Return to Transcripts main page

CNN Newsroom

Fed Hikes Rates For Seventh Time This Year; Warren Unveils Bipartisan Bill To Crackdown On Crypto Money Laundering; Nearly 3 Million People Under Elevated Risk For Tornadoes. Aired 2-2:30p ET

Aired December 14, 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]

(COMMERCIAL BREAK)

VICTOR BLACKWELL, CNN ANCHOR: Hey there, I'm Victor Blackwell. Welcome to CNN NEWSROOM.

BIANNA GOLODRYGA, CNN ANCHOR: And I'm Bianna Golodryga.

Any moment now, the Federal Reserve will reveal how much it will increase interest rates. The decision will impact how much more expensive it will be to borrow money for homes, cars, and other loans. The move is to fight persistently high inflation that's hurting the family budget.

BLACKWELL: Now, there are signs the Fed's method may be working with inflation metrics cooling recently. CNN's Matt Egan is outside the central bank. Matt, do we have a decision?

MATT EGAN, CNN REPORTER: We do. 50 basis points. The Fed just delivered its seventh straight interest rate hike. But it decided to slow the pace of those hikes after four straight moves of 75 basis points.

Now, this was expected but it is significant nonetheless. It is a sign that Fed officials believe that their tough medicine is starting to work. It's starting to cool off inflation. They're still pumping in medicine. They're just lowering the dosage a bit.

Now, this still is a big increase in interest rates. And it also lifts the Fed's target range to the highest level since late 2007, just before the great recession, and that means higher borrowing costs for everyone. We've already seen mortgage rates spike to the highest level in almost 20 years, credit card rates are at record highs, all that will probably go higher.

Now, what's interesting is that despite the fact that the Fed is slowing the pace of their interest rate hikes and despite signs of cooling inflation, the statement that accompanies this decision was basically identical to the last meeting. The only things that really changed were the date and the target range. And the Fed also reiterated that inflation "remains elevated, and that ongoing rate hikes are probably going to be appropriate to try to get inflation down." So, I think they're trying to send a message here that there's still more work to be done. They're not going to declare victory just yet. Also, Fed officials, they issued new projections here. They're penciling in more rate hikes next year. They see rates going up by another three-quarters of a percentage point. They also slashed their GDP forecast they now see near-zero growth next year. They bumped up the unemployment rate forecast. All of that is an acknowledgment from the Fed that this war on inflation is causing some real economic pain.

GOLODRYGA: All right, Matt, stay with us. We want to bring in Mark Zandi, chief economist for Moody's Analytics, and CNN Chief White House correspondent Phil Mattingly. So, let me start with you, Mark, and get you to respond to what we've seen from the Fed today. This was widely expected. But it comes after a slew of data showing that inflation is in fact cooling. Does that give you any hope that we could indeed see a soft landing and perhaps avoid a recession overall?

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: Yes, it does, Bianna. I think I'm much more optimistic today than I was a month or two ago because there's inflation numbers we got yesterday, they were about as good as they get. It does indicate that inflation is cooling off. Now, obviously, inflation is still high, still a problem for many Americans, and it will be for the next year, the Federal Reserve still has more work to do. And that's what they were saying today that they will raise rates further going forward.

But it feels like we've gone down the soft-landing path. Maybe soft landing is not the right word, it's going to feel a little uncomfortable, but certainly, the path that does not include a recession. So, yes, I'm growing more optimistic that we can make our way through without suffering an outright economic downturn.

BLACKWELL: Phil, anytime we have a question for this White House about the Fed, they always say they respect the independence of the Federal Reserve, but they are promoting that they're doing other things that try to bring down inflation, bring down the costs of items to everyday families. What are they doing? What are they promoting?

PHIL MATTINGLY, CNN CHIEF WHITE HOUSE CORRESPONDENT: You know, I think when you talk about the actual inflation itself, a big element of what the White House has done in the economic side of things to try and address inflation has largely been in the periphery, right, trying to bring down costs on other issues, whether it's the cost of prescription drugs, whether it's the cost of internet for some people. That has been kind of their primary course of action, something that underscores the reality that there's just not a lot on the monetary policy side of things that the executive branch can really trigger to some degree.

The one area, I think, where they very clearly feel like they've had some success, it took time, and it's still somewhat fluid depending on how things go is on the supply chain side. There is no question the scale of the effort, particularly on the ports, but even on a rail, even on shipping as well, just generally has been a central focus of President Biden's economic team over the course of really the better part of the last year and a half in terms of how they've operated, the policies they've been put in place.

[14:05:09]

And keep in mind, guys, these are really kind of supply chain elements that have no major federal government effect on them. So, this is entirely convening, trying to get people to change how they operate on the business side. They feel like they've really cleared up a lot of the critical bottlenecks here that have helped streamline this process.

Still, there is an acknowledgment that a couple of things. One, they know that this is not necessarily a very surefire direction towards a soft landing, that they feel very good, particularly as Mark was saying about the CPI data yesterday but also that things can change very quickly in this moment in time. So, not exactly celebrating in terms of this is all ending because inflation is still extraordinarily high, but feeling like what they've done has had an effect. And what the Fed has done, which is obviously the central player here is clearly having an effect as well.

GOLODRYGA: And the supply chain system, we should note, really effectively broke down because of the pandemic over the past few years. And, Mark, I'm just curious how much you're going to be focusing now on China, specifically, the world's second-largest economy, as it is now lifting COVID restrictions, but many would say that they are not prepared at all for the widespread number of cases that they are expecting right now. Could that once again, impact the global economy and the supply chains?

ZANDI: Yes, good point. I mean, they did bring down the no-COVID policy, so it means that they're not locking things down when COVID cases show up. And so, we won't see those kinds of disruptions. But you know, it does mean more infections, a lot of reports of people getting sick. So, I don't think the supply chains are going to iron themselves out completely quickly. You're going to have to work through all the illnesses.

But good news is as you move into the 2023 Spring-Summer, hopefully, the virus fades at that point in China, to get it back up and running full speed, that should really help out and bring inflation down even further. I mean, one place where you really see this is in vehicle prices -- to go new vehicle prices because the Japanese automakers and the German automakers which are big global producers, they get a lot of what they need from China, and they haven't been getting and so they can't produce. But as those supply chains improve, they get the parts they need, supplies they need, they produce more cars, and vehicle prices start to come in, another reason to be increasingly more optimistic about the inflation outlook here. Not next month, next quarter, but certainly by this time next year.

BLACKWELL: To the control room, if we have it, can we put the big board up as I asked Matt Egan this question about what the response from Wall Street is. We were seeing some gains. And then right at two o'clock, we're now at about where we started the day dipping in single-digits into negative territory. Matt, I know you don't have this in front of you but for a market that was doing pretty well before two o'clock, what would be the reaction now that would see that drop off at -- a drop off the cliff here?

EGAN: Well, I think it would probably be because the statement, as I mentioned, was identical. The Fed really didn't acknowledge anything about the cool-off in inflation. They didn't drop any hints yet about what it's going to take for them to stop raising interest rates altogether. So, there may be some disappointment there.

I would caution though, that the knee-jerk reaction is often wrong or at least reverse. We actually saw the exact opposite last time, the last meeting, markets popped up when the statement came out. There was a lot of enthusiasm about some of the framing in that statement. And then what happened was the Fed Chair Jerome Powell came out at 2:30, and he struck a cautious tone -- a hawkish tone. He signaled more interest rates, the hikes to come. So, we could see this go back and forth.

I think that what we're looking to hear from chair Powell coming up in the next 20 minutes or so, is how he frames this cool-off in inflation. We know that the -- we know that the White House was celebrating the better inflation numbers. We know that investors have been breathing a sigh of relief. How happy -- how pleased are Fed officials about that?

And then what is it going to take for them to pause this interest rate hiking campaign? At what point does he expect the Fed to be able to stop raising interest rates maybe next spring? And in -- you know, what is it going to take in terms of inflation numbers to get there? So, we'll see what chair Powell has to say in the next 20 minutes or so.

GOLODRYGA: Yes. On that note, Mark, are you concerned at all that perhaps we're now seeing a Fed that is focused on overcorrecting now and could as a result inadvertently bring the U.S. into a recession that didn't necessarily have to be?

ZANDI: Yes, that's a risk. You know, the -- they made a mistake earlier in the year by not raising rates quickly enough when there was gathering evidence of inflation developing and the economy is very strong. I don't want to be too critical because who would have predicted the Russian invasion and the impact that had on oil prices so hard to be too critical here, but they got it wrong. So, it's -- there's certainly riskier if they get it wrong again on the other side that they, you know, continue to raise rates too high, too fast, and push the economy into recession unnecessarily so.

[14:10:09]

So, that's why I think, Bianna, what they're going to do here is they're going to follow through on the script they've laid out for us, they're going to raise rates another half point or so over the next couple of three months, and then stop, take a look around, see what's happening with the job market and wages and on obviously, the inflation numbers. If they continue to improve like we saw last month, I think that's the end of the rate hikes. So, that'll be the end of it. It may take them a while to get rates back down to something we all feel comfortable with because it's going to take a while to get inflation back down to something we all feel comfortable with. But I think that might be the end of the story. But if they keep pushing, you're right. I mean, they could certainly inadvertently break the economy pushing the recession unnecessarily so.

BLACKWELL: Mark Zandi, Phil Mattingly, thank you. We, of course, are standing by for comments from the Fed Chair, Jerome Powell. And, Matt Egan, we'll bring you back after we hear from Powell. Thank you.

GOLODRYGA: We'll be watching the Dow as well as it gets below 100 points now.

BLACKWELL: Yes.

GOLODRYGA: Well, one day after the indictment of former FTX CEO Sam Bankman-Fried, a bipartisan push to regulate cryptocurrency is now gaining steam on Capitol Hill. Senator Elizabeth Warren wants to require crypto firms to follow the same rules as banks. She introduced a bill to close the loopholes that allowed digital assets to be used for money laundering.

BLACKWELL: The Massachusetts senator and other lawmakers held a hearing today to talk about the FTX crash and its effect on consumers. Meanwhile, Bankman-Fried is still in jail. He was denied bail in the Bahamas after being indicted on eight criminal charges. CNN correspondent Carlos Suarez joins us now from Nassau. Do we know how soon he might be extradited back to the U.S.?

CARLOS SUAREZ, CNN CORRESPONDENT: Well, Victor and Bianna, it is unclear at this hour just when the 30-year-old might be extradited to the U.S. He's expected to remain at this Bahamian prison here behind me through at least February. That's when he has another court hearing here in Nassau.

Now, yesterday during his initial appearance, SBF said that he was going to challenge his extradition to the U.S. And you can understand why. If he's convicted of all of the charges out of New York, he faces the possibility of up to 115 years in prison, Victor and Bianna.

GOLODRYGA: Carlos, we're hearing more about the role his parents may or may not have played in the company. They were both professors at Stanford at one point. I believe they're there with him in the Bahamas. Can you talk us through what connections if any they had to the company?

SUAREZ: Yes. So, that is one of the looming questions here in the Bahamas. His parents have been here for the last several days, specifically, what role if any, they had within the FTX company. The two of them, they were in court yesterday. And we tried to get their reaction to the allegations that have been made against their son, as well as an allegation that was made by FTX's new CEO who said that the company was looking into what role if any, the parents may have had, here's what that CEO told lawmakers yesterday.

(BEGIN VIDEO CLIP)

JOHN RAY III, CEO, FTX GROUP: In our first-day papers, we indicated that Mr. Bankman had given legal advice.

UNIDENTIFIED MALE: OK. Had he been an employee of FTX hasn't been reported?

RAY III: You know, I don't know if there's -- if we actually have an employee status.

UNIDENTIFIED MALE: OK.

RAY III: We certainly receive payments from -- the family did receive payments.

(END VIDEO CLIP)

SUAREZ: And so, when we approached both his parents, they told us that they did not want to comment about either of the allegations. In fact, throughout the entire hearing, the two of them mostly kept their head down, and then eventually did express some disbelief in the fact that their son is going to remain behind bars for the foreseeable future, Victor and Bianna.

GOLODRYGA: All right, Carlos Suarez, thank you.

BLACKWELL: A severe storm is threatening millions of people across the country right now. Blizzard conditions and deadly tornadoes have created -- look at this, a lot of destruction. We'll take you to one of the towns hardest hit by this line of storms.

GOLODRYGA: And a controversial border policy is set to expire next week, which could lead to an unprecedented surge of migrants. What the Biden administration is doing to try and stem the influx?

(COMMERCIAL BREAK)

[14:18:38]

GOLODRYGA: Right now, millions of people in the southeast are facing a tornado threat due to a massive storm system that continues to track east. New video in from southern Louisiana, you see there, shows what appears to be a tornado touching down in New Iberia. Police there say several homes were damaged and people might be trapped.

The same storm system tore through the northern part of the state just yesterday. Officials near Shreveport, Louisiana, say a boy and his mother died after a tornado destroyed their home.

BLACKWELL: About 100 miles away in the town of Farmerville, a tornado ripped through a mobile home community, at least 20 people were hurt there. CNN meteorologist Derek Van Dam is live in that town. Derek, what are you seeing?

DEREK VAN DAM, CNN METEOROLOGIST: Yes, we are seeing complete devastation here, especially in the mobile home park which is directly behind me in this. I wanted to show you this just really incredible thing. This is actually part of the foundation that held together one of the mobile homes, the modular homes behind me. And we'll take you to the skies here with our drone in just one moment. But this has got to be 70 feet of pure iron. So, that really just puts into perspective, the force of mother nature.

Just walking around. You can hear the usual sounds of a natural disaster with alarms blaring in the homes and residences behind me. Look at this. Just projectiles that were splintered from homes. Copper wire left here and its wake.

[14:20:06]

And I actually happen to speak to one of the tornado survivors who rode out this horrific night, last night when the tornado came through. And you will not believe her story of heroism that she did to save her and her friends. Listen.

(BEGIN VIDEO CLIP)

BETH TABOR, FARMERVILLE RESIDENT: We had the warning, so my roommates and the baby were in their room, and I grabbed them and threw them in the bathroom, put them in the tub, and then I laid on top of them because I could hear it coming so I knew what was going on.

VAN DAM: What did it sound like to you?

TABOR: It sounds just like they say, it's a freight train. And it was about 20, 25 seconds, then some more. I don't know if it was powerlines or what it was but once everything stopped all the noise that so when I know it was safe to come out.

(END VIDEO CLIP)

VAN DAM: She shared with me that she was a former EMT personnel and she had to perform triage on some of her neighbors. Those are part of the 20 that had injuries, some of them critical, just in their backyard. And it took about an hour and a half for EMTs to actually arrive to this very location because there was so much debris covering the roads. I'll leave you with this. This is a fully overturned flatbed truck, shows you the full power of what a tornado can do, Bianna.

GOLODRYGA: Never get enough. It's just the amount of power that these tornadoes have. Every time we cover these storms, you can never get used to it.

BLACKWELL: Yes.

GOLODRYGA: I mean, you just see the devastation there and what these families are going through. Derek Van Dam, thank you.

BLACKWELL: The Biden administration is preparing for a surge of migrants at the border which is days until the Trump-era immigration policy expires. GOLODRYGA: Yes. Title 42 was invoked at the beginning of the pandemic and allowed officials to turn people away at the border. This morning, a large group of migrants was escorted from a border crossing site in El Paso to a processing center. CNN's Priscilla Alvarez joins us now. So, Priscilla, what is the Biden administration doing as they prepare for this potential deluge now at the border?

PRISCILLA ALVAREZ, CNN WHITE HOUSE REPORTER: Well, they're ultimately trying to shore up enough resources across the U.S. southern border to meet the number of people who are crossing. So, what does that look like? Officials tell me it's setting up temporary facilities, it's scaling up air and ground transportation to move people or to also remove them back to their origin country, and increasing the number of referrals for prosecutions, for people who have crossed the border repeatedly. Now, we should remind viewers that the reason that this authority is ending is because of a federal judge who ordered that the administration stopped using this authority that since March of 2020, has allowed officials to turn migrants away at the U.S.-Mexico border.

Now, the administration knew that this was going to end at some point. And they have been receiving calls in recent weeks from lawmakers who have been asking about what happens next once this authority is gone. All the way up to Senate Majority Leader Chuck Schumer, whose sources tell us called President Biden's Chief of Staff Ron Klain to relay some of those concerns and try to get a sense of what is going to happen in the next few days and weeks.

And we have seen a sneak peek of that to a degree in El Paso, Texas where we have seen scenes of hundreds of migrants who are arriving there, just that one section of the border often lining up because they're asking for asylum. And El Paso city official really bluntly, put it by calling it an emergency. Take a listen.

(BEGIN VIDEO CLIP)

MARIO D'AGOSTINO, EL PASO DEPUTY CITY MANAGER: Title 42 going away with the numbers we're seeing today is a -- is a true emergency for the community. It's a federal crisis that's happening within the -- in the border of El Paso.

(END VIDEO CLIP)

ALVAREZ: Now, the concern for the administration is that this is just the beginning of a challenge ahead, Bianna and Victor.

BLACKWELL: Priscilla Alvarez for us, thank you, Priscilla.

GOLODRYGA: Well, there is a framework for a spending deal on Capitol Hill but that's causing tension already between two top Republicans. Why House GOP Leader Kevin McCarthy is unloading on Senate GOP Leader Mitch McConnell?

BLACKWELL: And some new CNN polling reveals what voters want in the 2024 presidential cycle and maybe more important here, what they don't. We'll talk about it next.

(COMMERCIAL BREAK)

[14:28:58]

GOLODRYGA: So, negotiators on Capitol Hill say that they've reached a bipartisan framework for a one-year spending deal. But key Republican leadership may not be on the same page here.

BLACKWELL: House GOP Leader Kevin McCarthy slammed Senate Minority Leader Mitch McConnell for working with Democrats on that spending deal. CNN's Melanie Zanona joins us from Capitol Hill now. So, we've heard that you know, behind the scenes, McCarthy was open, at least to a large spending deal to wrap up the year. What is happening here publicly? What's going on?

MELANIE ZANONA, CNN CAPITOL HILL REPORTER: Yes, this is the hope yes of the vote, no caucus. Many Republicans that I talked to you believe that McCarthy is actually privately rooting for this spending bill to pass. The reason is because if he does become a speaker, the last thing he wants to deal with is having to address a potential government shutdown upon immediately taking power.

But at the same time, he's been struggling to win over some of his conservative critics. They have been pressing him to take a harder line on spending issues, to stand up to McConnell, and on a number of those things. And so that is why you see McCarthy out there publicly railing against the spending deal. And he took a public shot at McConnell who has been trying to work behind the scenes to get this deal done.