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Fed Defies Trump, Unanimously Votes to Raise Interest Rates 0.25 Percent; El-Sayed Reacts to Vance Urging GOP to Target Him; Congress Heads Home Until November Without Addressing A.I. Risks; Rep. Nathaniel Moran (D-CA) Discusses About A.I. Bill Vote in Congress; Bipartisan Bill Would Require A.I. Labs to Maintain "Kill Switch"; 3- 3:30p ET

Aired September 16, 2026 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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[15:00:38]

BRIANNA KEILAR, CNN HOST: The Fed defies the President, raising interest rates despite President Trump's campaign for a rate cut. We'll dig into the numbers behind the decision.

And heading home, the Speaker of the House sends lawmakers home until after the midterms, despite tech CEOs urging action to address the threat from A.I.

BORIS SANCHEZ, CNN HOST: And the Kennedy Center shut down, fencing going up around the performing arts venue, as questions remain about its future.

We're following these major developing stories and many more, all coming in right here to CNN NEWS CENTRAL.

ANNOUNCER: This is CNN Breaking News.

KEILAR: Defying President Trump, the Federal Reserve just unanimously voted to raise U.S. interest rates. This hike happened just months after the President handpicked Chairman Kevin Warsh with hopes of getting rates lowered. And moments ago, Warsh explained his decision.

(BEGIN VIDEO CLIP)

KEVIN WARSH, FEDERAL RESERVE CHAIRMAN: The plain fact is that inflation is too high and has been for too long.

(END VIDEO CLIP)

SANCHEZ: The first rate hike in three years means these things are going to get more expensive for Americans. We're talking about credit cards, home equity lines of credit, adjustable rate mortgages, certain personal and student loans, and of course, car loans as well.

We're joined now by Douglas Holtz-Eakin. He served as chief economist for President George W. Bush's Council of Economic Advisers. He's also a former director of the Congressional Budget Office. Doug, great to see you as always.

DOUGLAS HOLTZ-EAKIN, CHIEF ECONOMIST, WH COUNCIL OF ECONOMIC ADVISERS UNDER PRESIDENT G. W. BUSH: Thank you.

SANCHEZ: How are you looking at the independence of the Fed and Fed Chairman Kevin Warsh after this announcement and the sort of positive spin he gave during his press briefing there?

HOLTZ-EAKIN: Well, the -- the Fed did its job. The reality is inflation has been too high for too long. And a lot of people have focused on recent events like the war with Iran, global oil prices. I think the telling fact is that if you look at core inflation that excludes food and energy, the things that have been bouncing around a lot, the Fed's preferred measure of core inflation has been at 3 percent since 2023. So, that's too long. It needs to get back to the 2 percent target. It took a step toward doing that today. That's the right thing in my view. We now see how the rest plays out.

To your point on the President being unhappy, we -- he's been known to respond. And the Fed now just has to stick to its guns and do its job.

KEILAR: The -- we're looking at the market now, and it's responding a little more negatively than it did just initially after -- it seemed to be indicating that perhaps this prediction was kind of baked in to what was going on there.

HOLTZ-EAKIN: Yes.

KEILAR: Maybe not the case. He expressed optimism, Warsh did, about the fundamentals of the economy. He wasn't shy about the problems of inflation. Do you think Wall Street thinks the Fed is doing what it needs to do to tackle inflation?

HOLTZ-EAKIN: I think that Wall Street expected 25 basis points today, and Wall Street got it. And so I didn't expect a big reaction from that. We didn't know what the chairman would say. And one of the real tests here is, if it's the case that people are very worried about the Fed not controlling inflation, then long-term interest rates will go up for that reason. And long-term rates have drifted up.

So, if the Fed convinces people, they're really after inflation and that inflation threat's going away, you could see short rates go up, but long rates come down. And that would help things like mortgages. That would help things like auto loans.

So, that's what I'm watching it for over the next couple of days. I'm not sure they made the case entirely in the first couple hours here, but it's worth keeping an eye on.

SANCHEZ: So, Warsh even alluded to it during his time at the podium that -- that he is not a fan of giving these further out prognostications of what the Fed might do. But -- but yet he did share some sort of near-term outlook. What were your takeaways about what he shared? HOLTZ-EAKIN: I think the near-term outlook has -- has been surprisingly strong. You know, we kept waiting for the -- the high global oil prices, high diesel prices, which are a big issue for shipping things, high gasoline prices to take a toll on family budgets. And spending has remained fairly strong. And the -- the -- third quarter numbers look to be pretty robust.

[15:05:00]

The -- the Achilles heel has been the inflation problem, and that inflation problem has led to the fact that even with wage increases, people aren't getting ahead. We've got this sort of phenomenon where you have the price increases outstrip any raise you might get.

So, getting the inflation under control is the key to getting real wages rising, and that would support households to continue their spending.

KEILAR: So, far, the President has stood by his guy, right? He's stood by his pick.

HOLTZ-EAKIN: Yes.

KEILAR: I wonder what you thought about considering Warsh was communicating clearly with an eye toward the President. He didn't say the Iran war. He said geopolitical developments. I mean, we all knew what he meant, but he seemed to be ...

HOLTZ-EAKIN: Sure.

KEILAR: ... really being careful with his language, knowing the President was an audience. What did you think about that, and is that going to be enough, do you think, for the President to continue to be okay with Warsh, considering it looks like the Fed is penciling in another interest rate hike for the year?

HOLTZ-EAKIN: So, full disclosure, I worked with Kevin Warsh at the White House in 2001, 2002, and Kevin is an extremely good politician in the best sense of that word. He knows how to appeal to his audience. He knows how to frame his arguments for the audience. He knows how to draw the audience in and let them understand his thinking.

The audience in this case is one person, and that's the President of the United States, and so we all know that they talk on the phone. We know that he shaped his remarks at the podium with an eye toward that audience. And so, if anyone has the capability to appeal to the President and say, look, we're doing the right thing, and it's the right thing for you, too, sir, I think it's the chairman, and we'll see how it plays out.

SANCHEZ: To that point, Warsh just spoke about his conversations with President Trump. Let's listen.

(BEGIN VIDEO CLIP) WARSH: I don't have anything for you on -- on discussions with the President. And I'm not a Wall Street newsletter. Part of the independence of the Federal Reserve is we stay in our lane.

(END VIDEO CLIP)

SANCHEZ: Interesting that he says that, obviously, given the background here and the ...

HOLTZ-EAKIN: Sure.

SANCHEZ: ... beef, for lack of a better word, that President Trump had with his predecessor, Jerome Powell. What are you anticipating we're going to hear from President Trump on this as the Fed uses its independence to go against what he wanted?

HOLTZ-EAKIN: I -- I think the President has been clear, even -- even leading up to the meeting, that he still thinks rates should be lower. He thinks that the U.S. is the best credit risk on the globe and rates are too high here. That -- I don't think we're going to change his mind. It's like trying to change his mind on tariffs.

So, what the Fed does is not going to persuade the President. The only question is, can it be presented in a way that keeps him from attacking the Fed again, which he did under Warsh's predecessor. That's the open question. I don't know. The answer is, I sit here and I'm as eager as anyone to see how this plays out over the next weeks and months.

SANCHEZ: We'll refresh social media and see what it might mean in the next few minutes if President Trump reacts. Douglas Holtz-Eakin, thanks so much for being with us.

HOLTZ-EAKIN: Thank you.

SANCHEZ: So, CNN is getting a peek inside the Republican Party's midterm playbook, and we've learned that Vice President J.D. Vance is now urging House Republicans to make Michigan Democratic Senate candidate Abdul El-Sayed their political boogeyman.

KEILAR: And he's telling members that if their own opponents aren't, quote, "that crazy," they should just talk about El-Sayed instead. CNN's Manu Raju just spoke with a Senate candidate. He's with us now.

I mean, Manu, I wonder what El-Sayed said in response to this and if there's an expectation that focusing on a race somewhere else is actually going to work in this way. Vance hopes it will.

MANU RAJU, CNN CHIEF CONGRESSIONAL CORRESPONDENT: Yes, I asked him directly about that. The Republican midterm strategy from J.D. Vance saying tie your candidate, your Democratic opponent to J.D. Vance -- to, sorry, to Abdul El-Sayed if your Democratic candidate is not, in Vance's word, crazy enough.

And I asked El-Sayed about that directly, whether or not he thinks that will work and whether or not -- what he thinks about just the fact that that is the Republican campaign playbook to some extent, to try to paint the Democrats as extreme and try to liken them to El- Sayed himself.

El-Sayed essentially said, bring it on. He's ready for that fight. And he dismissed that Republican attack line. And he also dismissed any notion about whether he needs to shift to the political middle, being a very progressive candidate. I asked him if he had to do that and disavow that very controversial streamer, Hasan Piker, whom he campaigned with during the primary campaign. And he indicated in his view that that focus on that issue is all off base.

(BEGIN VIDEO CLIP)

RAJU: What do you say about that strategy? They clearly think that you will make their jobs easier.

ABDUL EL-SAYED, (D) MICHIGAN SENATE NOMINEE: They'll talk about anything, not to have to talk about gas or groceries or whether or not you can see a doctor or the ability to send your kid to a good, dignified school. So, yes, if the whole Republican caucus meeting is not about what we can do to actually make lives better, but instead what we should talk about so that we can change the subject from what -- what lives are because of their policies, fine. Talk about me.

[15:10:09]

But you know what I'm going to be talking about? Gas, groceries, how hard it is to see a doctor, the fact that our kids' schools still look like they did 30 years ago. And so long as J.D. doesn't want to talk about things that actually matter, we're going to watch as in our state, we're going to, you know, we -- we are going to build the kind of movement that they have not seen for a very long time.

RAJU: Do you have to shift more to the middle, do you think, it's -- in this general election, even, you know, disavowing Hasan Pike or shifting to the middle? Do you need to do that stuff?

EL-SAYED: This this conversation is so far removed from what people are talking about. Every day in Michigan, people sit at their kitchen tables and ask, how am I going to make this work next month? That's not a middle right left issue. That's a basic affordability issue, so ...

UNIDENTIFIED FEMALE: (INAUDIBLE) about ...

EL-SAYED: ... standing up to corporations, taking on the power of those corporations to pick your pocket to buy off politicians, those are issues everybody cares about. That's what I'm talking about.

(END VIDEO CLIP)

RAJU: He went on to say that he would not campaign with Hasan Piker during the general election, though he did in the primary election. He also said he's in talks with former President Barack Obama to hit the campaign trail as well. And also, guys, this afternoon, El-Sayed meeting with Chuck Schumer, the Senate Democratic leader. And part of the discussion there is going to be about whether Schumer's super PAC can put in the kind of resources that he says his campaign needs to compete against a huge amount of Republicans spending against him, given that this is one of the most essential races. Republicans hoping to flip that seat in order to deny the Democrats the four seats they need to pick up the Senate majority. Guys.

SANCHEZ: Yes. A huge Senate race there in Michigan. Manu Raju from Capitol Hill, thank you so much.

Still to come, calls are growing for immediate action to control A.I., but that will not happen in the near future as lawmakers are headed home until after the midterms.

KEILAR: Plus, new fencing going up. You see it here. They're starting to put it up around the Kennedy Center one day after President Trump's handpicked board voted to close it.

And then later, the TV news community is mourning the death of a reporter and a pilot after their helicopter crashed while covering a story in Los Angeles. We have that and much more coming up on CNN NEWS CENTRAL.

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[15:16:44]

SANCHEZ: House Speaker Mike Johnson has rejected calls from more than a hundred Democratic lawmakers to postpone a weeks-long break in order to address growing concerns around A.I. In fact, Johnson is sending the House home this afternoon a day early without passing a single A.I. safety regulation bill, despite numerous proposals and some having bipartisan support.

One bill, for example, the AI Kill Switch Act, would require A.I. developers to have the ability to throttle, suspend, or shut down their A.I. systems. It would also allow the Homeland Security Secretary to order a slowdown or shutdown of an A.I. system that can cause catastrophic harm.

The bill was introduced back in July by Republican Congressman Nathaniel Moran and Democratic Congressman Ted Lieu.

Representative Lieu of California joins us now live.

Congressman, thank you so much for being with us.

So, I wonder, are you demanding a vote on your A.I. bill before members leave town?

REP. TED LIEU (D-CA): Thank you, Boris, for your question.

Last month, average gas prices set a record high in the United States. This month, diesel prices set a record high. And we now know that multiple A.I. companies have lost control of their A.I. models, causing three leading A.I. CEOs to say, we need congressional help. And the response from Speaker Johnson is, send us home on vacation two weeks and a day early. That is ridiculous. We need to be here to vote on A.I. legislation and vote on legislation to help the rising costs that are affecting American families.

SANCHEZ: I want to ask you about the Kill Switch bill. Essentially, it gives DHS oversight over A.I. companies the ability to -- to issue a stop command if a model were to become dangerous, or if there's a similar incident to what we saw with Hugging Face during the summer. I -- I wonder if you would trust Trump's DHS to issue that command when we've heard the President himself say that these concerns about A.I. are overblown, that they're a hoax.

LIEU: I believe that Donald Trump is lying, and he knows it, because his administration literally shut down two of Anthropic's advanced A.I. models earlier this year. They used this strange export control directive that was never designed for this purpose. Our bill sets out clear processes and procedures for the government to follow and gives rights to the A.I. companies to appeal. That's a much better way to go forward.

So, the government already has this power. We're just making it much more transparent and that's why this bill has bipartisan support.

SANCHEZ: You would need, to a degree, to trust the A.I. companies to allow the monitoring of these models and then to -- to actually follow that stop command from DHS. Is that enough, given that, for example, with the Hugging Face incident, it was clear that these rogue agents were acting on their own, and -- and no one was aware that this was even happening until months later?

LIEU: So, that's a good question you raised.

[15:20:00]

When Anthropic was ordered to shut down its two most advanced models, it, in fact, did so. And OpenAI did, in fact, turn -- basically shut down their OpenAI agent swarms that went rogue. So right now, the companies have the capability to turn off their systems, fix them, and then redeploy them. We just want to make sure that this can continue in the future. And this is based on something that society has long held in terms of solutions for products that can be used for good and can cause harm. It's called a kill switch.

And so, high speed rail has kill switches. Jet skis have kill switches. Even your Apple iPhone has one, because if it's stolen, you can erase it remotely.

SANCHEZ: I want to get your thoughts on the perspective of Geoffrey Hinton, a Nobel Prize-winning computer scientist known as the godfather of A.I. We spoke with him earlier this afternoon and asked him about your idea regarding the kill switch. Here's what he shared with us.

(BEGIN VIDEO CLIP)

GEOFFREY HINTON, "GODFATHER" OF A.I.: I don't think it'll work in the long run. Then there's a different kind of risk, which is A.I. itself getting much more intelligent and taking over, A.I. taking control. A kill switch is no good for that, because the A.I. will be much better than people at persuading people of things. When it's super intelligent, it'll be much better than people. So we'll be able to persuade the people in charge of the switch not to pull the switch.

SANCHEZ: I wonder what your reaction is and why not go further, even to what Senator Bernie Sanders has suggested, which is a total ban, not permanent ban, a semi-permanent ban on super intelligence.

LIEU: So, if you look at human society, no society has actually ever been able to ban technology. The only time that happened was in Japan. For a period of some years, they were able to stop guns from coming in. But as we all know, eventually, the Japanese also relented.

So, I think a better approach is to regulate A.I. so that catastrophic risks don't happen. And right now, these companies can't turn off their systems. We want to make sure they can continue to train their models, no matter how smart they get, to continue to listen to humans and to be able to obey shutdown orders. Because if you have a view that, look, these companies are going to create super intelligent things that can never be turned off, then we might as well just go to Bora Bora and wait for the apocalypse.

SANCHEZ: Yikes. Congressman, I -- I want to ask you about the China angle as well, and National Security. Your bill's co-author, Congressman Moran, estimates that China is only three to six months behind the U.S. on A.I. development. Are you concerned that domestic regulation of U.S. companies could risk ceding ground to Chinese dominance of this technology?

LIEU: So, the reason that we're getting bipartisan support for the Kill Switch Act, we just had Congresswoman Luna sign on as a co- author. We have Republican Senator John Kennedy on the Senate side introducing a version of the Kill Switch Act.

The reason we're getting this kind of support is because our bill does nothing to slow down innovation. By design, it applies to models that have already been built. And so, these A.I. companies continue to build whatever models they want. And if those models do great things and work well, that's terrific. But if they go rogue or they do something catastrophic, then we have to be able to, as human beings, turn them off and then have guardrails put on, and then the companies can redeploy them. But our bill does nothing to slow down innovation.

SANCHEZ: Do you think members of Congress as a whole are adequately equipped to handle this kind of technology that is rapidly changing? Because Axios spoke with more than two dozen members of Congress and -- and some governors who said that they rarely use A.I. or they don't use it at all, including the -- the chairs of the Senate Armed Services and Foreign Relations Committees, also ranking members of House Energy, Commerce, Appropriations. I mean, how can officials write legislation on this without relying solely on the industry and identify potential risks if they're not that familiar with it?

LIEU: Members of Congress are generalists. We vote over a thousand times in these two-year legislative cycles. And look, I'm not a pilot. I don't know how a Boeing 737 flies, but I voted on FAA reauthorization. And so, a member of Congress doesn't have to have a computer science degree to understand that having human beings being able to turn off A.I. agents and A.I. models is a good idea.

And so, Congress not only has their ability to regulate A.I., we've got the moral responsibility to do so.

SANCHEZ: Congressman Ted Lieu, thank you so much for joining us and sharing your point of view.

[15:25:03]

LIEU: Thank you.

SANCHEZ: Still ahead, more on that tragic helicopter crash in Los Angeles that left three people dead, including a TV reporter and a pilot. Stay with us.

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[15:29:40]

KEILAR: A quick check on the markets right now, the Dow down more than 840 points at this point. Stock spending most of the day treading water. But that ended after the Fed chief, Kevin Warsh, stepped up to the podium to talk about the Fed's decision to raise interest rates a quarter point. That's the first interest rate hike that we've seen in three years. And Warsh's words about inflation did not seem to ease any worries.

[15:30:06]

That was really why you're seeing what you're seeing here. We're going to keep an eye on ...