markets thinking the fed sees data showing the situation is worse than the markets believe, even though they think they believe the Bank Situation is bad. A pause by the fed would buy time for banks to get their Balance Sheets back and keep the situation from getting worse and also likely have little impact on inflation because many of those hikes take time to filter in the economy if the fed hikes markets believe this will be the last one. The year end contract, 437 rate on the year end, 75 basis points of cuts built in from where the market thinks the fed will be at the end of today whatever the fed does, the expectation is that its pretty quickly going to turn around and undo it. Let me ask you a question, apart from the banking issues you mentioned there, among those 59 or 57 of people who you said dont believe that an Interest Rate hike is appropriate, is that in part because they feel that the prior rate hikes, the 9 that weve had so far, have done the job in retarding inflation certainly some believe theres quite a bit of tightening by the way the tightening from the past is showing up in part on whats going on in the Banking System, part of it is theyre going to get you already had, by the way, tighter credit standards even before svb failed the expectation in the survey is credit standards are supposed to get tighter from here and theres going to be a big impact on main street the big banks and companies in the s p are not going to have trouble getting loans. Small, medium sized bus, if the regional banks cut back on credit they will get hurt. Great point thank you very much. First lets get to our i should sayl lets get to our first panel. One says no hike necessary, one says a quarter point is warranted and one says a half point. Jamie cox, harris financial groupss managing parter, also societal general rate strategy and bill lee, welcome all of you. Jamie, which camp . Do not hike. Really . Do not terrorize the Banking System anymore were on the precipes of maybe getting into the meat of many of the regional banks, so the fed has the ability to kind of fix the problem it has created if you think about it, the overnight reverse repo facility takes in 2. 2 trillion thats actually more than the gdp of south korea and that could be fixed very easily by the fed reducing the rate it pays on the reverse repos from 10 basis points to 25, restore deposits that are actually running out of the Banking System and restore some stability. At the same time, they could also cut stop cutting rates they need to or were going to be in trouble with regional banks. Let me ask you, did the fed cause the banks problems or the bankers . I think the fed is directly responsible. It wasnt the fed that caused those bankers to load up on longterm treasuries, and it wasnt the fed that was engineering that or keeping deposit rates low. If you go back to 2019, when joe m Jerome Powell pivoted, we flooded the banks with reserves and they invested in treasuries, highquality asset and then they did it again with persistent, persistent through the pandemic, persistent reserve increases all right. Now they raise rates really, really fast and basically bury the banks and made them technically insolvent. Its a problem the fed started its a problem the fed has now created a big mess with. Its a problem the fed can fix they need to do it before it becomes an even bigger problem than it is. One more point before we move on the regional banks are green today. Problem solved what do you make of this trading behavior where yesterday we saw declines and today started out that way and the tone changes into a fed decision no less . For the past, i dont know, probably three to four weeks youve seen this back and forth, you know, multihigh percentage point gains and losses day by day. Thats not normal in banks thats not normal in any i kwaulgts asset that tells me that theres a big problem that needs to be fixed i think we need to deal with it before it becomes a problem. One last thing, 500 billion of banking, you know, problems, its bigger than the Global Financial crisis we had three banks represent a bigger hole in the Financial System than we had during the financial crisis that is only going to get worse. Bigger than 2008 . Exactly. Bill lee, give the rejoineder to jamie, on the other end of the spectrum and think the fed will do 25 basis points or a quarter point, but you think they should do 50. Why . We dont have a banking crisis the supervisors have allowed badly managed banks to continue when they should have shut them down lets remember, banks account for only 11 of total corporate financing. Yes banks are important for Small Businesses and thats where we think the channels are going to hit the fed is worried too strong of an economy because consumption is too strong. Investments have turned down, real estate, but kunl summion is not. The Unemployment Rate 3. 5 and people are not worried about their jobs if we have small regional banks start to contract their loans that will hit Small Businesses the most and that will hit the labor market and finally get inflation to start slowing down by slowing down consumption. The channels are going exactly the right way, if we allow the banks to contract on their loans. To get rid of inflation we need more tightening to get people to stop spending so much. So if you look at reference rules, theyre calling for 6 . For me to say another 50 basis points is warranted is really somewhere between where the market is pricing and where the rules are pricing. Back to the point on banks, do you think we have a problem with regulators or regulation . In other words, are the rules wrong or is the application of the rules insufficient bingo we have a crisis in supervision. We have a lot of rules and the rules are designed to look at the banks that are the most systemically important ones and look at them carefully the ones that are smaller, they pay less attention to. The banks that failed put a hole in the Banking System in crypto currency areas, in Silicon Valley venture capitalists and rich people at First Republic. These are very, very narrow focused banking models regional banks that help Small Businesses, Community Banks that help minority businesses, theyre still doing very well. What is a shame is the Federal Reserve didnt say our supervisors fell on the job and were going to fix that and make sure that every bank out there is doing the job well and if theyre not were going to shut management down. We think we would calm the markets. Lets talk about inflation for a minute because thats the argument the people in the bill lee are making, if the fed backs off theyre making an inflationary mistake is that true the break even and other measures, Inflation Expectations look contained, oil collapsing, Consumer Credit taking a while to work through here, what do you think we might see pce or cpi or pce in a couple months time yeah. I think that both jamie and bill make very, very good points, and highlight the difficulty that fed is facing on Monetary Policy on the one hand. We have very hot inflation and what it is about is raise aggressively and to put a lid on inflation. On the other hand you have the Regional Banking Crisis and Financial Stability concerns thats why we think a 25 basis points rate hike which is what the market is priced in for, makes a lot of sense the trajectory for inflation is that you should see inflation gradually decline, if the fed doesnt act aggressively on the rate hike and they pause, they might not be able to achieve their inflation goals. In some respects the fed has to hike in order to keep a lid on inflation. The broader for pc, for the upcoming months and the end of the year is the disinflationary path we end the year still around 3. 5 thats still pretty high and pretty much higher than i dont know. But is that i mean 2. 5 , is that worth risking the kind of credit crunch were worried about here youre talking about the quarter point rate hike . If inflation is going to be 2. 5 on the core number by the end of the year cant they kind of back off here and say maybe Financial Stability thats what former fed members have been saying all week long, maybe Financial Stability needs to take more precedence here. But you dont have anything in the data that shows we are on a path to disinflation if anything the cpi prints have been in line with consensus. Shelter costs are running high, inflation is still pretty strong and the labor markets are strong as long as people are employed, inflation is going to continue to come under pressure and the only way to put a lid on that if they continue to raise rates thats going to have an impact on the Financial Assets within the regional banking sector. The rate of inflation has come down dramatically, right . It has, but not anywhere near what the fed would be comfortable with what they want to achieve is get to the 2 inflation target they dont have pc getting below or at 2 even at 2025 theyre expecting a gradual path of disinflation over the next couple years any turmoil in the markets you could see erratic behavior you need to see the Unemployment Rate, unfortunately go up for inflation to start to moderate. All right jamie, back to you, final it thought. If im the fed i would rather be blamed for supervision failure than be blamed for bringing down the Banking System, so to me, i think that the fed is lucky if they get blamed for supervision problems. Is this a richmond thing . Its bad in richmond, jamie, that much worse than other parts of the country where other guests are. Things are fine in richmond i worry about Middle America i work with ordinary people and Small Businesses and they are going to suffer the theyre going to take the brunt. Are they feeling it already. I dont think its happened yet, but i think its going to and people are not ready for what will happen and i think thats the problem normal ordinary people will pay the price for the bad decisions of, you know, people who run these large corporations everyone agrees the goal is to help them but the fed would say thats why were fighting inflation. I dont find myself on the same side of Elizabeth Warren on all things, but i find myself with her on the need we will tell you you are on her side when she arrives in an hours time. Perfect. Thank you very much suebatra and bill lee. Thank you. Just Getting Started on the fed decision. What higher rates mean for main street and your money as the fed fight against flation continues. Elizabeth warren and john kennedy will join us in studio to discuss the fed decision, debt ceiling debate and Regional Banking Crisis and Stock Ownership by members of congress, all of that coming up in the show. As we head ahead to break, your markets into the fed decision about 45 minutes away the dow up 42, the s p up, the nasdaq up half a percent the russell 338 on the 10year, 44 minutes to go were back after this. Whats the next chapter . Thats the real question. With fidelity income planning, a dedicated advisor can help you grow and protect your wealth, even when youre not working. Theyll look at your full financial picture and help you create a flexible strategy designed to balance Growth Potential and guaranteed income. So you can stop worrying about the future and enjoy the life youve created. Thats the planning effect. From fidelity. What if you could make analyzing a big banks data. No big deal . Go on. Well, what if you partner with ibm and red hat, use a hybrid Cloud Solution to connect data across multiple systems globally, then analyze all that data with watson. Okay, but this needs to meet our. Security standards . Yup. Compliance standards . Mmhmm. So they get the insights they need. Yup. In real time. Check. To make quick decisions . Check. Aaaand check. Thats the hybrid Cloud Solution ibm and a global bank created. What will you create . Ibm. Lets create. Welcome back to our special edition of the exchange. About 40 minutes away from the decision on Interest Rates where the fed largely expected to make its tenth increase since march of last year the consumer already feeling the impact, and from what you pay for your mortgage, car, rate on your credit card, personal loons, lines of credit, has gotten expensive as Household Debt rises and savings decline for more on the implications of Consumer Spending in the economy were joined by davids weal, senior fellow in economic studies at the Brookings Institute and chief analyst greg p mcbride. Its easy to look at Interest Rate levels and hikes in an abstract way, but they are real. They translate into real dollars on peoples budgets. Take us through some of the numbers with respect to, for example, home equity lines of credit, mortgages, lines of credit, credit cards and whats happens happened we start with Mortgage RateMortgage Rates last year the increase for would be buyers of enough affordability into a 30 increase in home prices even though Mortgage Rates have been stable lines of credit, after that run up in home prices americans are sitting on more home equity than theyve had before, but its no longer a low cost proposition with the cume lasive impacts of these rate hikes, the 5 equity line you had is now going to hit double digits and in terms of your servicing that debt the minimum payment is now 200 a month more than it would be before the fed started to raise rates. Perhaps the most important headlines as well is going to be the deposit rate, right. When all the water cooler talk is about hey, guess what you can get on the new apple savings account or what you can get on t bills f that gets worse, the bill ackman warning, if the fed hikes again and people get tantalized by money market funds or yields outside the Banking System and moving their money, you kind of, i dont know, keep the deposit flight going thats ban problem. I think thats risk for the banks and theyve been slow to raise Interest Rates they have a lot of reserve at the fed so if they need to pull them out they can. The bottom line here is, this is what the fed thing was designed to do, not to unsettle the Banking System but make borrowing more expensive to people spend less