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Early Start with John Berman and Zoraida Sambolin

Federal Reserve Expected to Order Biggest Interest Rate Hike in Decades Today; Biden White House Blames Putin for High Gas Price; Trump's Efforts to Pressure Pence the Focus of Next January 6th Hearing; U.S. Expects Announcement of More Weapons to Ukraine; Ukraine in Desperate Need of Firepower at Critical Stage of War. Aired 5-5:30a ET

Aired June 15, 2022 - 05:00   ET



CHRISTINE ROMANS, CNN ANCHOR: Welcome to our viewers in the United States and all around the world. It is -- it's Wednesday, June 15th. I had to check there first. I'm Christine Romans.


And we begin this morning with the economy and the struggle of course to control inflation. What everyone is talking about just hours from now, the Federal Reserve will make a move that it hopes, hopes, will tamp down these soaring price increases we've seen. Here is how the president put it.


JOE BIDEN, PRESIDENT OF THE UNITED STATES: Inflation, it's zapping the strength of a lot of families.


JARRETT: That inflation hit 8.6 percent last month, the highest rate since 1981. The majority of Americans weren't even alive actually. U.S. families paying more for everything. Gas, cars, food, housing, just to name a few.

ROMANS: Plane tickets, everything. Today the Fed is expected to make its biggest interest rate hike in decades. Three quarters of a point. And that could bring inflation down, but here's the tradeoff. Those same struggling families will end up paying more to take out a mortgage, to shop with credit cards, to get a car loan, or to borrow from college. The medicine for what ails us will taste pretty bad. But the hope is it cools down this inflation overall.

Fear about what's next pushed stocks further into bear market territory yesterday. Right now on Wall Street you're seeing a little bit of optimism here heading into this final Fed decision here.

In overseas market, a mixed performance in Asia, those markets are now closed. And Europe has opened higher this morning. This is a perfect day to talk to our old friend, Greg McBride, chief

financial analyst at He's a guy who knows something about interest rates, all kinds of different rates.

Hi, Greg, how are you?

GREG MCBRIDE, CHIEF FINANCIAL ANALYST, BANKRATE.COM: Good morning, Christine. Great to be with you again.

ROMANS: So tell us, Greg, this rate hike we're expecting to be the biggest since 1994, 75 basis points. What does that tell you about the job the Fed has to do here to get an overheating American economy under control?

MCBRIDE: Well, inflation is far too high. It's in a 40-year high and interest rates are far too low for that. The Fed is behind the curve. They have to play catchup and they're not going to do that by making quarter point baby steps. That's why we saw in May when they raised interest rates, they raised rates by half a percentage point. And up until just a few days ago, we thought they were going to raise rates by half a percentage point. Today, with the inflation report that came out Friday was just a disaster, and that's really kind of forced their hand into taking -- be more aggressive three-quarter percentage step higher in rates today.

ROMANS: And I know we saw factor level inflation number yesterday that just didn't show any signs of cooling in any kind of meaningful way. For people watching at home, you know, for our viewers, how can they expect this increase to affect their everyday life?

MCBRIDE: Yes, a few different ways. I mean, from on the borrowing front, if you're going out to take out a new loan, borrowing will cost more. We've already seen mortgage rates jumped nearly three full percentage points since the beginning of the year. Mortgage rates are closing in on the highest levels in 14 years. But if you go out to buy a new car that's going to cost more than what it would have earlier this year as rates go up.

But also even if you're not in the market to borrow, if you have variable rate debt, credit cards, home equity line of credit, variable rate student loans, those rates are going to be marching higher. And this isn't just about a three-quarter percentage point rate hike today. This is about a cumulative effect. The Federal Reserve could raise interest rates three full percentage points before this year is out.

And so what that means is your credit card rate is going to be three full percentage points higher at the end of the year than where you started. Same with your home equity line of credit or other variable rate debt. So those are really the big exposures on the borrowing side. On the plus side, savings rates are going up, but you have to shop around. A lot of banks are being very stingy about their payouts. Look at the online savings accounts. That's really where you're going to get the best return on your savings.

ROMANS: That's really good advice. And if you're looking to borrow money to buy a car or to do some home improvements or something, don't wait two months. I mean, maybe now is the time to be looking for those loans. We're just saying price rates are going to continue to rise.

Let's take a listen to what former Treasury secretary Larry Summers said on inflation.


LARRY SUMMERS, FORMER U.S. TREASURY SECRETARY: We're still going to have inflation for quite some time to come and we're probably going to have a slowing economy as well. So there is going to be an element of what people call stagflation in our situation.


ROMANS: Is that a risk, Greg, do you think, if the Fed doesn't get this right?


MCBRIDE: Very definitely a risk. And I think even more than that. You know, the risk or the price we end up having to pay could be a recession because inflation is so far out of control and the Fed has to do so much heavy lifting with interest rates in order to get inflation down. It's not going to happen quickly, and as Larry Summers said, it's a significant economic slowdown or an outright recession could end up being the consequence of that.

ROMANS: I think a lot of people -- I mean, we're now five months into a stock market that has been falling. Right? The bear market for the S&P 500, rising interest rates, housing market that has been unattainable for some people, right, because there hasn't been a lot of inventory in the housing market. For consumers, for regular folks, what should they be doing right now, I guess, to really try to recession-proof their money, Greg?

MCBRIDE: I've got three things for you. One, pay down debt, especially that variable rate debt that's most exposed to the rising rates. Second, boost savings. We mentioned how savings rates are going to go up, but also you want to have a little bit more cushion just in case. We don't really know from an economic standpoint what lies ahead over the next, say, 12 to 18 months. Having more savings will help you weather that.

And then third, when it comes to the retirement savings, stay the course. Yes, markets have been volatile, been pulled back, there hasn't been a whole lot of places to hide, but you have to keep making those contributions to the 401(k) every pay period. Keep making those retirement or college account contributions, stay the course. The less you do on that front the better.

ROMANS: Yes. Sometimes inertia is the best financial plan honestly when you are talking about a long-term environment in investing. But always remember to rebalance periodically whether it's good times or bad.

Greg McBride, of, always nice to see you, Greg. Thanks for getting up early for us from Florida this morning.

MCBRIDE: Thank you, Christine. Appreciate it.

JARRETT: I'm taking notes. Stay the course.

ROMANS: I know. Yes. Pay down debt, pay down debt, pay down debt. I say that all the time and people are like, oh, that's so old fashioned.

JARRETT: Yes. But don't divest from your 401(k).

ROMANS: No, no, no. By the time you freak out, seriously, by the time you freak out, you're like I have to sell my stocks, I'm telling you, you're making a mistake.

JARRETT: It's too late.

ROMANS: It's too late. The freakout should have happened a long time ago. Now you have to adapt. Adjust.

JARRETT: Well, so all of this is the reason why President Biden says he is tackling the economy and inflation is his top priority. And that Russian leader Vladimir Putin is to blame for rising prices.

CNN's Tom Foreman takes a closer look at this.


TOM FOREMAN, CNN CORRESPONDENT (voice-over): In the air, on the ground, in businesses and homes, rising prices are scorching American pocketbooks. Yet who does the White House blame? The leader of faraway Russia, Vladimir Putin.

BIDEN: We've never seen anything like Putin's tax on both food and gas. I'm doing everything in my power to blunt Putin's gas price hike.

FOREMAN: Certainly when Russia invaded Ukraine, global energy prices soared as much of the world turned away from Russian fuel exports. Agricultural export problems in Russia and production disruptions in Ukraine have the World Food Program tweeting about ripple effects everywhere.

ARIF HUSAIN, U.N. WORLD FOOD PROGRAMME CHIEF ECONOMIST: These two countries supply about 30 percent of all the wheat exports globally.

FOREMAN: So money watchers like Julia Horowitz say --

JULIA HOROWITZ, CNN BUSINESS SENIOR WRITER: I think Joe Biden has a point and the war in Ukraine is absolutely exacerbating rising food costs and rising fuel costs that are putting pressure on American households all across the country.

FOREMAN: But hold on, America's inflationary surge started in May of 2020 while Trump was still in office and has skyrocketed under Biden. The war effect kicked in only a few months ago. Economists say that bigger trend was driven by the pandemic, which is still disrupting production in places like China and supply chains all over. But they also cite supply's evil twin, demand for goods and services, which is way up, pushed by Americans eager to spend pandemic savings, and that has President Biden himself taking heat.

HOROWITZ: There's a lot of debate right now among economists about whether the stimulus packages that were passed by the Biden administration fueled demand and that supercharged the inflation problem.

FOREMAN: Still, many financial analysts say while Putin does not deserve all the blame, his war in Ukraine has undeniably made inflationary woes worse, even as the White House keeps promising to somehow make it all better.

BIDEN: Jobs are back, but prices are still too high. COVID is down, but gas prices are up. Our work isn't done.

FOREMAN (on-camera): The White House would not be wrong to say the real causes of inflation are a global economy, the lingering pandemic, the fighting in Ukraine, maybe some corporate greed, and Americans going on a spending spree after being cooped up for two years. But that's complicated. It's much easier politically to say, see that bad guy in the Kremlin? It's his fault.

Tom Foreman, CNN, Washington.



ROMANS: Thanks, Tom, for that.

You know, Mark Zandi over at Moody's Analytics sort of broke down inflation and assign -- you know, assign a value to each of these different factors. And if I can zero in here, the Russian invasion of Ukraine is number one. COVID pandemic, number two with supply chains, and reopening labor shortages. Affordable housing crisis, then the American Rescue Plan so that's, you know, government spending, then energy regulation, money supply, and corporate price gouging at the very end.

And yesterday Mohammad El-Erian who's someone -- a famous economist was on with our colleague Poppy Harlow and he has been very prescient about the inflation risk. And he said there are five causes of inflation. He sees, number one, the Fed. The Fed being too easy with money and behind the curve for too long. The Ukraine war number two. Ill-prepared energy transition number three. COVID number four. And then number five is all of that spending -- the government spending after -- and White House spending after the crisis.

JARRETT: So the point is it's a nuisance portrait here.

ROMANS: Yes. Absolutely.

JARRETT: It's a mosaic of problems as you call it.

ROMANS: A lot of reasons.

JARRETT: All coming at the same time. But Putin being at the top of the list.

ROMANS: All right. Still ahead, can Congress help lower gas prices? The ideas on the table have some drawbacks of course.

JARRETT: Plus the U.S. about to approve more weapons for Ukraine. But is it already too late?

ROMANS: First a blunt preview of what's to come at the next January 6th hearing.


ERIC HERSCHMANN, FORMER WHITE HOUSE LAWYER: Get a great effing criminal defense lawyer. You're going to need it.




JARRETT: The January 6th Committee now giving the public a little flavor of what's to come at its next scheduled hearing this Thursday. The panel will focus on the pressure campaign waged by President Trump, former President Trump to get his vice president Mike Pence to violate his oath of office and refuse to certify the 2020 election results.

CNN's Daniella Diaz is live on Capitol Hill for us this morning.

Daniella, the committee is teasing tomorrow's hearing like it's a drama series with this new video clip. Tell us about it.

DANIELLA DIAZ, CNN CONGRESSIONAL CORRESPONDENT: This clip, Laura, features then White House attorney Eric Herschmann who outlined how he warned conservative attorney John Eastman to back off plans for appeals in Georgia based on the election results after the January 6th insurrection.

It's really interesting. He said that he warned this attorney John Eastman, the architect of this plan, and they plan to use this clip to show how he pushed it to former president Donald Trump to overturn the results in Georgia, to file appeals of the results -- the election results in Georgia despite the insistence from his top legal -- top lawyers that it was bad advice and not sound legal advice. Let's take a listen to this clip that the committee teased yesterday.


HERSCHMANN: I said to him, are you out of your effing mind. I said I only want to hear two words coming out of your mouth from now on. Orderly transition. Eventually he said orderly transition. I said good, John, now I'm going to give you the best free legal advice you're ever getting in your life. Get a great effing criminal defense lawyer. You're going to need it. And then I hung up on him.


DIAZ: Laura, remember the goal with all these hearings, there are going to be seven in total in the next couple of weeks is to continue to weave that narrative that former president Donald Trump, then President Trump, knew he had lost the election, had been told he had lost the election but wanted to overturn the election results anyway. And specifically tomorrow's hearing is expected to focus on that pressure campaign against then vice president Mike Pence to stand in the way of the certification of the election results.

So we will continue to see that from the committee going forward and I assume, you know, considering what we've seen in the past, we will continue to hear from people in Trump's orbit saying that they warned people in his orbit that they did not win the election even though he pushed forward to try to overturn the election results anyway -- Laura.

JARRETT: It is quite the revelation to have one lawyer telling another you better get a good criminal defense lawyer. Just a preview of probably what is more to come.

Daniella, thank you. Appreciate it.

ROMANS: All right. New York's attorney general confirms she is now investigating the Trump campaign's fundraising tactics that were exposed by the January 6th House Committee. Letitia James tweeting, "The new details revealed tonight related to January 6th are disturbing. It's my duty to investigate allegations of fraud or potential misconduct in New York. This accident is no exception."

On Monday the House showed that the Trump campaign raised at least $250 million from small donors based on false claims of election fraud. James is already investigating the former president's hotel and golf resort empire.

JARRETT: All right. Let's get to some primary coverage. Republican voters in South Carolina deciding the fate of two House incumbents who defied former President Trump. One won, one lost in last night's primary. CNN can now project Tom Rice, the first of 10 House Republicans who voted for Trump's impeachment last year lost to State Representative Russell Fry in the state's 7th District. Fry was endorsed by Trump and he will clear the 50 percent threshold needed to avoid a runoff.

ROMANS: All right. The other South Carolina incumbent who defied Trump, Nancy Mace, was a clear winner in her GOP primary race. CNN projects that Mace has defeated Trump-backed challenger Katie Arrington in their three-candidate race.


Mace did not vote to impeach Trump but she voted to certify President Biden's election victory earning Trump's wrath in that process, though the former president actually congratulated Mace on her win. JARRETT: Coming up for you, how oil and human rights have Joe Biden

caught between a rock and a hard place.

ROMANS: CNN on the ground with Ukrainian troops using Western weapons.


BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: There is a problem, though. We're told that there is not enough Western ammunition.



ROMANS: Welcome back. 24 minutes past the hour.


The U.S. expects the announcement of more weapons and aid packages for Ukraine today. At a meeting of nearly 50 nations in Brussels, Ukrainian officials warned Russia is gaining ground in the eastern Donbas region and help is desperately needed.


PRES. VOLODYMYR ZELENSKYY, UKRAINE (through translator): Even though Russia has fewer and fewer missiles with each passing day, Ukraine's need for such systems remains because Russia still has enough Soviet types of missiles which are even more dangerous. They are many times less precise and therefore threaten civilian objects and ordinary residential buildings much more.


ROMANS: Defense Secretary Lloyd Austin is in Brussels to host what's known as the Ukraine Defense Contact Group.

CNN Pentagon correspondent Oren Liebermann is there. Oren, nice to see you this morning. Do we have any sense which countries are ready to deliver more weapons to Ukraine?

OREN LIEBERMANN, CNN PENTAGON CORRESPONDENT: We don't yet. We just know from a senior U.S. Defense official that the U.S. expects more announcements of weapons shipments and perhaps equipment shipments as well from some of the nearly 50 countries in attendance here.

This is the second time this contact group, this forum, has been held. The first time was in late April at Ramstein Air Base, and there we saw from a few countries for example Canada and the U.K. that they made some of their own announcements in weapons deliveries. And that's what we're expecting here again. Some countries to come forward and say yes, we're ready to make these shipments.

Crucially we don't yet know what the U.S. will announce if anything. The last aid package from the U.S. was on the first of this month when the U.S. announced $700 million in aid to Ukraine including for the first time HIMARS systems, systems capable of launching a barrage of rockets. But it was only four. Ukraine is calling for more than 300 of those systems and more than 1,000 Howitzers to push back against Russia to have a successful fight against Russia.

To put that into perspective, to this point the U.S. has delivered about a 10th of that number of Howitzers. So Ukrainian officials are calling for more and we'll wait to see what the U.S. and others announce at this forum that's set to start here in just a couple of hours.

Ukraine has made it clear how difficult, perhaps even how desperate the situation is in the Donbas region, specifically in the city of Severodonetsk where some of the most powerful and most brutal fighting is now taking place. They are saying they need these weapons now to successfully fight back and take back their own territory.

So, Christine, they're calling on the countries that are here not just to make statements but to make announcements of deliveries of weapons to Ukraine's armed forces.

ROMANS: And you'll be following it all for us. All right, Oren Liebermann, for us in Brussels. Thanks, Oren.

JARRETT: Meantime, for Ukraine, fighting off Russians has never been a matter of will, it is a matter of weapons. And right now the Ukrainian military needs a lot more firepower.

Here's CNN's Ben Wedeman.


WEDEMAN (voice-over): American symbol, American weapon. Ukrainian troops try out new equipment U.S. supplied M4 rifles fresh out of the box.

Away from the front lines, these soldiers are preparing to join the battle raging in the east.

(On camera): This exercise is designed to accustom Ukrainian forces to the use of Western weapons. This is an American 50 caliber machine gun firing Italian bullets. There's a problem, though. We're told there's not enough Western ammunitions.

(Voice-over): And not enough weapons either. Even in this drill, much of the firepower dates back to the Soviet era.

Ukrainian forces are slowly losing ground in the battle for the eastern Donbas region. Morale here is high.

UNIDENTIFIED MALE: Good morning, Vietnam.

WEDEMAN: Yet no one believes these rifles will halt the Russian advance.

TARAS, UKRAINIAN ARMED FORCES: This, this is not enough. WEDEMAN: Ukrainian officials say Russian artillery outnumbers their

artillery at a ratio of perhaps more than 10 to one, used to deadly effect in the city of Severodonetsk, now almost completely under Russian control. Big guns, not small arms, could help Ukraine turn the tide.

VITALI, UKRAINIAN ARMED FORCES: But I can protect myself as a soldier with this weapon. I can protect my comrades. But unfortunately, I can't clear my country from invaders using only this rifle, so we need more artillery, we need heavy rocket system, and as seriously weapon because it's the modern war.


WEDEMAN: The U.S. and its allies have delivered advanced weapons systems to Ukraine and more are on the way. But the army here is losing men at an alarming rate more than 100 killed in action every day, according to Ukrainian officials.

We need a basic minimum to avoid more casualties, artillery, smart weapons, radar drones and people to train us, says the commander Lieutenant Oleksander, a veteran of the French Foreign Legion. We've shown we will fight. We will learn to use these weapons.