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J.D. Vance Wins Ohio Senate Republican Primary; Mariupol Evacuation Efforts Continue; Federal Reserve Hikes Interest Rates Half-a-Point. Aired 2-2:30p ET

Aired May 04, 2022 - 14:00   ET

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

[14:00:05]

ANNOUNCER: This is CNN breaking news.

VICTOR BLACKWELL, CNN HOST: Hello. I'm Victor Blackwell. Welcome to CNN NEWSROOM. Alisyn is off.

Any moment now, the Federal Reserve is expected to announce an interest rate hike. The question is, by how much? The decision will affect millions of American families and businesses. And it comes as inflation stands at a 40-year high.

Now, earlier, President Biden says his administration is on track to reduce the national deficit by what he called a record amount. He said that would combat inflation.

CNN White House correspondent Arlette Saenz joins me now.

So, the president wanted to fill out the economic picture ahead of this announcement. Tell us more about what he said.

ARLETTE SAENZ, CNN WHITE HOUSE CORRESPONDENT: Yes, Victor, President Biden really has been leaning into this idea of deficit reduction in recent weeks.

The president is very cognizant of the fact that Americans are looking for action, be it on the economy or inflation. And that is why you see the president holding events like this one today, where he is touting some of the progress the administration has made, as the Treasury Department is estimating the federal deficit will fall by $1.5 trillion.

Now, the president is also making a play for Senator Joe Manchin with all this talk about deficit reduction, as Joe Manchin has repeatedly said that any economic agenda that passes through Congress must reduce the deficit.

But take a listen to how President Biden described some of the progress that's been made and how he believes his economic agenda will ease some of those pressures.

(BEGIN VIDEO CLIP)

JOE BIDEN, PRESIDENT OF THE UNITED STATES: The bottom line is, the deficit went up every year under my predecessor, before the pandemic and during the pandemic. And it's gone down both years since I have been here, period.

That's -- there are the facts. And why is it important? Because bringing down the deficit is one way to ease inflationary pressures.

(END VIDEO CLIP)

SAENZ: Now, notably, President Biden also tried to paint a contrast with Republicans, labeling their agenda as an extreme MAGA agenda, a reference to former President Donald Trump, the president there showing some of the battle lines that he is expected to draw heading into the midterm elections in November -- Victor.

BLACKWELL: Arlette, thank you very much.

The breaking news is in. The Federal Reserve will raise interest rates by 0.5 percent.

CNN's Matt Egan joins us now.

Matt, as expected?

MATT EGAN, CNN REPORTER: This is as expected, and yet, Victor, this is historic.

We haven't seen the Fed do anything like this in almost exactly 22 years, back when Bill Clinton was in the White House. And this means that borrowing costs are going to be going up for everyone. It means higher interest on credit cards, on car loans. Mortgage rates are spiking by the most we have seen in four decades.

Now, normally, the Fed prefers to just gradually raise interest rates, moving them up by a quarter-of-a-percentage point every meeting, sort of tapping the brakes on the economy. But the Fed doesn't have that luxury right now, because inflation is really high. Consumer prices are rising at the fastest pace we have seen in 40 years.

Families are facing sticker shock on everything from gasoline to used cars to food, and, of course, shelter. And so the Fed is being forced to step in like the firefighter and try to put out this inflation fire right now. And they're really being forced to take more significant steps than normally.

Now, the Fed deserves credit, I think, for helping to save the economy from COVID. There was no COVID financial crisis, in part because the Fed had all of these emergency actions. And yet the Fed has come under some criticism for arguably being too late to take away that support.

I mean, the economy doesn't need emergency support right now. And so that's why the Fed finds itself in this really tricky place, because they have to catch up to inflation. Now, no one doubts they have the ability to do that. They could raise interest rates as high as they think is needed to get inflation back down.

But the higher rates go, the more economic pain that there's going to be. And so they find themselves in this tricky spot. Can they tame inflation, without short-circuiting this economy, without causing a recession in 2023 or 2024?

The odds, Victor, may be stacked against the Fed, but they have got no choice but to try.

BLACKWELL: All right, let's get into all that now -- Matt Egan, thank you very much -- and bring in for reaction CNN economics and political commentator Catherine Rampell and business reporter Marc Stewart.

Marc is sitting here next to me.

So let me get your quick reaction first.

MARC STEWART, BUSINESS JOURNALIST: Well, there's no question that the Fed had to do something aggressive, I think for all of those reasons that Matt mentioned.

But I think it's important to keep in mind, Victor, that this inflation equation isn't just about increased demand and a strained supply chain, not even the war in Ukraine. There's a bigger issue that many economists feel. And that is labor. People are asking for more money.

They are getting more money. Companies have no choice but to comply with that. That costs more. In addition, the number of baby boomers who have been retiring, particularly in 2020, when the pandemic hit...

[14:05:02]

BLACKWELL: Yes.

STEWART: .... that number has rapidly accelerated.

That leaves companies with a need for more workers. That too increased costs. So there are many different layers to this. But there are some significant cost conundrum, specifically when we look at labor, in addition to everything else.

BLACKWELL: We will get into the Great Resignation, record numbers in March of people losing their jobs in just a moment.

But, Catherine, let me come out to you, and on the question of timing. Jamie Dimon, CEO of J.P. Morgan Chase, says that the Fed waited too long to raise rates. What do you say?

CATHERINE RAMPELL, CNN ECONOMICS AND POLITICAL COMMENTATOR: I think, with the benefit of hindsight, probably even the Fed would agree with that.

Basically, they were much too optimistic, like many of us, last year about the pace of inflation going forward. They thought that it would be transitory. They thought that it would come down on its own as some of those supply chain problems unwound themselves. And that's not what happened. Instead, they waited a while, and, instead, inflation just continued

going up on its own. So now they're in this position, as Matt laid out, where they have to raise rates much more aggressively than they likely would have had to do had they begun this process earlier, in order to get prices down.

BLACKWELL: Marc, the potential for this soft landing, cooling things off just enough without triggering a recession, is that less likely now?

STEWART: It's very difficult.

I think that the conventional feeling among economists -- and it's been strengthening over the last few weeks -- is that a recession may be inevitable. I think one way to think about this is a doctor treating a patient with a very serious condition.

You do something aggressive, but there may be some unpleasant side effects in the aftermath.

BLACKWELL: Yes.

STEWART: The economy may be the same way. Raise interest rates, perhaps deal with a recession, but in the bigger picture of things, it may benefit, because that will give it -- the economy a shock, and, therefore, that will reduce inflation.

BLACKWELL: If a recession is coming, are you seeing Great Recession? Are you seeing early 2000s short, shallow recession?

STEWART: So, the thing about a recession, the textbook example is when we see two quarters, six months without economic growth.

BLACKWELL: Yes.

STEWART: As we saw early on in the pandemic, we went into a recession, but it only lasted a few months. So I think that is the hope, that you do something strong and sudden, have some hardship, but then we see a rebound.

BLACKWELL: Catherine, let me ask you, what do you think? Is a recession inevitable now, and, if so, how deep of a decline?

RAMPELL: I don't think a recession is inevitable.

I do think that the risks of recession have risen quite a bit in the past few months, because we have gotten hit with a lot of unlucky events, including these COVID-related shutdowns in China in major manufacturing hubs, including the war in Ukraine, whose main and critical consequence, of course, is the loss of life.

But that's also disrupted lots of other core commodity markets around the world, energy, food, metals, fertilizer, et cetera. All of those things suggest that the risk of recession is higher because it means that inflation is going up. The Fed has to act much more aggressively, as we have been discussing. And, historically, when the Fed has raised rates in order to get

inflation under control, it has accidentally tipped us into recession. And because they have to raise rates even more today than perhaps they would have liked to have they begun this process -- they would have likely had to have they begun this process earlier, the risk of accidentally tipping us into a downturn just goes up.

So, a series of unfortunate policy mistakes, again, with benefit of hindsight, plus a spell of bad luck, means that the economic outlook has darkened.

BLACKWELL: Catherine, I don't know if you heard Arlette's report at the top of the show. Certainly, you heard the news from the White House about deficit reduction from this administration.

And the president says that reducing the deficit takes the pressure off inflation. Do you agree with that? And what should people see is that connection that the White House is saying is going to happen?

RAMPELL: Look, the main reasons why the deficit has come down so much is that a lot of the stimulus has faded. There was a lot of money pumped into the economy last year. Relative to that, it does look like we're spending less because we're spending less.

We had these one-time payments that went out, for example. Beyond that, tax revenues are up because of inflation. So that makes the numbers look bigger. Whether all of that means that inflation is going to come down I think is mostly irrelevant. What matters at this point is, how strong is demand and how easily can those supply chains accommodate that growing demand?

Can factories produce as much stuff as consumers are willing and eager to buy? That's what will determine the pace of price increases going forward, as well as expectations about all of that, rather than government budgets in the next few months.

[14:10:07]

BLACKWELL: Marc, let's end where we started here. And you mentioned people quitting their jobs; 4.5, a little more 4.5 million people in March, a new record, tipping over what we saw in November 2020.

Here's the last six months we have on your screen, 5.6 million more job openings and available workers. Place, that piece into the puzzle. And how long is that expected to go on we're seeing four-million-plus a month?

STEWART: Well, it's an interesting phenomenon that we're seeing right now, because people who participated in the Great Resignation took another job are also in many cases resigning from those new positions.

BLACKWELL: Yes.

STEWART: I think what's happening right now is just a systematic redefinition of the work force.

Sometimes, people would take jobs in -- for example, let's just focus on fast food. This gets a lot of attention.

BLACKWELL: OK.

STEWART: Now there are new -- there are new careers that involve staying at home, with far less intense labor, sometimes not even involving a commute.

So that is part of this shift that we are seeing, and that too can impact how jobs are being filled. I mean, it'll be interesting to look, especially on Friday, where the gaps are and where the needs are and who's really hiring, what jobs are really being filled.

BLACKWELL: Yes. We will...

STEWART: We will see that on Friday.

BLACKWELL: We will get that April report.

Marc, Catherine, thank you both.

All right, there is heavy fighting right now in the city of Mariupol. And the city's mayor says they have lost contact with Ukrainian soldiers at that steel plant where civilians are still trapped. Look at this video we have just gotten in. We will have a live update next.

And former President Trump's endorsement power proves strong in Ohio's GOP primaries. What this signals for the midterms.

Stay with us.

(COMMERCIAL BREAK)

[14:16:06]

BLACKWELL: The Mariupol mayor says that the Azovstal steel plant is under attack.

We have got a new video. It shows the explosions. Look at this, the smoke plumes, extensive damage at that complex.

CNN's Scott McLean is in Lviv.

Scott, we know that a new convoy of buses with civilians from Mariupol is now on its way to Zaporizhzhia today. Get us up to speed on the fighting and the evacuations there.

SCOTT MCLEAN, CNN INTERNATIONAL CORRESPONDENT: Hey, Victor.

Yes, first on the evacuations. You mentioned that convoy that is being, according to a local official, organized with the help of the Red Cross and the United Nations. That, of course, is good news because of that previously successful effort to get at least some people out from under the Azovstal steel plant.

Now, in this case, it is not entirely clear whether or not there is anyone from the steel plant who is on that convoy in route to Zaporizhzhia. It seems unlikely at this stage because of the heavy fighting there. So it's more likely that there are people from the wider Mariupol city who are as part of that convoy, rather than people from under the steel plant.

The Ukrainians say that there have been heavy bombardment today. The mayor says that they are hitting them with tanks, with artillery, with airstrikes. They have even moved a ship closer to the plant itself, so that they can strike from closer distance.

The Ukrainians say that the Russians for the second day in a row have attempted to storm the facility on the ground as well. Earlier today, the mayor said that they had lost contact with the soldiers who are continuing to fight there. An adviser to the president has just said that that contact has now been reestablished.

And they said that any Russian efforts to actually get on the site of the plant have not been successful thus far. The Russians had previously said that the actual site of the plant and the boundary of it was completely sealed off, impossible for anyone to get in or out. But they deny any claims that they are trying to storm that facility.

What they do say, though, is that they are suppressing militants' attempts to take new firing positions. Again, they say that they have orders from Vladimir Putin not to storm the plant, and, thus far, they are obeying them.

The worrisome thing here, Victor, is that, of course, there are civilians, they say, trapped still underneath. According to the mayor, there are 30 children as well. And we know that, while you can get quite deep underground into some of these -- some of these caverns, some of these chambers underground, there have been instances where part of them have collapsed.

There have been rubble, according to the soldiers who have been sheltering there as well. There have been places where people have been trapped as well. And so none of this bodes well for the civilians there. By the way, two young women were killed earlier this week. It is very likely that there will be more.

BLACKWELL: Scott McLean for us in Lviv.

Just awful seeing those pictures.

Scott, thank you so much.

President Biden says that he is open to additional sanctions on Russia. That's after the European Union proposed a sixth round of sanctions against the Kremlin, including a ban on all Russian oil imports by the end of the year.

CNN international diplomatic editor Nic Robertson joins me now.

Nic, it is a ban on all Russian energy imports, specifically the oil imports. What's the significance there?

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Significant because oil represents sort of the single biggest item that the European Union spends money on, and that money going into Russia's pockets, and then funds the war.

So, oil is the big one. The aim is to end Russian oil imports by the end of the year. There's a sort of a get-out clause for Hungary and Slovakia, because they are so dependent on Russian oil at the moment, although we have heard that Hungary is pushing back and saying it won't sign up to this as it stands right now.

[14:20:03]

What in reality that means is that, although we heard from the European Commission president outlining this today, it likely means that the debate over trying to agree to the sixth round of sanctions will take longer, possibly pushing it towards the end of May, when the European Union leaders will get together to discuss it.

And, even in that environment, it becomes hard, because leaders say something to cameras on the way in. Viktor Orban, the Hungarian Prime Minister, maybe will speak to cameras. Positions become hardened. And it's harder, therefore, within these -- within the context of that meeting to get a deal fully signed off.

There are other issues. The European Union is targeting three significant Russian banks, will face -- will sanction SberBank. One of those three Russian-state backed broadcasters will be banned from the European airwaves.

And, again, another significant item on that sixth round of sanctions, that senior military officers and other top-level officials will be -- that are believed to be responsible for the alleged war crimes in Bucha will also hit the sanctions list.

So it's a big raft of sanctions, but there's a lot of talk needed to get it over the line.

BLACKWELL: Nic, Pope Francis, he spoke with the leader of the Russian Orthodox Church. He told him to not become Putin's altar boy.

We also know, according to sources, that the leader of the Russian Orthodox Church is included in the E.U.'s latest sanctions proposal. Why include that figure?

ROBERTSON: Yes.

And there's been heavy pushback from the leadership of the Russian Orthodox Church today on -- as well on both those accounts.

The reason being is that the perception is and the words of the Russian Orthodox Patriarch Kirill have been supportive of President Putin, had been supportive of the war. And the pope, like other religious leaders around the world, doesn't believe that another religious leader should be engaged in essentially helping -- helping President Putin have this war, that he should be speaking out against it. Now, the Russian Orthodox Church said today that the comments by the

pope were not helpful because they weren't conducive to having a reasonable dialogue or conversation. And they also said that the European Union was out of touch with common sense, that it didn't understand what it was doing.

But it's a very clear perception that the Russian patriarch is very much behind Putin on this and that -- and that is not a good thing, because it does help push forward some people who might not otherwise take up arms.

BLACKWELL: One more for you here, Nic.

New threats from Russia against NATO countries continuing to supply weapons to Ukraine. What are they saying?

ROBERTSON: Yes.

Again, we have heard this coming from this time the defense minister, Sergei Shoigu, saying that, again, any NATO weapons that cross over the border into Ukraine, then they are legitimate targets for the Russian military. We continue to hear the Russian leadership, President Putin on down, complaining, criticizing NATO for this.

And what we have seen the Russians do in the past few days is really step up their attacks on Ukraine's ability to move those weapons from the borders to the front line, targeting, as we saw in Lviv, electrical substations that are connected to the rail network way in the west of Ukraine.

And this really represents some very significant, specific targeting by Putin to send missiles, cruise missiles, to hit those precise locations. They want to take down these supply routes -- Victor.

BLACKWELL: Yes.

Nic Robertson for us in Finland.

Thank you, Nic.

In his most forceful pushback yet of the leaked draft opinion that would strike down Roe v. Wade, President Biden calls out -- quote -- "the MAGA crowd" as extremists. And there was more.

(COMMERCIAL BREAK)

[14:28:35]

BLACKWELL: Donald Trump gave a big boost to some Ohio GOP candidates.

The Republicans who strongly support the former president got more votes than the non-Trump Republicans. And author J.D. Vance, the Senate candidate who scored Trump's endorsement, is the projected winner of that primary.

(BEGIN VIDEO CLIP) J.D. VANCE (R), OHIO SENATORIAL CANDIDATE: I have absolutely got to think the 45th, the president of the United States, Donald J. Trump, ladies and gentlemen.

(CHEERING AND APPLAUSE)

VANCE: They wanted to write a story that this campaign would be the death of Donald Trump's America first agenda.

Ladies and gentlemen, it ain't the death of the America first agenda.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

BLACKWELL: With me now, CNN senior political analyst John Avlon and CNN political commentator Margaret Hoover.

Welcome to you both.

All right, let's get into it.

MARGARET HOOVER, CNN POLITICAL COMMENTATOR: Hey, Victor.

(CROSSTALK)

BLACKWELL: Margaret, you're first.

(CROSSTALK)

BLACKWELL: You're first.

So, how big of a win is this for Trump? Our reporting is that he was relieved that Vance won, maybe some concerns before that. What's it mean for him?

HOOVER: Yes, well, he should be relieved, because the weekend in a rally in another state, he actually screwed up the endorsement.

He said it was for J.D. Mandel.

(LAUGHTER)

BLACKWELL: OK.

HOOVER: So, he merged the two candidates.

BLACKWELL: First and second place, yes.

HOOVER: Good thing the voters got the right note.

BLACKWELL: Yes.

HOOVER: Look, no, this is a win for Trump and for J.D. Vance, but don't read into too much. I mean, Trump owns the Ohio GOP, sort of. DeWine won, the incumbent

Republican governor. On the other side, the flip side is that the Trump-adjacent GOP gubernatorial candidates did not win.

BLACKWELL: Yes.

HOOVER: Trump is going to do best when he endorses in