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Federal Reserve Raises Interest Rates for the First Time since 2023; Canada Set to Welcome as E.U.'s Associate Member. Aired 3-3:45a ET

Aired September 17, 2026 - 03:00   ET

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

[03:00:00]

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POLO SANDOVAL, CNN ANCHOR AND CORRESPONDENT: Hi everybody, welcome to our viewers around the world, I'm Polo Sandoval, live in New York, and ahead here on "CNN Newsroom."

An action that the U.S. President says could amount to a hostile act. We'll take a closer look at the European Union's proposal to make Canada its associate country.

And the U.S. Federal Reserve raises interest rates for the first time in more than three years. The move is being met with a fiery response from President Trump.

Plus, Iran-backed Houthi fighters are becoming increasingly involved in the conflict in the Middle East, claiming to have downed a Saudi fighter jet. I'll take you live to the Gulf region of the Middle East.

UNKNOWN (voice-over): Live from New York, this is "CNN Newsroom" with Polo Sandoval.

SANDOVAL: Let's begin with U.S. President Donald Trump as he lashes out after the Federal Reserve raised interest rates for the first time in more than three years. He defended his handpicked Fed chairman, Kevin Warsh, despite Warsh breaking with the President's call to lower rates.

But he attacked the rest of the Fed's board, calling them, quote, "very hostile and very political." He also accused the Fed's board of raising rates for political reasons rather than economic ones.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES OF AMERICA: I talked to Kevin and I said, you might as well vote with the board because it's not going to matter.

The board is very hostile, they're very political. They're raising the rates to, they're raising the rates to make Trump do as bad as they can possibly do.

(END VIDEO CLIP)

SANDOVAL: It is worth noting, though, that the Fed's interest rate decisions are not made by its board alone, but by a broader policymaking group that includes the board, of course.

And the Federal Open Market Committee voted unanimously on Wednesday to hike key overnight lending rate by a quarter point, and that bumps it up to a range of 3.75 to 4 percent. And 16 of the 18 policymakers on the committee expect at least one more rate hike later this year. So that's telling.

And the move underscores the Fed's concern about persistently high inflation in the U.S., which has worsened in recent months due to the war with Iran. CNN's Richard Quest reports from London.

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RICHARD QUEST, "QUEST MEANS BUSINESS" ANCHOR, AND CNN BUSINESS EDITOR- AT-LARGE: The fact that this rate rise was widely expected should not diminish the fact of what has actually taken place. It's the first rate rise in three years, but more importantly, perhaps, it's the indication that the new Fed chair, Kevin Warsh, is serious about getting inflation squeezed out of the U.S. economy.

He made it clear at his important Jackson Hole speech that inflation had been too high for too long and that there needed to be action. And even though the committee had been predisposed to raise rates, it was this final act by the chair pushing it over the edge that everybody will remember.

Kevin Warsh was in no doubt why it was necessary.

KEVIN WARSH, FEDERAL RESERVE CHAIRMAN: It cannot affect any individual price, whether it be oil prices, whether it be foodstuffs at the grocery store. But what we can do and will do is ensure that any change in relative prices don't broaden out, don't have second and third order effects on the economy. That's what we're tasked to do and that's what we will do.

QUEST: What also became clear is that this will not be the first and only rate rise. Another can be expected probably before the end of the year. The Federal Open Markets Committee, the interest rate setting body, is sending the strongest message it can to the markets, that it will deal with this inflation once and for all.

Richard Quest, CNN, London.

(END VIDEOTAPE)

SANDOVAL: Thank you, Richard.

Let's see how U.S. futures are doing right now. You see them slightly up there with Dow up about 385 points, with the Nasdaq up 214 points. You see the S&P 500 there about a little over a 54-point gain in light of that interest rate hike from the Fed. When you look at some of the markets in Asia as well, with trading well underway there, you see sort of a mixed reaction there across the board as well. Now, the key 10-year U.S. Treasury yield, it did close on Wednesday just above 5 percent, it's actually its highest level since 2007. So we're going to keep watching those markets as well in the coming hours.

And as tensions with Washington escalate, Canadian Prime Minister Mark Carney is now looking to strengthen ties with Europe. He's set to address European lawmakers in the coming hours after the E.U. invited Canada to become its first-ever associate member.

[03:05:07]

And President Trump, not welcoming the move, he had some pretty sharp criticism in this warning for Europe.

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TRUMP: Canada has been a terrible trade partner, and no, I don't see that. And if they do that, if I think it's at all a hostile act, I will put very serious tariffs or stop trading with Europe on many things. So if they do that, if Europe does that with a bad intention, if it's a good intention, that's fine; but if it's a bad intention, we'll put very heavy tariffs on Europe.

(END VIDEO CLIP)

SANDOVAL: Whatever the intention, there's still a lot that we don't know, a lot that's still not clear about what being an associate member would actually entail. The E.U. ambassador to Canada told the Canadian press that the partnership would be unlike anything that currently exists without giving any specifics.

Here's how the European Commission President explained it in her State of the Union address just yesterday.

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URSULA VON DER LEYEN, EUROPEAN COMMISSION PRESIDENT: We will integrate defense industrial bases. We will make the Arctic a flagship joint project. We will work on energy-critical minerals and batteries, on A.I., quantum, cyber, and economic security.

This is not a partnership against anyone else, but for our common strengths.

(END VIDEO CLIP)

SANDOVAL: All right, so let's talk about this announcement.

Joining me is Mujtaba Rahman. He's joining me live from London. He's the managing director for your practice with the Eurasia Group.

Mujtaba, it's great to see you. Thank you for joining us.

MUJTABA RAHMAN, MANAGING DIRECTOR, EURASIA GROUP: Thanks for having me.

SANDOVAL: So just let's look at the unknowns of Canada's E.U. associate membership proposal that we heard just yesterday. Important to point out that this is a partnership that doesn't quite exist yet, hence this would be the first. What questions do you have about this proposal that was just announced?

RAHMAN: I would completely stay clear of the associate membership label. I think it's a complete red herring. It has no basis in the treaty, it has no legal basis, it has no institutional form.

I think what Von der Leyen is actually looking to do with Canada is upgrade the cooperation, economic and trade agreement, CETA. Officials in the European Commission in the Brussels bubble have described the ambition between Europe and Canada to me as CETA-plus, maybe CETA- plus.

So that's where I would start from. I think Europe is confronting a challenge from China in terms of its dumping onto the single market. It's confronting an imperialist Russia with the war in Ukraine, it is confronting concerns over America's withdrawal from the world and Trump's unwillingness to ultimately provide for European security.

That's the context that is motivating the European Commission to seek out strategic partnerships with a whole range of countries. And Canada may be the first among equals, but I wouldn't describe that as associate membership. It's an ambition to do more in the areas that Von der Leyen described in her pitch to MEPs yesterday.

SANDOVAL: So that really answers the question of just how likely is it that we will actually see this associate member status. But then the question that I was asking myself when we were watching this announcement live yesterday too was, is this even necessary?

I mean, reminder viewers of these longstanding trade relationships that already exist between Canada and E.U. nations.

RAHMAN: I think Von der Leyen is of the view that someone has to make the bigger argument, right? Given the triangle from hell I described that Europe is confronting, one of the leaders in Europe needs to make the bigger argument about how Europe finds its way in the world. And I think what she was trying to do yesterday was signal an intention to broaden Europe's geopolitical coalition, within which Canada has a very important role to play. If you look at the state of leaders across the European Union at the moment, they are weak, they are struggling.

There are major domestic challenges with insurgent populists, very challenging public finances, leaders with very weak mandates, you know, Chancellor Merz just had a very difficult regional election in Saxony-Anhalt, there are upcoming regional elections that will also be really challenging for his party, Emmanuel Macron leading a minority government as a Presidential election next April and May, far-right leader Marine Le Pen is in a position to win the presidency next year, and so on and so forth.

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And so I think Von der Leyen feels she is best positioned, given what's happening across the E.U., to make the stronger argument about Europe's geopolitical ambition, and wants to use her role and mandate to make that pitch and that argument to a broader set of countries. What I would say is there are other countries in the European community that she is also seeking to bring in closer to Europe, Ukraine being the obvious example, there's also ideas to increase collaboration with the U.K., and they are also becoming unstuck because of internal domestic politics within the E.U.

It won't be any different with Canada. If Ukraine and the U.K. are proving hard to draw closer in, Canada, for its own reasons, will also prove a challenge when it hits domestic politics in the major countries.

SANDOVAL: It is absolutely fascinating as we continue to watch and see, of course, what this means in the long term. Of course, Prime Minister Mark Carney has been actively searching for new markets for Canadian products, so we'll see if this is a route that they'll take eventually.

Nonetheless, so, Mujtaba Rahman, thank you so much for all your valuable analysis and for your time. Have a good day.

RAHMAN: Thank you.

SANDOVAL: All right, now to Iran-backed Houthi rebels who have released a video of what they say is the wreckage of a Saudi F-15 fighter jet, and they're claiming that they shot it down over Yemen. In a statement, the Houthis say that the jet was down with a surface- to-air missile as it conducted what they called hostile operations.

And this video showing Houthi fighters inspecting the wreckage, and you see at one point some of the men raising what appears to be the tail fin of an aircraft, which if you look closely, you can see a Saudi flag insignia there. Important to point out, CNN has not yet been able to verify or geolocate this footage as it was just recently released, but we do continue efforts on that front.

Let's get the latest, though, from CNN's Eleni Giokos, who joins me live from Dubai. Eleni, as we see these pictures that were released by the Houthi group, tell us what else we're learning about this and, of course, the conflict at large.

ELENI GIOKOS, CNN CORRESPONDENT: So it's really interesting when we see this footage, and as you mentioned, CNN hasn't been able to geolocate or verify the footage, but it is absolutely shocking to see the tail fin there, where there's clear Saudi insignia. Now, CNN military analyst Cedric Leighton says that this footage does appear to seem legitimate as we wait for more information.

We haven't heard back from the Saudis as yet, but it does mark an escalation at a time where we're seeing major issues coming through from the Iranian proxy group, the Houthis that are making headway in the Red Sea. And then also Saudi Arabia saying there was a red line attack yesterday where a drone breached Mecca airspace. It is the holiest of sites for Islam, and they downed that drone.

Now, the Houthis are denying that attack, saying that they predominantly focus on energy infrastructure and military infrastructure. But the images we're seeing right now about the purported F-15 is quite an important moment to mark as well.

We also have heard from sources, Polo, and this is significant, that Saudi Crown Prince Mohammed bin Salman had called President Trump twice to ask for intervention with the Houthis, to strike the Houthis, and President Trump denied this request.

There's a lot of questions around the American security umbrella in the region, and importantly, why he would be hesitant to assist with the Houthis. Many say this is because of protecting trade through the Bab al-Mandab Strait, where the Houthis seem to have dominance right now that any U.S.-linked vessels could potentially pass through without any issue.

At the wider, sort of the wider picture here is what happens with Iran. And President Trump says that the Iranians are desperate to make a deal. Now, you and I know we've discussed this line many times over the past few months.

Could this be a moment where we could see diplomacy come to the fore?

Let's take a listen to President Trump, Polo.

(BEGIN VIDEO CLIP)

TRUMP: Well, hopefully, we're toward the end of the war. They want to make a deal. We'll see how that works out.

They're very much wanting to make, Iran is very much wanting to make a deal. We'll see how that works out.

(END VIDEO CLIP)

GIOKOS: All right, so they're wanting to make a deal. I mean, we've seen delays and delays when it comes to the off-ramp to all of this conflict, Polo. But we do know President Trump is going to be meeting with world leaders on the sidelines of the U.N. General Assembly next week and remains to be seen how that will go and perhaps bring some kind of alignment in terms of how Iran views the end of this war and the United States views the end of this as we've seen gas prices, crude prices rising further, creating massive disruption on a global level.

SANDOVAL: Eleni Giokos, live in Dubai, as always, thank you so much for that reporting.

And there's so much more to come here on "CNN Newsroom," including Fiji as it faces a growing health crisis. HIV cases are surging as drug use grows in that part of the world.

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I'll be telling you how the Pacific Island nation is now ramping up its response.

Plus ahead of Benjamin Netanyahu's visit to the United Nations General Assembly, a different tone from New York City's mayor, Waizor Mamdani says that he won't be joining any protests next week.

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SANDOVAL: Welcome back. You're watching CNN.

As world leaders get ready to come here to New York next week for the United Nations General Assembly, Mayor Zohran Mamdani says that he's staying focused on security.

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MAYOR ZOHRAN MAMDANI (D), NEW YORK CITY: I do not have any plans to attend any protests at the U.N. General Assembly, and I have also been in touch with our P.D. in general as we prepare for the U.N. General Assembly. Right now, there are no expected threats that we know of, and we continue to be confident in being able to deliver safety and security for New Yorkers.

And to New Yorkers, I have never encouraged them to protest. What I have always told them is that they have the right to do so in this city. We respect that right.

And this is a city that is proud of the Constitution, proud of the First Amendment, and will continue to do so.

(END VIDEO CLIP)

SANDOVAL: And Mayor Mamdani also struck a different tone when asked Wednesday about Israeli Prime Minister Benjamin Netanyahu and his attendance. Previously, he called Netanyahu a war criminal, and the mayor also discussed whether the Israeli leader should be arrested if he came to New York previously. He later conceded, though, that he does not have the authority to make such arrests.

Now, on Wednesday, he dodged questions about that and focused on hosting world leaders and keeping New Yorkers safe.

One high-profile leader skipping the General Assembly is German Chancellor Friedrich Merz. This comes as political pressure builds at home after his conservative Christian Democratic Union suffered a stunning loss to the far-right AfD party just last week. It was a key state election.

Fiji has declared a national HIV emergency as the Pacific Island nation faces a surge in cases, partly fueled by increasing drug use. Officials are estimating that one out of every 60 adults in Fiji is now living with human immunodeficiency virus, out of a national population of less than a million.

More than 2000 new cases were diagnosed last year, and HIV-related deaths have soared. Fiji has seen a surge in intravenous drug use in recent years, and it has become a crucial transit point for narcotics being trafficked from the Americas to Australia, New Zealand and other parts of Asia.

Joining us now is Dr. Dashika Balak. She is a senior medical officer and also leads the HIV unit for Fiji's Ministry of Health and Medical Services. She comes to us from Melbourne, Australia.

Dr. Balak, it's so good to see you. Thank you for joining us.

DR. DASHIKA BALAK, SENIOR MEDICAL OFFICER, AND HIV UNIT HEAD, FIJI MINISTRY OF HEALTH AND MEDICAL SERVICES: Thank you so much, Polo.

SANDOVAL; So doctor, Fiji first declared an HIV outbreak back in 2025, and they immediately increased testing efforts, and perhaps that's what gave a better view of just the seriousness of this. But why is this happening in Fiji? And now that it's become a national emergency, what is the government doing about it?

BALAK: Yes, Polo, rightfully said, testing has increased our number of detections, and these detections were basically infections that were already soaring in the country. So as we all know, that methamphetamine and injecting drug use has increased, and this has been one of the major routes of transmission.

And from those whom we already know are in care, almost half of them are linked to injecting drug use, and therefore sharing of needles and syringes has become a major factor. Sexual transmission still continues because we have very low quantum use in the country, which also accounts for the other half of the transmission. And we've also seen that HIV is now moving from injecting networks into their partners and their families as well.

We are seeing young people are being significantly affected, and babies are born with HIV. Stigma and discrimination is also around HIV drug use and sexuality, which remains one of the biggest barriers discouraging people from testing and seeking.

So therefore this all has asked for a collective response in the country. And therefore the declaration by the government for the national HIV emergency this week means that we want a whole-of-nation response, which is led by the cabinet, with a bipartisan approach. And this means that this is not just a health issue now, it is the whole- of-nation issue, and therefore a whole-of-nation response.

SANDOVAL: So you mentioned, doctor, the two main factors that seem to be fueling this, of course there's drug use and unprotected sex that is fueling this health crisis. On the first, on drug use, as we just discussed a little while ago, Fiji is uniquely located in the South Pacific, which makes it a transit point for narcotics, according to our reporting that goes from the Americas to Australia and other parts of Asia.

From your position, doctor, are you hearing from government officials if there's a plan to try to tackle the source of these narcotics, so you can at least hit one of the main factors driving this crisis?

BALAK: Yes, Polo, definitely. I mean, from the health arm, we are trying to look after harm reduction and trying to reduce the health harm that drug does.

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But then from the law enforcement side, they are also looking into breaking the supply and demand chain, and therefore setting up plans in order for us to stop the transition of drugs into our country and then to other countries as well.

As I've said, both of these are interlinked, and both of these require a whole-of-nation response.

SANDOVAL: Yes, certainly. And Dr. Balak, Fiji's advisor for the joint United Nations program on HIV-AIDS told CNN recently that only 39 percent of people living with HIV in Fiji actually know their status, with less than a quarter being treated.

In Fiji, just to give other viewers around the world an idea, are there also social dynamics here at play that may keep this topic from being openly discussed or make those who've been exposed perhaps make them feel shunned?

BALAK: So Fiji, or as in a whole the Pacific Island country, there is a big stigma or taboo around talking about, you know, sexuality, HIV, and drugs collectively or on its own as well. And this is something that has led to people not talking about it openly, not accessing services.

And those who've been tested not coming in even for their results forget about engaging into treatment and care services. So yes, as I said, stigma and discrimination still plays a huge part. And we are now encouraging the people of the country to start openly talking about these issues so that people can become comfortable.

We need to normalize the language around this so that people can start accessing services and stay linked to care so that we can retain them.

SANDOVAL: And thanks to you, Dr. Balak, we're able to have this conversation. We certainly hope that that message reaches some of those individuals in Fiji and the families to move, encourage them to move that stigma aside and have those difficult but crucial conversations.

Dr. Dasika Balak, thank you so much for all you do and for your time. Do keep us posted.

BALAK: Thank you, Polo.

SANDOVAL: Of course.

And there's so much more ahead here on "CNN Newsroom," including some fears over A.I. We've been talking about it while there are growing worries over the technology here in the U.S. It seems that the view in China is far less concerned. We'll tell you why.

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SANDOVAL: Welcome back. I'm Polo Sandoval in New York and these are today's top stories.

The U.N. General Assembly gets down to business next week with a number of high level meetings and speeches. President Trump is scheduled to meet with Gulf leaders on the sidelines of the assembly to discuss the war with Iran. And on Wednesday, he again claimed that Iran wants to make a deal and said that he hopes the war is nearing an end.

The U.S. Federal Reserve voted unanimously to raise interest rates for the first time in more than three years. The Fed's Open Market Committee hiked the key overnight lending rate by a quarter point. Fed Chairman Kevin Warsh says that the move is due to persistently high inflation, which has worsened in recent months due to the U.S. war with Iran.

OpenAI says that it plans to report instances of concerning AI model behavior more frequently than it has in the past. The announcement comes after the company identified six more cases of models acting on their own over the past six months. Many industry leaders and lawmakers have been calling for a slowdown in A.I. development, they want to make sure that the technology doesn't escape human control.

Speaker Mike Johnson sent House members home from Washington a little early of the midterm elections ahead of the midterm elections, and they left for their seven week campaign recess without voting on A.I. safety regulations. A group of House Democrats had asked the speaker to cancel the break to address the, quote, "catastrophic risk posed by advanced artificial intelligence." But on Monday, Mike Johnson, the speaker, said that Congress must avoid rushing into A.I. regulation as the U.S. competes with China.

And both the U.S. and China are trying to find the correct balance on A.I., looking for regulations that protect people, but also let the technology advance. But when it comes to concerns about what A.I. might be able to do in the future, each side has a very different view.

Here's CNN's David Goldman.

(BEGIN VIDEOTAPE)

DAVID GOLDMAN, CNN BUSINESS SENIOR REPORTER: So China and the United States have two fundamentally and diametrically opposed thoughts about what could happen with A.I., and they are both trying to regulate it, but they're doing it in very different ways. China believes that AI has the power to unseat the Communist Party and get it out of power and start a populist revolt.

And it doesn't want to do that. So it's trying to regulate what A.I. can tell its citizens. In the United States, it's very different. The concern is that A.I.

might wipe out humanity. And so the industry is trying to regulate itself and stop that from happening, because obviously if there's no humans to use A.I., then you can't make any revenue on it.

[03:35:05]

Now, there are skeptics who say that both are being a little bit disingenuous here, that AI might not have that capability and that it's trying to distract from other kinds of problems that are present in the AI war.

But either way, what is clear is that A.I. is in a bubble. There's a big financial bubble because all of the investment in A.I. is creating one. It's about a trillion dollars of infrastructure spending in the United States and a significant amount of money in China as well.

The question is, when will the bubble pop and will it pop? And no one really knows the answer to that. But if there is a slowdown in spending in A.I., certainly in the United States, the economy stands on two legs and one of them is A.I. The other is consumer spending that is being fueled by the stock market gains that A.I. has produced.

And so if there is a slowdown, it could really cause a lot of pain for investors.

(END VIDEOTAPE)

SANDOVAL: Certainly could. Thank you so much, David Goldman.

And still ahead here on "CNN Newsroom," was it a cost-cutting success or a costly buyout? One of the staggering price tag of the Trump administration's DOGE buyout program. Stay with us.

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SANDOVAL: Welcome back. Here are your business headlines.

Hong Kong has unveiled its first five-year plan aimed at boosting the economy and living standards. The city plans to solidify its position as a global financial hub, while at the same time improving technology ties with mainland China. The plan addresses job creation, education and health, it also calls for building almost 200,000 new public housing units in the next five years.

A congressional watchdog says that the Trump administration spent an estimated $9.5 billion last year for federal workers not to work. The new report from the Government Accountability Office says that it was a six-fold increase in paid administrative leave compared to 2023; much of it was driven by the Deferred Resignation Program, which was tied to the Department of Government Efficiency, or DOGE. The administration has said that the program will deliver long-term savings for taxpayers.

A government fuel subsidy is now in effect in Pakistan, as the country attempts to lessen the impact of surging costs, including for fuel. The Iran war has disrupted global oil and gas trade throughout the Strait of Hormuz, and that's driving up gas prices. Pakistan's subsidy is being offered to motorcycle and small car owners; some business leaders say that it isn't enough, and are calling for the fuel levy to be lowered.

Thank you so much for watching. I'm Polo Sandoval, in New York. "World Sport" is coming up next, and I'll join you again at the top of the next hour with more news.

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