LIZ: OKAY.
I THINK WE NEED TO SHOW YOU THE
30-YEAR TREASURY.
I KNOW WE TALK A LOT ABOUT THE
TEN-YEAR, BUT THE 30-YEAR
TREASURY YIELD, THE MINUTE WE
STARTED THE SHOW AT 3:00 P.M.
EASTERN, THE LONG BOND YIELD HIT
SESSION HIGHS.
WE ARE LOOKING AT IT RIGHT NOW
AT 3.01% FOR THE 30-YEAR, 3.06%
AT THIS VERY MOMENT.
I JUST WANT TO ALWAYS CHECK THE
TEN-YEAR YIELD.
WE ARE LOOKING AT IT AT ABOUT
2.7% FOR THE TEN-YEAR.
EVERYBODY'S WATCHING INTEREST
RATES, WHAT'S THE FED GOING TO
DO.
GUESS WHAT?
EDWARD LAWRENCE JUST SAT DOWN IN
THE LAST HOUR WITH FEDERAL
RESERVE VICE-CHAIR RICHARD
CLARIDA TO DISCUSS IT.
EDWARD, YOU REALLY PUSHED HIM
HERE.
THE MARKETS CAME OFF EVEN MORE
OF THE FLOOR IT HAD BEEN ON.
LET'S TALK ABOUT WHAT HE SAID
AND WHAT REALLY KIND OF HIT YOU
THERE.
REPORTER: I REALLY THINK THE
MARKETS LIKED OBVIOUSLY WHAT
THEY HEARD, AT LEAST A LITTLE
BIT, IN TERMS OF THIS INTERVIEW,
BUT THE FEDERAL RESERVE VICE
CHAIRMAN RICHARD CLARIDA DID
SAY, CONCEDED THERE'S A LITTLE
BIT MORE UNCERTAINTY BECAUSE OF
THE FEDERAL GOVERNMENT SHUTDOWN.
THAT'S BECAUSE THE COMMERCE
DEPARTMENT IS SHUT DOWN AND THEY
RELEASE DATA TO THE FED ON GDP,
ALSO RETAIL SALES, AND THAT DATA
MAY BE DELAYED.
STILL, HE SAYS THE ECONOMY IS
VERY STRONG, IN FACT, WE HAVE A
LOT OF MOMENTUM AS HE SAYS GOING
INTO 2019.
FOR THAT REASON, THEY HAD FOUR
RATE HIKES IN 2018, INCLUDING
LAST DECEMBER.
>> OUR PRIORITY'S PURSUING A
MONETARY POLICY THAT WILL
ACHIEVE OUR OBJECTIVE WHICH IS
FULL EMPLOYMENT AND PRICE
STABILITY.
WE THINK WE CAN AFFORD TO BE
VERY PATIENT IN OUR MEETINGS
THIS YEAR AS WE ASSESS THE
APPROPRIATE POLICY BUT WE THINK
THE ECONOMY HAS GOOD MOMENTUM
GOING INTO THE YEAR.
REPORTER: BE PATIENT, THAT'S
BEEN THE MANTRA NOW FROM THE
FEDERAL RESERVE.
THE FEDERAL RESERVE VICE
CHAIRMAN SAYS THEY LISTEN TO THE
MARKET VOLATILITY IN DECEMBER
AND SAID THEY ARE FLEXIBLE ON
THE RATES GOING FORWARD.
THEY ARE GOING TO BE MEETING BY
MEETING TO SEE WHAT THEY NEED TO
DO.
THE FED FORECASTED TWO MORE RATE
HIKES FOR 2019.
NOW WE MAY SEE THOSE IN THE
SUMMER AND LATE NEXT YEAR.
MEANTIME, THE VICE CHAIRMAN SAYS
HE DOES NOT REGRET, IS NOT
SECOND-GUESSING THAT RATE HIKE
IN DECEMBER.
>> THE DECISION WAS UNANIMOUS.
I DID SUPPORT IT.
I THINK IT WAS THE RIGHT
DECISION.
AT THIS POINT, WHAT WE HAVE BEEN
REALLY DOING IS REMOVING
ACCOMMODATION.
WE WERE AT ZERO INTEREST RATES
IN THE U.S. FOR A LONG TIME.
RATES NOW A LITTLE UNDER 2.5%
ARE JUST ABOVE THE RATE OF
INFLATION WHICH HISTORICALLY, IF
YOU LOOK AT A CHART, IS STILL A
PRETTY LOW LEVEL OF INTEREST
RATE.
I THINK IT WAS THE APPROPRIATE
DECISION TO CONTINUE THAT
NORMALIZATION.
REPORTER: SO I ASKED HIM IF THEY
GET TO THAT STOR
GET TO THAT SORR
GET TO THAT SORT OF AROUND 3%
GOAL, LONG-TERM GOAL OF 2.8%,
COULD THAT BE ENOUGH TO HANDLE
THE NEXT RECESSION USING THE
FEDERAL RESERVE INTEREST RATES.
I CAN TELL YOU THAT HE SAID THAT
HE DOES NOT FEAR RECESSION IN
2019 EVEN FOR SOME TIME TO COME.
HE ADDS THAT LOW RATES ARE A
FACT OF LIFE NOW AND THEY DO
HAVE TOOLS, SOMETHING WE HAVE TO
DEAL WITH AND THEY ALL HAVE
TOOLS WITHIN THE FEDERAL RESERVE
TO BE ABLE TO HANDLE THE NEXT
RECESSION THAT COMES ALONG.
BACK TO YOU.
LIZ: STICK WITH US.
I WANT TO BRING IN MARKET
WATCH'S MARKETS EDITOR MARK
DICAMBRI.
WE JUST HAD THIS BANNER THAT
SAID CLARIDA SAYS WE HAVE GREAT
MOMENTUM IN THE ECONOMY, SO WE
CAN AFFORD TO BE PATIENT.
HERE'S WHAT I HEARD.
I HEARD DIP MY TOE IN THE WATER,
THE WATER'S GREAT, STAY OUT.
WHAT DID YOU THINK YOU HEARD
FROM EDWARD'S INTERVIEW WITH
RICHARD CLARIDA?
>> YEAH, I HEARD A SIMILAR SORT
OF CAUTIOUS TONE.
BUT YOU KNOW, I THINK IT WAS
MORE OR LESS A REAFFIRMATION OF
WHAT YOU HEARD FROM JEROME
POWELL TWICE LAST WEEK, THE IDEA
THAT GROWTH IS SLOWING GLOBALLY,
BUT THE U.S. ECONOMY REMAINS
STRONG.
YOU ALSO HEARD THAT FROM THE
CITI CEO TODAY ON THEIR EARNINGS
CALL.
HE REITERATED SIMILAR SENTIMENTS
ABOUT THE HEALTH OF THE U.S.
ECONOMY.
LIZ: YEAH.
AND CITIBANK CERTAINLY HAS A
VERY NICE MOVEMENT IN ITS STOCK,
UP ABOUT 4% RIGHT NOW BECAUSE OF
THOSE EARNINGS THAT CAME OUT.
EDWARD, DID HE GET INTO ANY
TEXTURE WHEN IT COMES TO THE
FED'S ROLE BEYOND ITS ORIGINAL
TWO MANDATES, WHICH IS FULL
EMPLOYMENT AND KEEPING A LID ON
INFLATION?
REPORTER: NO, HE STUCK TO THOSE
TWO PRINCIPLES, SAYING THAT THEY
BELIEVE THE ECONOMY AND WHAT
THEY'RE DOING CAN MANAGE THAT.
INFLATION HAS BEEN 1.9%, LAST
YEAR IT WAS AROUND THAT 2% LEVEL
WHERE THEY SAY SO WE ARE NOT
REALLY SEEING INFLATION.
IT'S INTERESTING, HE DID TALK
ABOUT THE GLOBAL SLOWDOWN.
HE SAID THAT AGAIN, THE GLOBAL
SLOWDOWN IS AFFECTING OTHER
COUNTRIES BUT IT'S NOT REALLY
AFFECTING THE UNITED STATES AT
THIS MOMENT.
HE SAID IT COULD AFFECT THE
UNITED STATES BUT IT'S
INTERESTING, SO I WENT ON AND
ASKED HIM ABOUT THE INTEREST
RATES AND NOW HOW THEY ARE
FLEXIBLE, MEETING TO MEETING ON
THOSE INTEREST RATES, WOULD THAT
MEAN COMPANIES WOULD START TO
OPEN UP THEIR INVESTMENT AGAIN.
HE SAID THAT MIGHT AFFECT GLOBAL
COMPANIES, POSSIBLY OPENING
INVESTMENT HERE IN THE UNITED
STATES.
SEEING THAT THE RATES WOULD
REMAIN POSSIBLY LOWER IN THE
NEXT YEAR, INTO THIS YEAR.
LIZ: GO AHEAD.
>> I WAS JUST GOING TO SAY,
SEEMS LIKE THE BIG X FACTOR IS
THE TRADE ISSUES WITH CHINA AND
THE U.S.
THAT'S THE BIG HAMSTRING OF THE
ECONOMY HERE BECAUSE AT THE SAME
TIME YOU HAVE THE U.S. IN A
HEALTHY STATE AND ED PUSHED HIM
A LITTLE TO SAY WHETHER OR NOT
WE ARE HEADED INTO A RECESSION,
HE SAID I DON'T SEE IT ON THE
HORIZON BUT AT THE SAME TIME YOU
GET THE UNDERTONE IF THINGS
CONTINUE TO DETERIORATE IN THE
GLOBAL ECONOMY, THAT THAT MIGHT
START TO IMPACT THE U.S.
LIZ: LET'S JUST SAY, DECEMBER
EXPORTS FOR CHINA FELL THE MOST
IN ABOUT TWO AND A HALF YEARS.
THEY PUT THAT OUT ON SUNDAY.
EXPORTS FELL 4.4%.
THE EXPECTATION WAS FOR THEM TO
RISE 2.5%.
I'M WITH YOU THERE.
I DO THINK THAT, THOUGH,
PRESIDENT TRUMP MIGHT BE
SECRETLY CHEERING THAT WEAKNESS
BECAUSE IT MAY, HE BELIEVES,
FORCE CHINA TO A DEAL.
IN THE MEANTIME, WHAT DO THE
MARKETS THINK?
>> TRUMP SEEMS TO BE JUGGLING A
LOT OF BALLS RIGHT NOW BETWEEN
THE PARTIAL GOVERNMENT SHUTDOWN
WHICH IS ALREADY IN A RECORD AND
TRADE NEGOTIATIONS, YOU KNOW.
THE EXPECTATION IS THAT HE WAS
GOING TO BE IN DAVOS WITH THE
OPPORTUNITY TO MAYBE TALK TO THE
CHINESE PRESIDENT, BUT IT SEEMS
UNCERTAIN WHERE WE WILL HIT SOME
KIND OF RESOLUTION ON TRADE.
THAT'S THE BIGGEST HEAD WIND
THAT THE MARKET IS COMMUNICATING
TO US.
LIZ: MARK AND EDWARD, THANK YOU