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CNN INTERNATIONAL: U.S. Fed Expected To Raise Interest Rates; U.S. Pledges Additional $1 Billion In Military Aid For Ukraine; Europe Swelters Under Record Temperatures; Federal Reserve Chair Jerome Powell Speaks After Raising Interest Rates; K-Pop Superstars Promise To Return After "Hiatus". Aired 2-3p ET

Aired June 15, 2022 - 14:00   ET

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

[14:00:00]

LYNDA KINKADE, HOST, CNN NEWSROOM: Hello, everyone, I'm Lynda Kinkade, you're watching CNN NEWSROOM live from the CNN Center. Tonight, we are moments away from the U.S. Federal Reserve's decision on interest rates. Our Richard Quest will be with us to break down what it means for consumers around the world.

Then the U.S. announces $1 billion in additional military aid to Ukraine. We'll have reaction to that. And Europe's heat wave, France and Spain sweltering under record temperatures. And scientists are warning that they're becoming more frequent.

ANNOUNCER: This is CNN Breaking News.

KINKADE: We begin with one of the biggest decisions for the U.S. economy in years. In the face of unprecedented challenges, the Federal Reserve is expected to announce that it's raising interest rates by three-quarters of a percent. Well, I want to get straight to our Richard Quest for the decision. And Richard, has the decision been made? Is it as expected?

RICHARD QUEST, CNN BUSINESS EDITOR-AT-LARGE: Well, I'm just waiting to hear from the Fed and to see the first releases of information about it. In fact, from where you're sitting, you may see it more than I will, or quicker than I will on the way is why I copied. Going into this meeting, the view had been that the Fed would be raising rates -- I suppose it was half a point, half a percentage point that people were thinking of because that's what the chair of the Fed had suggested would be the way forward.

But as you can imagine with the most recent inflation numbers, at 8.6 percent, the worst since some 40 odd years. It became ever more increasingly important that the Fed not only deals with inflation, but is seen to deal with inflation. And so now we are just waiting for the announcement from Washington. Whether it is a half -- and I'm hearing now the Fed has raised interest rates by three quarters of 1 percent.

Three quarters of a 1 percent. Now, this is dramatic. It is remarkable. It is an indication of, I would say, not panic, but certainly crisis as a result of necessity of dealing with inflation. Now, originally, when they decided it was time to normalize policy, they said they would be slow. They would be gradual. They would be measured. And we were looking for a series of hot quarter point, quarter point, quarter point.

And now we started to get earlier this year, these dreadful inflation numbers, which showed essentially my words, that the Fed has lost control of inflation. And then we started to hear that there would be rate rises of half a point, maybe two, possibly three before the end of the year. And then in the last ten days, this idea of a three- quarter percent rise in interest rates which is absolutely walloped. Now, the market -- forgive me, I'm just going to continue talking and tell you what -- you know, I'm seeing in the market.

The market is up sharply. You're seeing -- it had been up most of the morning. And I think the reason is because bad news out of the way, therefore, people can concentrate on what might be next. The Fed telegraphed this move, the Fed telegraphed it and now they've done it.

KINKADE: That's right. This was what investors were expecting, were anticipating, given that we heard this prediction early this week. But interesting to note just a month ago, the Fed chairman said, we wouldn't see an interest rate this significant, 0.75 percent. Will it be enough, Richard, to bring down inflation which is currently at a 40-year high in the U.S.?

QUEST: No is the short answer. No, it won't. It will be the start and it will certainly give a clobbering, but if you think there's been, you know, to -- the ones earlier this year, you're still not near the normal rate or normalcy or neutrality, whatever you want to call it. You're still higher than -- you're still being accommodative as what they would say.

So you're looking at two, three, possibly four more interest rates rises this year. Maybe even five or six, but you will -- I think it's highly unlikely that you would see more three-quarter percent rises or maybe one more. But you certainly wouldn't see a series of them. That would smack of panic and emergency. We haven't had a rate this -- three-quarter percentage point, 75 basis as we say, you haven't had that for some 30 odd years.

[14:05:00]

And so, the fact that they've done it with inflation at a 40-year high, having really just made their decision to do this in the last week or so, smacks of not panic, but crisis. Inflation is out of control, and they need to do what they can to bring it back. And even while we're talking, you can see the market is giving back the gains because we're going to get the statement from the Fed, and the statement which I'm just waiting to still -- to receive the actual detail.

And once we've got the statement -- here we go, forgive me, I'm going to read the statement while I'm talking to you if I may. It talks about economic activity has picked up, job gains have been robust. Supply and demand imbalances continue, and here is a key, higher energy prices and broader price pressure. On Ukraine, they say the invasions creating additional upward pressure on inflation.

And so, the committee has decided to raise the Fed's turbulence as we heard in the necessity of what we're talking about. In addition, on the stance of monetary policy, they'll monitor the implications for future looks. The dot plots, this is the document that we also get, which shows where members of the committee think interest rates will go.

It's known as the dot plot because they literally have dots on it. The dot plot of individual expectations shows that the rate at the end of the year will be 3.4 percent, 3.4 percent. Now, where are we now? We're one in south -- 1.75 percent. So we have a long way to go between now and then. This rate at 3.4 percent is considerably higher than what they were thinking of, rates are going up much more.

KINKADE: They certainly are, Richard Quest with the breaking news. Joining us from Lisbon. Federal Reserve raising interest rates here in the United States by three-quarters of a percent. That is of course the highest rate rise since 1994, and we will be bringing you the remarks from the Federal Reserve chairman which is set to take place in about 20 minutes from now.

Well, let's move on from now. The United States has just announced $1 billion in additional military aid to Ukraine. The pledge came in a meeting of dozens of countries in Brussels as western officials say the war is at a pivotal moment. CNN's Oren Liebermann is joining us right now from Brussels. Good to have you with us, Oren. So, this billion-dollar military package from the U.S. including weaponry as well as humanitarian aid, take us through the details.

OREN LIEBERMANN, CNN PENTAGON CORRESPONDENT: So first, this package in terms of weaponry totals a billion dollars. Now, that's split up between $350 million in draw-down authority. That means it will come right from DOD stocks, which means it can move very quickly. The other $650 million is what's known as the Ukraine Security Assistance Initiative. So, the U.S. will contract directly with arms makers to get that to Ukraine.

So, that will take a bit more time. In terms of what will move in quickly, that will be 18 more howitzers as well as some 36,000 rounds of ammunition. That in addition to the howitzers, the artillery, the U.S. has already sent in. And of course, one of the key weapons we saw announced earlier this month, that was the HIMARS system. High Mobility Artillery Rocket System which is the multiple launch systems that Ukraine has been requesting for quite some time now.

A key statement from Defense Secretary Lloyd Austin, he says not only that other weapons and other -- will come from other countries, but also that the U.S. will move as quickly as possible to make sure this gets to Ukraine. Here's what he said just a short time ago at a press conference.

(BEGIN VIDEO CLIP)

LLOYD AUSTIN, SECRETARY OF DEFENSE, UNITED STATES: Since the contact group first came together nearly three months ago, we built tremendous momentum for donations and delivery of military assistance. And after this afternoon's discussions, we're not just going to maintain that momentum, we're going to move even faster and push even harder. We'll deepen our coordination and cooperation, and will bolster Ukraine's armed forces to help them repel Russian aggression now and in the future.

(END VIDEO CLIP)

LIEBERMANN: Austin also thanked Germany and a number of other countries. Germany, he thanked specifically for sending in three multiple launch systems again, that's a key system that Ukraine has been requesting for some time now. Austin also thanked other countries for sending artillery tubes, artillery systems to get them as quickly as possible to the front line where they are perhaps desperately needed by Ukraine.

Ukraine has made it clear that the fight in eastern Ukraine in the Donbas region is incredibly challenging, specifically in the city of Severodonetsk. So that's where these systems are needed to push back Russia's aggression, Russia's ongoing attack.

[14:10:00]

Russia has made incremental gains over the past few weeks, even perhaps the past few months. But those gains have added up, and they now control perhaps three quarters or a little more, 80 percent of Severodonetsk. So, the need for these systems has become increasingly apparent. Ukrainian Defense Minister Oleksii Reznikov was there, he spoke with Defense Secretary Lloyd Austin, and made clear, the need for these.

And the U.S. has made it clear in response that these systems will move in as quickly as possible. One more point to note, Lynda, it was Chairman of the Joint Chiefs General Mark Milley who said the training on the HIMARS system, that key system Ukraine has been requesting for some time now, the first tranche of training has been complete. So 60 Ukrainian soldiers are ready to use that system as it moves into the country.

KINKADE: All right, Oren Liebermann for us in Brussels, our thanks to you. And we are going to stay on this story. I want to get some reaction now from Ukraine to this new weapons pledge. We're joined by Yuriy Sak; an adviser to Ukraine's defense minister. Good to have you with us.

YURIY SAK, ADVISER TO UKRAINIAN DEFENSE MINISTER: Thank you for having me.

KINKADE: So we had 50 defense ministers meeting in Brussels. Several countries making major pledges including the United States. This $1 billion aid package. Give us a sense, is it what you wanted to hear? How is it being received in Ukraine?

SAK: This meeting in the Ramstein format, of course, is a unique format for such events in particular when measured against the failure of the global security system to repel this aggression. The results of the meeting, we're very optimistic about this beforehand, and of course, we are quite optimistic now as well. Because we have heard important pledges, we have heard those promises which will enable us to boost our defense capabilities, which will enable us to better protect our cities and which will enable us to liberate our cities from the enemy.

KINKADE: So, the biggest question right now is, is it enough? I just want to bring up a tweet from presidential adviser to your president, also involved in the peace talks negotiations. He listed the weapons that Ukraine needs right now to win this war against Russia. He said these weapons include tanks, armored vehicles, drones, multiple-launch rocket systems or MLRS. Would that be enough to win the war or is it simply what is needed right now, and how much of that list was met today?

SAK: We have said many times that the front line in Ukraine stretches over 2,000 kilometers, 1,000 of those kilometers is very intense fighting. And you know, when your house is on fire, it's not likely that you will be able to put it out with a bucket of water or with a couple of fire extinguishers. You need a fire engine.

And if that fire spreads, you need a number of fire engines. So this is an analogy as to how much heavy weaponry we require. And I think there is a growing understanding in the governments of our international partners. And this was highlighted today by Mr. Lloyd Austin as well, that this war in Ukraine, while it is fought by the Ukrainian army and the Ukrainian cities are destroyed.

This war is a menace, not just to Ukraine, it's a menace to the whole of Europe. It's a menace to the global security order. So, from this perspective, you know, we've been campaigning internationally, and all our political and military leadership has been saying for months now, that we need more heavy weapons and faster. And these campaigns have been taking place under the hash-tag Arm Ukraine Now.

So, sometimes it feels like this Arm Ukraine Now is a synonym to arm yourselves now. Because actually, by providing Ukraine with heavy weaponry, the western partners are actually boosting and improving and strengthening the eastern front -- the eastern flank of NATO alliance.

KINKADE: So does today's announcement falls short of what you need?

SAK: It's a good beginning, and of course, we understand, and I think this was stressed today at the press conference as well after the meeting, that the situation on the front is very dynamic. It changes in our international confidence, try to react accordingly. The most important thing for us to understand is that the Ukrainian army, the Ukrainian servicemen are very capable of learning very fast. And as soon as these systems arrive, they will be able to use them very efficiently.

But of course, we will continue to ask our international partners to send us more because you mentioned -- you referred to the statement by the representative of the office of the president.

[14:15:00] And of course, look, the minimum when it comes to. for example MLRS

systems, the multi launch rocket systems, the minimum number that we require to be able to start liberating our territories and protecting our people is 100. So the optimal number will be 300. So, from this perspective, if we get some numbers at this stage, of course, they will be very helpful. But they will not solve the problems.

So, we will keep negotiating with our partners. We already look forward to the next Ramstein, which is like I said, a very important and unique format. And you know, we understand that there is a growing realization of the menace of this war to the West. Nobody wants it to spread further West. So we count on our international partners on that.

KINKADE: Well, as we heard from the U.S. Defense Minister, these weapons should start to arrive in the next few days. But it sounds like a lot more is needed. Yuriy Sak; Ukraine's Defense Ministry, I appreciate your time today, thanks very much.

SAK: Thank you.

KINKADE: We've got some news just in to CNN. Two Americans fighting alongside Ukrainian troops have been missing for nearly a week, and are feared captured by Russian forces. A man who is acting as their team sergeant says the Americans went missing during a battle near Kharkiv.

A State Department spokesperson says the U.S. is aware of the reports, and is in contact with Ukrainian authorities. Well, still to come tonight, the U.K. government is doubling down on its deportation plan, even though its first migrant flight to Rwanda was grounded as it was about to take off.

And a record held for more than 40 years is broken. How France and Spain are coping with an unexpected early start to Summer.

(COMMERCIAL BREAK)

KINKADE: Welcome back. In the United States, extreme weather continues to cause problems for one of the world's most popular wilderness areas. And take a look at this vision. That is a roof of a house that you can see there, floating on the Yellowstone river. A combination of rain and snow now, it has caused catastrophic flooding at Yellowstone National Park, where all entrances have been closed since Monday.

Well, CNN's Nick Watt joins us from Livingston, Montana, on the bank of that same river. Nick, good to have you with us. We're seeing these extraordinary pictures of homes absolutely inundated. Give us a sense of what sort of conditions caused this devastation.

[14:20:00]

NICK WATT, CNN CORRESPONDENT: Well, first of all, Lynda, we're actually in Gardiner, which is right at the edge of the park. We were in Livingston, we managed to get down the road right to this entrance. The video you just showed of that house, that used to be right here. And clearly, it is not anymore. Now, what caused this? Heavy snowfall late in the Winter, very high temperatures in the early Summer, and a lot of rain.

And what created, what caused the damage is the Yellowstone River. Now, we've watched the level fall a little bit in the past few hours. But what happened here over the past few days, we had about three months worth of water barreling down this river in the space of just three days. Setting records that previously, they weren't even close in the past century. So this is a huge event.

I mean, one local official called it, you know, a once in a 1,000-year event. But there was once in a 1,000-year event are becoming more common. And this might not be over. There is still about 12 inches of the snow pack left up there. And high temperatures are forecast again for this weekend. So the fear is that more snow may melt, and more water may barrel down this river, causing damage. Lynda?

KINKADE: All right, Nick Watt, good to have you there on the scene. We will catch up with you again soon. Thanks so much. Well, June, of course, normally means a boom for tourism in western Europe. But this year, brutal heat is putting a damper on life for visitors and residents alike. Al Goodman looks at the record-breaking weather that's arrived even before the official start of Summer.

(BEGIN VIDEOTAPE)

AL GOODMAN, CNN REPORTER (voice-over): A usually bustling town square is nearly empty Wednesday. Terraces with new patrons, all trying to stay cool. Spaniards are sweltering in the earliest heat wave in four decades, setting scorching temperatures across the country.

UNIDENTIFIED MALE (through translator): We do have heat here in the Summer until November. But we weren't prepared for this because the change was so drastic, we weren't able to adapt to how quickly it got hot.

UNIDENTIFIED FEMALE (through translator): We have to do things indoors because I don't think we can cope walking under the sun.

GOODMAN: Spain's state meteorological agency says a cloud of hot air from North Africa is hitting western Europe with unseasonably blistering temperatures. Experts point to global warming for the extreme heat and say it poses a risk to public safety.

UNIDENTIFIED MALE (through translator): Spain's Summers are getting hotter and hotter. The current Summer lasts more than a month longer than in the 1980s. In general, morbidity and hospital admissions and people with previous health problems, well, these hospital admissions increased as a consequence of the heat.

GOODMAN: In the southwestern Spanish city of Badajoz, many schools closed early this week to protect students from temperatures. Students in neighboring France also sweltering as the nationwide (INAUDIBLE) exam for philosophy is administered Wednesday. UNIDENTIFIED FEMALE (through translator): Being in a room for four

hours where there is no air conditioning is going to be hard in this heat. I've brought some cold bottles of water, but it's complicated to concentrate when it's so hot.

GOODMAN: Searing heat in France has also come early as the country tries to combat the impact of the climate crisis.

UNIDENTIFIED FEMALE (through translator): On Tuesday, France announced a 500 million euro plan to rigging cities and develop urban cool islands in an effort to fight global warming.

GOODMAN: The need for climate solutions is increasingly urgent as the cost to stay cool rises. The heat waves is boosting demand for air conditioning, while European natural gas prices spike this week amid a U.S. outage and the Ukraine war tightening supplies from Russia. Now, residents in Spain, France and elsewhere may have to find creative solutions to stay cool as these sizzling temperatures may soon become standard in an increasingly warming world. Al Goodman, CNN, Madrid.

(END VIDEOTAPE)

KINKADE: Well, the U.K. is pushing on with its controversial policy of relocating asylum seekers to Rwanda. It tried to send a handful of migrants on a chartered plane to Rwanda Tuesday night. But the European Court of Human Rights intervened, and the flight was grounded at the last minute. The first attempt -- although, this was the first attempt, which is part of a deal the U.K. says will help slowdown human trafficking.

The British Home Secretary said just a short time ago that the government remains committed despite its legal setback.

(BEGIN VIDEO CLIP)

PRITI PATEL, HOME SECRETARY OF THE UNITED KINGDOM: Whiles this decision by the Strasbourg court intervene was disappointing and surprising, given the repeated and considered judgments to the country in our domestic cause. We remain committed to this policy.

(END VIDEO CLIP)

[14:25:00]

KINKADE: Well, CNN's Nada Bashir is following this story for us, and joins us now from Paris. So, Nada, the U.K. is continuing with this policy. It says it's going to be committed to it. This is despite the fact that the European Court on Human Rights pretty much shut down that plane from leaving last night. Explain that decision by the court and the government's reaction to try and push ahead with this policy.

NADA BASHIR, CNN REPORTER: Well, look, Lynda. The government has said that it longed and expected these legal challenges to come to the fore. They had anticipated that they would be significant legal obstacles to face. But as you heard there from Priti Patel, the Home Secretary, she was disappointed and surprised to learn that the European Court of Human Rights had decided to intervene. As we understand it, that court intervened on behalf of three asylum seekers who were set to be on that flight last night to Rwanda.

But we've seen a number of legal challenges over the last few days. Originally, it was understood that more than a 100 people would be on that flight. That figure dwindled down to single figures over the last few days. As a result, individual legal challenges being placed in applications by asylum seekers. We understood that yesterday, seven people will be on that flight, and of course, as a result of that European Court of Human Rights challenge, but also as a result of independent legal applications by other asylum seekers.

That flight was halted, it didn't go ahead. Now, what we understand from the advocacy groups that have been representing and supporting these asylum seekers is that, there has been real concern that there needs to be more time for their cases to be heard. For them to be able to lobby and launch legal challenges today, independent asylum claims.

But of course, what we saw from Boris Johnson and from Priti Patel; the Home Secretary, is a determination to push ahead with that. And there has been some question around the jurisdiction, the European Court of Human Rights has over U.K. policy. Now, the U.K. is party to that European Convention of Human Rights.

But the Prime Minister Boris Johnson was actually asked about this yesterday. He was asked whether or not the U.K. would consider, perhaps, withdrawing from that convention so that it can go about its own rules and laws as it wishes. And now he didn't address this directly, but also refused to rule that out. Take a listen.

(BEGIN VIDEO CLIP)

BORIS JOHNSON, PRIME MINISTER, UNITED KINGDOM: Will it be necessary to change some laws to help us as we go along? It may very well be. And all these options are under constant review.

(END VIDEO CLIP)

BASHIR: Now, this is, of course, a deeply controversial policy. And we've heard from the Home Secretary Priti Patel saying that preparations are already underway for subsequent flights. They are still pushing ahead with plans to deport asylum seekers to Rwanda.

KINKADE: Just extraordinary. All right, Nada Bashir, we'll leave it there for now, thanks very much. Well, still to come tonight, extraordinary measures for extraordinary times. The Fed takes action to tackle economic challenges in the U.S. We'll have full analysis next.

(COMMERCIAL BREAK)

[14:30:00]

KINKADE: The U.S. Federal Reserve chairman is speaking now after announcing the decision to lift interest rates. Let's listen in.

(JOINED IN PROGRESS)

JEROME POWELL, CHAIRMAN, FEDERAL RESERVE: -- to have a sustained period of strong labor market conditions that benefit all.

From the standpoint of our congressional mandate to promote maximum employment and price stability, the current picture is plain to see: the labor market is extremely tight and inflation is much too high.

Against this backdrop, today the Federal Open Market Committee raised its policy interest rate by 0.75 percentage point and anticipates that ongoing increases in that rate will be appropriate.

In addition, we are continuing the process of significantly reducing the size of our balance sheet. I will have more to say about today's monetary policy actions after briefly reviewing economic developments.

Overall economic activity edged down in the first quarter, as unusually sharp swings in inventories and net exports more than offset continued strong underlying demand. Recent indicators suggest that real GDP growth has picked up this quarter, with consumption spending remaining strong.

In contrast, growth in business fixed investment appears to be slowing and activity in the housing sector looks to be softening, in part reflecting higher mortgage rates. The tightening in financial conditions that we have seen in recent months should continue to temper growth and help bring demand into better balance with supply.

As shown in our Summary of Economic Projections, FOMC participants have marked down their projections for economic activity, with the median projection for real GDP growth running below 2 percent through 2024.

The labor market has remained extremely tight, with the unemployment rate near a 50- year low, job vacancies at historical highs and wage growth elevated. Over the past three months, employment rose by an average of 408,000 jobs per month, down from the average pace seen earlier in the year but still robust.

Improvements in labor market conditions have been widespread, including for workers at the lower end of the wage distribution as well as for African Americans and Hispanics. Labor demand is very strong, while labor supply remains subdued with the labor force participation rate little changed since January.

FOMC participants expect supply and demand conditions in the labor market to come into better balance, easing the upward pressures on wages and prices.

The median projection in the SEP for the unemployment rate rises somewhat over the next few years, moving from 3.7 percent at the end of this year to 4.1 percent in 2024, levels that are noticeably above the March projections.

Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in April, total PCE prices rose 6.3 percent, excluding the volatile food and energy categories; core prices rose 4.9 percent.

In May, the 12-month change in the Consumer Price Index came in above expectations at 8.6 percent and the change in the core CPI was 6 percent. Aggregate demand is strong, supply constraints have been larger and longer lasting than anticipated and price pressures have spread to a broad range of goods and services.

The surge in prices of crude oil and other commodities that resulted from Russia's invasion of Ukraine is boosting prices for gasoline and food and is creating additional upward pressure on inflation.

And COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. FOMC participants have revised up their projections for inflation this year, particularly for total PCE inflation given developments in food and energy prices.

[14:35:00]

The median projection is 5.2 percent this year and falls to 2.6 percent next year and 2.2 percent in 2024. Participants continue to see risks to inflation as weighted to the upside.

The Fed's monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the American people. My colleagues and I are acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials, like food, housing and transportation.

We are highly attentive to the risks high inflation poses to both sides of our mandate and we are strongly committed to returning inflation to our 2 percent objective.

Against the backdrop of the rapidly evolving economic environment, our policy has been adapting and it will continue to do so. At today's meeting, the committee raised the target range for the federal funds rate by 0.75 percentage point, resulting in a 1.5 percentage point increase in the target range so far this year. The committee reiterated that it anticipates that ongoing increases in the target range will be appropriate.

And we are continuing the process of significantly reducing the size of our balance sheet, which plays an important role in firming the stance of monetary policy.

Coming out of our last meeting in May, there was a broad sense on the committee that a 0.5 percentage point increase in the target range should be considered at this meeting if economic and financial conditions evolved in line with expectations.

We also stated that we were highly attentive to inflation risks and that we would be nimble in responding to incoming data and the evolving outlook.

Since then, inflation has again surprised to the upside. Some indicators of inflation expectations have risen and projections for inflation this year have been revised up notably. In response to these developments, the Committee decided that a larger

increase in the target range was warranted at today's meeting. This continues our approach of expeditiously moving our policy rate up to more normal levels. And it will help ensure that longer-term inflation expectations remain well anchored at 2 percent.

As shown in the SEP, the median projection for the appropriate level of the federal funds rate is 3.4 percent at the end of this year, 1.5 percentage points higher than projected in March and 0.9 percentage point above the median estimate of its longer-run value.

The median projection rises further to 3.8 percent at the end of next year and declines to 3.4 percent in 2024, still above the median longer-run value. Of course, these projections do not represent a committee plan or decision and no one knows with any certainty where the economy will be a year or more from now.

Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing rate increases will be appropriate. The pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.

Clearly, today's 75 basis point increase is an unusually large one and I do not expect moves of this size to be common. From the perspective of today, either a 50 basis point or a 75 basis point increase seems most likely at our next meeting.

We will, however, make our decisions meeting by meeting and we will continue to communicate our thinking as clearly as we can. Our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored.

Making appropriate monetary policy in this uncertain environment requires a recognition that the economy often evolves in unexpected ways. Inflation has obviously surprised to the upside over the past year and further surprises could be in store.

We therefore will need to be nimble in responding to incoming data and the evolving outlook. And we will strive to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain time.

We are highly attentive to inflation risks and determined to take the measures necessary to restore price stability. The American economy is very strong and well positioned to handle tighter monetary policy.

To conclude, we understand that our actions affect communities, families and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions.

QUESTION: Thank you. Howard Schneider with Reuters. Two related questions.

[14:40:00]

Did you feel you boxed yourself in with the language you used at the last press conference on 50 basis point hikes in June and July?

And would you please give us, as the table says you can, over what role you played in reshaping market expectations so quickly on Monday?

POWELL: So as you know, we always aim to provide as much clarity as we can about our policy intentions subject to the inherent uncertainty in the economic outlook, because we think monetary policy is more effective when market participants understand how policy will evolve, when they understand our objective function, our reaction function.

And in the current highly unusual circumstances with inflation well above our goal, we think it's helpful to provide even more clarity than usual; again, subject to uncertainty in the outlook.

So -- and I think over the course of this year, financial markets have responded and have generally shown that they understand the path we're laying out. Of course, it remains data dependent.

And so that's what we generally think about guidance and that's why we offer it. And of course, when we offered that guidance at the last meeting, I did say that it was subject to the economy performing about in line with expectations.

I also said that, if the economy performance, if data came in worse than expected, then we would consider moving even more aggressively. So we got the CPI data and also some data on inflation expectations late last week. And we thought for a while and we thought, well, this is the appropriate thing to do.

So then the question is, what do you do?

And do you wait six weeks to do it at the next meeting?

And I think the answer is that's not where we are with this. So we decided to need to go ahead. And so we did. And that's really how we made the decision.

KINKADE: You've just been listening there to the Federal Reserve chairman listing the economic challenges in the U.S. as reasons for raising the interest rates today by 0.75 percent, which is the largest rate hike since 1994.

And he made a forecast there would be more rate rises to come. Want to bring in now global economic analyst Rana Foroohar for more on what this all means.

Good to see you. So how quickly things have changed because, just a month ago, the Federal Reserve chairman said the bank would not raise interest rates by 0.75 percent. It seems the forecasts have been all over the shop.

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: One hundred percent. We are in a new era of tremendous volatility. And I thought Powell did a pretty good job at sort of laying out the truth, which is that things are volatile, inflation is really out of control and neither he nor any of the other central bankers really know where we're going to be in a year.

It kind of reminds me of Treasury Secretary Janet Yellen saying, I got it wrong on inflation. It is a surprising time. And there are just so many vectors in play, from the war in Ukraine, the possibility of Europe cutting off Russian gas, commodities and the commodities weaponization around the world.

You see countries starting to exacerbate what is already a spike in food prices by hoarding food and grain. So there is just a lot going on right now. You still have the tail end of COVID playing out, with lockdowns and supply chain issues in different places.

So I just don't see us getting out of this anytime soon. The one silver lining I would say is that I already see, certainly in the U.S. -- and I think this is true in many rich countries-- and already has been the case in many emerging markets -- that people are really cutting back on whatever they don't need.

So I suspect that, once the markets get the message, that, look, this is a Volcker moment, the Fed is going to do whatever it can. I think that inflation will be reigned in pretty quickly.

I do think that, as much as the Fed thinks that labor markets are running hot, I actually think that we're going to see labor pressure abate more quickly than we think. I think companies are putting in a lot of technology.

So again, that's a wild card factor. There's just a lot in play right now.

KINKADE: It's interesting, Rana, as you're speaking, just looking at the markets, they dropped initially, very slightly when the interest rate hike was announced. Picked back up, dropped again and then they've taken off as soon as the Fed chairman started speaking.

What does that tell you about how investors are feeling going forward, getting some more clarity today?

FOROOHAR: So let me start by saying that some of what happens in the markets at a time like this is about algorithmic trading, it's about the programs rebalancing.

[14:45:00]

Based on certain words that are being heard from the Fed, certain rate increases, they just sort of sell and then buy back.

So some of that is really about the computers. Some of it, I think, is also about investors saying, look, I'm going to buy this dip. Yes, the central bank is pulling out of the markets. Some people are worried that that means that really we're just not going to see the kind of returns we have in the last few decades for some time to come. Others say, hey, I think that the U.S. is fundamentally OK and I'm

going to buy back into this market at a dip when it's cheap. I think we're going to see that story continue to play out over the next few months.

And we really will not get a sense probably until early next year as to where the market is finally going to land and what the new normal looks like.

Is it going to pull back ultimately to sort of a pre-COVID level?

Is it going to pull back to a 2008 level?

Where is that benchmark that we're looking to pull back to?

KINKADE: Yes, exactly. As always, good to get your analysis. Rana Foroohar, good to have you with us.

And, of course, we're going to get much more on this next hour with Richard Quest on "QUEST MEANS BUSINESS."

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KINKADE: Iran is planning to send two satellite launch vehicles into space. The country's defense ministry spokesperson says they've already completed one test. Satellite pictures from Maxar Technologies shows what looks like increased activity and possible preparations for a rocket launch.

Some experts see the tests as a provocation, because the satellite launch vehicles used technology similar to what's needed for intercontinental ballistic missiles.

We will take a short break now. We will be right back.

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Stay with us.

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KINKADE: Well, there's heartbreak today for BTS fans around the world, the K-Pop megastars have announced it's time to go on a hiatus and explore what they can do artistically on their own. They made that unexpected announcement in a televised anniversary dinner video. Paula Hancocks reports from Seoul.

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PAULA HANCOCKS, CNN CORRESPONDENT: It was just a couple of weeks ago that BTS was at the White House, meeting with U.S. President Joe Biden, discussing how to address anti-Asian hate crimes. And now the seven-member group has announced that they will be taking

a break to pursue solo pursuits and solo careers.

Now this all came about as they were having an anniversary dinner, which was televised, they posted to their official YouTube channel. And the seven of them were discussing the fact that they needed a rest, that they needed to take a break.

One of them saying that the band had gone through a rough patch and that they needed individually to find their identity; another also pointing out that, within the K-Pop industry, it is difficult to try and find time to be able to mature.

So the group says that they want to now step back as a group. They're not saying that they are splitting up; they said that they will come back at some point in the future. But for now they want to have their solo careers.

Now it will be a big blow as we've seen by many comments online to their very loyal fans, known as the Army.

Some expressing devastation, disappointment but many also saying they understand the band does need to rest. And one of the band members did address that within that dinner.

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RM, BTS MEMBER (through translator): Right now, we have lost our direction. I just want to take some time to think and then return. But that just feels rude to our fans and like I am letting down their expectations.

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HANCOCKS: Now to say BTS is successful would be a massive understatement. They are the first group since The Beatles to have had three number one albums on the Billboard 200 chart.

Twice they've been nominated for Grammy Awards. And they have fans around the world. Now one thing that has been speculated on a great deal over the past year or so is the fact that many of them are close to needing to do the compulsory military service that you have here in South Korea.

[14:55:00]

As soon as you hit 30, then you, if you are an able bodied man, you have to serve at least 18 months in the military. And the group at this point is between the ages of 24 and 29. So that was also something that was hanging over BTS -- Paula Hancocks, CNN, Seoul.

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KINKADE: Finally some news just in. Dr. Anthony Fauci, the man most closely associated with the United States' fight against the COVID pandemic, has tested positive for COVID-19. The news was announced by the National Institute of Allergy and Infectious Diseases, which he leads. He is said to have mild symptoms and will continue working from home.

Thank you for watching tonight.

We wish you all the best.

I'm Lynda Kinkade. Stay with CNN. "QUEST MEANS BUSINESS" with more on the interest rate hike is up next.