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Quest Means Business
Fed Raises Rates 50 Basis Points For First Time In 22 Years; Joe Biden: Reducing Deficit Will Help Reduce Inflation; Ukraine: Azovstal Plant Holding On Despite Russian Attacks; Markets Soar After Fed Interest Rate Comments; Airbus Revenue Soars Along With Demand For Its Jets; Call To Earth: Deserts. Aired 3-4p ET
Aired May 04, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN BUSINESS ANCHOR: There's an hour to go before the close of trading.
Now look, this should have been a difficult day for the markets. I want you to look closely, we're going to see this chart several times and I want you
to note where the gain comes. It doesn't come at two o'clock. It comes at about 2:30. We need to explain why. It's because the Fed chair was speaking
at the time.
The main events of the day, it's all parts of the same big story today. The Fed takes historic action to quash U.S. inflation. The first half-point
rate rise in 22 years.
Four E.U. nations are breaking ranks over the proposed E.U. ban on Russian oil.
And as travel rebound propels profits of Airbus. It all happens despite Russian sanctions. The Chief Executive of Airbus is with me tonight.
We are live in New York, a very busy day, Wednesday, May the Fourth, I'm Richard Quest and yes, I mean business.
Tonight, the Fed is fighting back full force against inflation by raising interest rates or half a percentage point. The Fed Chairman Jerome Powell
is now delivering its closely watched press conference. These are live pictures at the moment.
The last time the Fed raised rates this sharply was in 2000. And then U.S. inflation was only half of today's rate. However, now in a sign of urgency,
the Feds warned the war in Ukraine is adding even more pressure on prices and weighing down economic activity. And the chair made a direct promise to
the American people.
(BEGIN VIDEO CLIP)
JEROME POWELL, CHAIRMAN, U.S. FEDERAL RESERVE: Before I go into the details of today's meeting, I'd like to take this opportunity to speak
directly to the American people.
Inflation is much too high, and we understand the hardship it is causing and we're moving expeditiously to bring it back down. We have both the
tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses.
(END VIDEO CLIP)
QUEST: Now, look at that market chart again, and let's go through this in a bit more detail because the markets rose after Jerome Powell started
speaking and if you look at the Dow chart, the reason you can see the interest rates have gone up over the last 20 years. And that long trough,
of course, is a result of different parts of recessions and great financial crises and all, but today's Dow, we are pretty much Even Stevens
And then at two o'clock we get the decision and that was expected. So the market doesn't react to that. But at 2:30, it seems that when Powell
discounted the possibility of 75 basis point rises, that's when the market took off.
The Dow is up 600. Look at the NASDAQ and the triple stack, and you'll see them as well. There we go. We're all at roughly very sharply.
Rahel is with us. Rahel Solomon, our Business correspondent. What was it that they saw? What was it that Powell said? I mean, because this is still
a fairly historic rise in interest rates.
RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: It is in fact, but Richard, I think you hit it right on the head there, right, that 75 basis points does
not appear to be actively considered. But I want to point out some of the other language that we heard because it was so important to your point, it
was very clear, Fed Chair Powell saying that we need to be nimble in response to inflation saying that inflation has obviously surprised to the
upside and may continue to do so and that they are determined to respond, very clear message here to the markets.
Let's take a look at what is to come. More half point Fed rate hikes on tap. He did say that. He said that it appears that half a percentage point
may be needed for future meetings, but he ruled out 75 basis point.
Also said that job creation and wage inflation should moderate, so very clear message here, Richard, that the Fed means business.
QUEST: All right, but where are we headed to in a nominal number on interest rates? What seems to be -- because we had that on the dot-plot.
What seems to be the point of neutrality?
SOLOMON: Well, he was asked about that and he said, you know, it's hard to say a specific number, but what they are hoping for is between two to three
If right now, after this rate hike, we're at a hundred basis points or one percent, we still have some room to go. So two to three percent, that
neutral rate, which essentially means the rate at which it doesn't spur economic activity, but it also doesn't dampen economic activity.
But, Richard, the question also is, can they raise rates without spurring a recession?
QUEST: And that, of course is the question of the soft landing we'll come to in a moment. Looking at the statement and the changes, the invasion of
related events before he said, are likely to create additional upward pressure. Now they're saying, it is creating additional upward pressure.
Also the lockdowns in China likely to make things worse.
I mean, they are caught between a rock and a hard place in the bigger picture.
SOLOMON: They sure are because certain things perhaps we saw coming and certain things we didn't like the war in Ukraine. He talked about a lot of
the issues, Richard that you and I speak about on this very show -- supply chain issues being persistent, lasting longer than expected, COVID related
lockdowns in China sort of adding to the supply chain issues, and then of course, the war in Ukraine and the toll it has taken on a human level, but
also on an economic level.
So a lot of the macro factors we are not only just dealing with here in the U.S., but really across the globe.
QUEST: And we'll look at the markets and follow them as they go through. We seem to be at the best of the day.
Rahel, thank you.
Before the Fed's decision, President Biden said he hopes to reduce inflation by reducing the Federal deficit. At the White House meeting this
morning, the President discussed his plans to lower energy and drug costs and emphasize the benefits of his stimulus measures.
(BEGIN VIDEO CLIP)
JOE BIDEN (D), PRESIDENT OF THE UNITED STATES: We recovered faster than projected, a record 6.7 million jobs created last year, the most in the
first year of any President in American history, and the fastest economic growth in any year in nearly four decades.
And looking ahead, I have a plan to reduce the deficit even more, which will help reduce inflationary pressures and lower everyone's costs for
(END VIDEO CLIP)
QUEST: So what is Jerome Powell and the Fed trying to do? It's to engineer the much spoken of soft landing. Think of it as a plane coming in to land
literally, slowing the economy without causing a recession.
Now between full employment and high inflation, the runway is extremely narrow, and there are heavy, tricky headwinds against you.
You've got Russia's war in Ukraine, which the Fed admits is pushing energy prices higher. Also admitting supply chain problems from the pandemic still
disrupting the economy. The U.S. Treasury Secretary Janet Yellen said the Fed needs to handle this aircraft just right.
(BEGIN VIDEO CLIP)
JANET YELLEN, U.S. TREASURY SECRETARY: I'm certain that the Fed will try to use its -- deploy its tools to achieve a soft landing where the economy
can continue to grow, we avoid a recession, but inflation comes down.
I've said before that the Fed will need to be skillful and also lucky to achieve that, but I believe it's a combination that is possible.
(END VIDEO CLIP)
QUEST: Seth Carpenter is with me, Global Chief Economist at Morgan Stanley in New York.
The Treasury Secretary not exactly rousing in her confidence there when she says, you know, it is possible, but you need to be skillful and lucky. The
market seems to think that there will be a recession next year, where are you standing on that?
SETH CARPENTER, GLOBAL CHIEF ECONOMIST, MORGAN STANLEY: So we don't have a recession as the baseline forecast, and I think when you listen to
Secretary Yellen, what she said was you have to be skillful, you have to be lucky, it is true, it will be very, very difficult. But that doesn't mean
that the baseline scenario should be a recession.
Chair Powell in saying that they want to be nimble means that they're going to tighten policy, they're going to be trying to pay attention to
everything that's going on around them, and if they feel like they've gone too far, they're going to reverse course to try to engineer that soft
Maybe, it won't be a soft landing. It might be a bumpy landing, but I think they'll try to avoid a recession.
QUEST: This is what the Chair said on the question of future rate rises, having discounted out a 75-basis point. Have a listen to what he said on 50
(BEGIN VIDEO CLIP)
POWELL: Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the committee that additional
50-basis-point increases should be on the table at the next couple of meetings.
(END VIDEO CLIP)
QUEST: That's as much as walking in front of us with a red flag and a trombone, isn't it? I mean, all things being equal, it is 50 basis points
CARPENTER: Yes, I think that's right and I think what they're trying to do is, is really thread that needle by doing enough to tighten financial
conditions without doing too much.
I think the key there is, if everything evolves according to their current forecasts, and things almost never go exactly according to plan, but 50
definitely seems right for the next meeting in June whether you get one more at the July meeting, I think, is possible, clearly, but it's going to
depend on do we see slowing, especially in the labor market? Do we see the sequential monthly print on inflation starting to trend down? I think
that's where they're going to have a real challenge to make a decision.
QUEST: Because I'm relatively sad, I spent some time today looking at the year 2000. The transcript in fact of the last time we had a rate rise of 50
basis points, then it was Greenspan, and inflation was a fraction of what it is today. Inflation back then, as you can see on this chart is only --
just under four percent.
Now, interest rates were at six percent, and the Committee's discussion back in 2000, was what the balance of risk was. It's very different today.
CARPENTER: Absolutely very different. You know, it's funny, I was actually a staffer in the Monetary Policy Group there at the Fed in 2000 and things
are very, very different today. This will be the first hiking cycle we've seen, I think roughly since the 1970s, where the Fed is raising rates to
try to bring inflation down.
The past couple of decades, it's all been about raising interest rates so that inflation doesn't start to rise too much. And so we are in a very,
very different situation. They are trying to slow things down to try to tame inflation. This is going to be a much more challenging circumstance
for the Fed.
QUEST: I know, it is rear view mirror stuff, but did they just let this thing get out of control? I know omicron came along when they perhaps
should have been raising rates. But to talk about transitory in the middle of last year, when people like you were saying no, it's not transitory. And
if you look, you can see from this graph that we have on the screen, the take off in inflation, since the beginning of 2021 has been phenomenal.
CARPENTER: It has been -- it has been remarkable. You know, if I wanted to throw stones at the Fed and criticize them, I think holding on to the
phrase transitory a bit too long could be one place to criticize them. I think, holding on to how long they were buying $120 billion of securities
per month, that's another place.
But in point of fact, they saw that they made a mistake. They changed their tune pretty dramatically. The two-year note yield is up over 200 basis
points this year alone, year-to-date, so they have changed very quickly.
They've demonstrated to markets and have been serious about it. The markets are forward looking and the market started tightening because the Fed
demonstrated that they were going to hike rates.
So I think you could quibble, but they have clearly repositioned themselves.
QUEST: And finally, Seth, what do you see as the neutral rate?
CARPENTER: Boy, that's such a difficult question. I mean, I'm sympathetic to, you know, the estimates between two and a half and three percent, but I
really think they're going to have to go beyond neutral analysis to slow the economy just because how robust it is.
I think they're going to get up to just under three and a quarter percent next year.
QUEST: Good to talk to you. We'll talk more. Thank you, sir, I appreciate your time.
CARPENTER: Thank you.
QUEST: QUEST MEANS BUSINESS tonight, the E.U.'s plan to fully ban Russian oil may not be complete. Some countries want exemptions from the embargo if
they're going to vote in support.
QUEST: Ukraine's Foreign Minister says the Azovstal steel plant is holding on despite relentless attacks by Russian forces, he called the stronghold
of Ukrainian resistance.
Ukrainian Army says Russian troops tried today to storm the massive facility, which has been under relentless bombing since the fighting began.
It says they had in their words "no success." There is still the problem of getting civilians inside the facility to safety.
Sam Kiley is with me in Kramatorsk.
Sam, I am slightly confused at the current sort of situation there. Are they holding on? Is the battle continuing to rage? Where does it stand?
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, in Mariupol, there are a few hundred civilians and a similar number a bit more of
Ukrainian Armed Forces, Azov Battalion and Marines that say they lost contact with their government about 24 hours ago, reestablished it
following this massive attack launched they say by the Russians.
Now the Russian Ministry of Defense and we've heard this before, so take it with a pinch of salt is saying that they are prepared to organize an
evacuation on May 5, 6, and 7 of people from that very same location even saying that the people evacuated will be allowed to travel in any direction
they want, but Mariupol evacuations have been deeply fraught.
Elsewhere in the country or in the east of the country, the battalions that were being used by the Russians in Mariupol, Richard, are being deployed
elsewhere and pressure is being put very hard in the east, particularly on towns close to where I am here in Kramatorsk which arguably is the
strategic prize for the Russians.
And the consequences of that inevitably are more and more civilian deaths as we found on a recent visit.
KILEY (voice over): Since Russian rockets destroyed her home and killed her brother, all she has left is her mother and her life.
LIUDMYLA (through translator): All at once, grad started falling one by one. There were explosions everywhere, opposite the kitchen in the house.
The windows and frame into the room.
We were standing there. My brother was making the sign of the cross and I'm shouting. I turned away from him to look at the house, and then another
rocket hit, and I was trapped under the rubble.
I can't see my brother anymore. I fell and I don't even know how I woke up and started pulling myself out.
I'm all scratched and battered. I yelled "Vita, Vita." But he was gone.
KILEY (voice over): Liudmyla's (ph) home was flattened in Lysychansk during the battle for Rubizhne, which is now in Russian hands.
Putin's forces have been driving southeast along the Donetsk River and south from Izyum. Russia's stated aim is to capture all of the Donbas and
that includes Luhansk and Donetsk Provinces.
The Governor of Luhansk says that Ukraine can hold the Russians back, for now.
(SERHIY GAIDAI, LUHANSK OBLAST GOVERNOR speaking in foreign language.)
KILEY (voice over): But he says, "We need powerful long range artillery, and that unfortunately is not here yet and it could completely change the
whole war." Without the heavy weapons already promised by the U.S. and other Western allies. He says, "The Russians will destroy everything with
artillery and mortars. They destroy with aircraft, they use helicopters, they're just wiping everything off the face of the Earth."
"So there is nothing left to hang on to."
For Ukraine, this is an existential battle. Reinforcements are being rushed to the frontlines, but there's no sign of the heavy weapons needed to block
a Russian advance, much less reverse it.
The doctor says Liudmyla will be moved west for more treatment, but her fate and that of a 96-year-old mother is unknown.
(DR. DMYTRO BONDAR, ORTHOPEDIC SURGEON speaking in foreign language.)
KILEY (voice over): "We simply cannot physically handle so many wounded with such severe injuries," he says.
This elderly woman, a victim of Russian shelling that morning joins the ward, and more than 13 million other Ukrainians have fled their homes to
escape Liudmyla's fate.
LIUDMYLA (through translator): I was brought here naked. I have nothing at all. No money, no documents -- nothing.
KILEY (voice over): Yet her very survival is a small victory over Putin because she has been neither beggared nor beaten.
KILEY (on camera): Now, there has been a counter attack also by the Ukrainians around Kharkiv, to the north of Kharkiv capturing a village 13
kilometers from the Russian border. Relatively small victory as the Russians continue to put pressure on the north of where I am here in
Kramatorsk towards Izyum with very heavy exchanges of artillery and it's all about artillery this war at the moment, Richard, about pounding each
other, particularly the Russian tactic trying to crush everything in its path before sending infantry in.
And they still have the advantage for now over the Ukrainians in terms of their artillery capacity, but that could change or will change when those
NATO weapons arrive -- Richard.
QUEST: Sam Kiley, who is in Ukraine and we know that President Zelenskyy is speaking at the moment. He is addressing the Danish people -- well, he
is addressing Denmark and is being broadcast. His speech is being broadcast.
We're watching it closely, and apparently it's also being relayed in various public squares. Where if he says something that's particularly
significant tonight, we'll bring that to you, and not only that, we will then come back to Sam to get some interpretation and analysis as and when
So, we are watching that, as it proceeds.
On the economic front, Russia's grip on European energy is now a real problem for Brussels. Several E.U. countries have pushed back on the
union's proposed Russian oil ban.
The idea is E.U. diplomats say they'll give Hungary and Slovakia until the end of next year to completely phase out imports. You can see the amount of
reliance. However, Slovakia says an extra year isn't enough time to adapt, it once a third.
Bulgaria and the Czech Republic have also said they're going to seek exceptions. And a spokesman for the Hungarian Prime Minister says he can't
support the proposed ban in its current form.
(BEGIN VIDEO CLIP)
ZOLTAN KOVACS, SPOKESPERSON FOR HUNGARIAN PRIME MINISTER: We are reliant on Russian oil 65 percent and Russian gas 85 percent. It's a situation we
have inherited. It's not the fault, as a matter of fact, it has remained with us against the efforts of this government for the past five years to
increase energy diversification.
(END VIDEO CLIP)
QUEST: Anna Stewart is with me in London to explain how an embargo across the board would hurt both Russia and the E.U. and goes into some details.
Anna, take us to Europe, please.
ANNA STEWART, CNN REPORTER: Well, yes. I mean, this is going to be very costly for Russia, if it is implemented, if you can get through all those
hurdles, but it will also be costly to Europe and there are so many challenges. Here are a few.
URSULA VON DER LEYEN, EUROPEAN COMMISSION PRESIDENT: So today, we will propose to ban all Russian oil from Europe.
STEWART (voice over): Once unthinkable, a Russian oil embargo is now on the table. It would be a major acceleration of the current plan to end the
E.U.'s Russia energy addiction by 2027 and a significant escalation of sanctions against the Kremlin.
Oil exports account for 37 percent of Russia's export revenues and the E.U. is its biggest oil customer, bringing it $95 billion in revenue last year.
But finding replacements for a quarter of the E.U.'s annual oil imports is no mean feat.
SIMONE TAGLIAPIETRA, SENIOR FELLOW, BRUEGEL: It's true that certain countries like Saudi Arabia or the United Arab Emirates do have spare
capacity, but so far, they have seen, they are not so willing to put the spare capacity into the market, and therefore it will be very challenging
to replace Russian oil in case of a European embargo.
STEWART (voice over): Some E.U. members like Hungary and Slovakia would be hit harder than others, and have so far opposed an oil embargo.
KOVACS: The proposals, the announcements we've seen on behalf of Brussels is simply against Hungarian national security, energy security, and cannot
be done if it's about Hungary.
STEWART (voice over): Oil prices rose 38 percent between January and March, according to the W.T.O. adding pressure onto businesses, households,
and at petrol pumps all over the world.
In an effort to bring those prices down, the U.S. and other I.E.A. member nations are releasing oil from emergency reserves. It is short-term support
for prices, but a longer-term solution is needed.
And even if Europe's supply could be produced elsewhere, a ban on oil might result in Russia retaliating.
TAGLIAPIETRA: It is plausible that a reaction would be for example, on cutting the supply of gas to Europe. Europe has options to diminish its
reliance on Russian energy in the short term. It needs to put all these options in the table in order to be prepared for also what can be the worst
reaction from the Kremlin.
STEWART (voice over): An embargo of Russian oil and gas could see a three percent drop in Europe's growth this year, according to the I.M.F. The
shockwaves of war having far reaching consequences across the continent.
QUEST: So Anna, we've got these countries that say they can't, we've got the countries like Germany that says they probably can. Are we talking
about a ban coming in with exemptions, or fiddling the ban so that everybody gets on board?
STEWART: So this morning, I would have said this was going to be a ban on oil with some sort of one year extension for the likes of Hungary,
Slovakia, maybe Czech Republic, and Bulgaria but clearly, from the Hungarian government who spoke to CNN earlier today, the spokesperson said
they're not looking for a one year extension that wouldn't work at all. Their minimum would be three years, at which point what point is the oil
QUEST: Right. But related to that is the question of what you -- I mean, the oil is one thing. You've told me on this program that the big thing is
the gas. And as I see it, nobody is talking about gas.
STEWART: Now, the E.U. is absolutely not ready for that, and there are certainly some corners of Europe that are very worried that any kind of
embargo on oil could see Russia actually retaliate with gas because while the E.U. is more or less with a few holdouts ready to rid themselves of
Russian oil this year, they are not ready to do that for gas and it's not simple to replace that, it is not nearly as liquid and market, it is
But that said, Richard, it's not easy to replace Russian oil either, and I think some of the holdouts today were saying we want to see the nitty-
gritty. Where is the oil coming from? What capacity is there? And how for, you know, a landlocked country like Hungary, how is it going to get to us?
QUEST: Anna Stewart in London. Anna, thank you.
The markets are strong. I am going to show you. I think we're at the best of the day. The Dow is now 780 odd points, and it's because -- in a
perversion, it's because the bad news wasn't worse. How do you like that for the day?
We're going to get a half-percentage point increases in U.S. interest rates maybe in a couple of months probably, but we're not going to get 75-basis
Pays your money, you take your choice. It's Airbus who is next. They're ramping up production of their bestselling jet, but delaying another. The
Chief Executive, Guillaume Faury is with me after the break.
QUEST MEANS BUSINESS.
QUEST: Hello. I'm Richard Quest. QUEST MEANS BUSINESS with a great deal more.
The CEO of Airbus with us to talk about the strong earnings report but also how the war on Ukraine is affecting the recovery and sanctions in Russia.
Investors are jubilant after the Fed ruled out a big rate rise this year. The closing numbers between now and the top of the hour. But it'll only
come after the news because this is CNN, and here, the news always comes first.
QUEST (voice-over): Beijing has suspended service on buses and subways in its largest district. It is encouraging people to stay home to curb the
spread of COVID. At least 28 cities across China are now under some form of lockdown; 185 million residents may be impacted in some way by these
Police in Los Angeles have arrested a man suspected of attacking the comedian David Chappelle during his show at the Hollywood Bowl. Authorities
say the man jumped on stage and tackled Chappelle to the ground.
The tackler was carrying a replica camera (ph) that contained a knife blade. Police say Chappelle was not injured but it is unclear what the
motivation was for the attack.
Having driven more than one charge in court, it could be thinking of the past in the E.U. The European Parliament said it is -- start working on
rules for universal chargers for phones and other devices. It's in part designed to reduce the 11,000 tons of electronic waste that the bloc puts
out every year.
QUEST: We've got half an hour of trading left. The Dow is just rocketing up, the best of the day, 880 points. Now bear with me, this is on a day
where interest rates went up by 50 basis points. And the actual rate rise didn't have much of a reaction.
But it was when the Fed chair said, we're not really looking at 75 basis points but we are looking at a series of 50 basis points. Whether that
means we think the situation is serious but not calamitous, I don't know.
But the result is the market likes what it sees and as a result the Nasdaq is also very strongly higher.
Airbus says it needs to increase production of its narrowbody jets by 50 percent, just to keep up with rising demands. Q1 revenues are 82 percent
over the previous year not exactly analogous because of what happened.
But the company's guidance for this year remains unchanged, despite disruptions from the war in Ukraine. The titanium supply which comes from
Russia is a major factor. Airbus chief executive Guillaume Faury is with me.
Good to see you as always, sir.
It's interesting, isn't it?
The difficulties remain. There is this war and you're being hit by sanctions in Russia, that you can't trade there. But elsewhere, doing very
GUILLAUME FAURY, CEO, AIRBUS: Yes indeed.
FAURY: It's a very contrasted situation between the different regions of the world. But overall, we see a recovery in the traffic. And we see very
strong demand for our planes moving forward. So we are in a situation to decide to increase the production rate in the perspective by 2025 and
QUEST: The question of Russia. Now you had some notes, the consolidated reports, in which you go through the sanction and the effects. But
obviously you can't service in any shape or form, those Airbus metal, in Russia at the moment, can you?
FAURY: That's true. The sanctions are preventing delivering goods to Russia and servicing aircraft and other products over there.
QUEST: What's going to happen?
Because a lot of those leased planes are still there; there's a question of whether they're going to be insured, paid or whatever. But at some point it
has to be sorted out.
Have you started to work on a post-plan?
FAURY: As far as Airbus is concerned, we can no longer deliver planes to Russia or deliver parts or service. As I said earlier, the situation of the
planes which have been already delivered that are belonging to the alliance or belonging to the lessors, it's only the character of the lessors have to
We are trying to manage our own part of the complex situation we're in.
QUEST: The A321 XLR, which you've announced you're delaying slightly, it's a small delay because of a need to convince regulators of what?
FAURY: It's a delay that is linked to the progress we are making on the development, on the ground tests. We will soon have the first prototype in
flight, for the flight test and the certification process.
And all of this is taking a bit more time that what we had planned in this rather complex environment, after years of COVID, in a moment where there's
maybe a bit more pressure on the regulatory bodies as well.
So this is taking a bit more time. We are just acknowledging that this is the case and delaying the (INAUDIBLE) service, from the end of 2023 to the
beginning of 2024.
QUEST: The aviation industry, yourself included, to an extent, is agog with your battle with Qatar Airlines. Now you won the question of the A320
in the London court but it doesn't really address this problem of the 350.
Do you see a way of resolving this dispute with Qatar over the 350 without a full-scale trial?
FAURY: We don't like to be in the situation we are in with Qatar Airways. It's a very important customer of Airbus. So we keep trying to find an
amicable resolution on the 350. There is indeed a legal case ongoing that we are trying our very best to come to a solution moving forward.
QUEST: Just one more on this, both sides seem to be digging in for a long battle here, which cannot serve anybody's interest particularly well, can
FAURY: We were not the ones who decided to go into legal action. So we have to defend ourselves. But as I said earlier, I would really like to
find a way forward that is of a different nature, for an amicable resolution with Qatar Airways. And we will keep trying to reach that
objective of an amicable settlement.
QUEST: Let's talk about the 350-1000, Project Sunrise. Well, you flew a plane to Sydney and it was there for the announcement. Now you have to do
quite a bit more work on it, not the certification but fuel tax and the like. You're confident you'll make the 2025 deadline. I know that seems a
long way off but in the world of aviation it's not.
FAURY: That's a fantastic contract and we are very happy to have been selected by Qantas for the Mission Sunrise and connecting Sydney to Western
Europe, or to the U.S. Yes, there are developments to be made on the product, to extend the range.
Actually, we have started to work on that project a long time ago, before COVID19 and therefore we have (INAUDIBLE) the project and we think that
2025 is a good timeframe to come with (INAUDIBLE) to service this great plane that would extend the range beyond what is existing today.
QUEST: It's 20 odd hours, good lord.
What do you look forward now in your tenure as CEO?
What's your priority?
Because you've got the 350 and it's up and running and it's nice and you've got Sunrise. You've got a 321 in the formus (ph) sometime. The XLR is very
popular, the LR is very popular and you've got the Neos.
So where do you now focus your CEO attention?
FAURY: Indeed, we have a great range of products with the A220, the A320 family, the very successful family of the A320, including the A321 and the
XLR, the 330 Neo and the 350. So e are very happy with the range of products. One of the priorities is to serve our customers, in particular on
the A320 family that is very much on demand.
That is why we have decided to increase the production rates to be able to serve that demand. But beyond the production and the progress on those
products, you know we have a purpose, that is to pioneer sustainable aerospace for a safe and united world.
And in those words, we are sustainable. So we have put the ambition to decarbonize emission very high on our agenda. And in parlay of all the
actions that we have on the existing range of projects, the improvements to safety, the ramp-up and all those trends, we are also preparing
technologies to be able to bring the next generation of products to the market, including but not limited to the first hydrogen plane.
QUEST: Ah! I knew it we weren't going to get away without hydrogen somewhere in this. Absolutely. All right, sir. We will talk about hydrogen
in the future. I'm grateful for your time tonight. Good to see you again. I'll see you at the IATA meeting, when we will be talking more.
Look at the markets. Just a quick. Look there you go. We are bouncing around 900 at the moment. Strong session across the board.
Sand and heat and a few lonely trees. The world's deserts seem to offer little in the way of biodiversity, unless of course, you know where to
look. This (INAUDIBLE) mission is to reveal the hidden wonders of arid desert.
QUEST: It is "Call to Earth." Deserts making up the fifth of the Earth's land area. Coarse, barren and desolate to the eye but the Rolex Awards
laureate Erika Cuellar Soto knows better. On today's "Call to Earth," the biologist talks about the biodiversity found in the desert and how to
ERIKA CUELLAR SOTO, BIOLOGIST (voice-over): When you start working in arid lands, the first thing you imagine is emptiness. But you would be amazed of
the diversity hidden.
My name is Erika Cuellar Soto. I am originally from Bolivia. But I am here in Oman, working as a professor, teaching conservation, desert biology and
So together with the mangrove, we have a species like this. They depend on the mangrove formation.
I am here at the (INAUDIBLE) university. I have students from different parts of the country. And for me, this is very strategic, because, when
they finish the university, they are fresh biologists and they will go back to their areas in the country.
SOTO (voice-over): We are developing a very, very interesting cooperation with the natural history museum in Muscat (ph). We are developing a project
with the students in order to contribute with samples for the museum to represent the diversity of the country.
Here, as you may see.
The young generations are very interested in technology, so it's a challenge for me to just attract them to see the nature in a different way.
What is the difference?
We just want to take a sample of this.
OK, we might just see just sediment or oil (ph).
They are mainly desert people, to be inside the forest just so refreshing, it's so different to what they're used to seeing.
Have you been in another place like this?
You would be in love (INAUDIBLE).
I take the students to different environments. And mangroves are something that really attract them.
Conservation, in the middle is, it's important in any place in the world. We are facing a very difficult time in terms of health of our planet. I am
hopeful but, at the same time, I want them to be realistic.
I want them to understand that we need to invest in gaining knowledge and advancing in science. I believe that this region deserves attention. It's a
very rich area and we should not ignore it. And we should not ignore any arid lands.
The quote for me there was, I am hopeful but I'm also realistic. You're probably the same, hopeful and realistic. So let me tell you, what would
you be doing to answer the call?
It's #CallToEarth. Let me know and we will continue our discussion.
QUEST: Two breaking new stories to update you. The first to Ukraine. A commander inside Mariupol's besieged Azovstal steel plant says the Russian
forces have now breached the perimeter. Heavy battles are underway in the complex.
He says the Ukrainian forces are making superhuman efforts to fight off the Russians. The mayor of the town says hundreds of civilians are still
trapped in that plant.
Other breaking news:
QUEST: The U.S. secretary of state Antony Blinken has tested positive for COVID-19. He attended the White House Correspondents dinner on Saturday.
However, he said he has not been in close contact with President Biden recently. And he is believed to be well and recovering.
Last few moments of trade on Wall Street to update you. The Fed did what we thought the Fed was going to do. It raised rates by half a percentage
point. But if you look at that chart, you see at half past two, when he started speaking, the market went up like a rocket.
Paul La Monica is with me.
Paul, this is bordering on perverse. They get a half a percentage point rise. When he says in the meeting that there will be another half a
percentage point and the market goes nearly 1,000 points.
PAUL LA MONICA, CNNMONEY DIGITAL CORRESPONDENT: I think, Richard, it's because the market was worried that Powell was even going to be more
hawkish and start preparing investors for the possibility of three quarter- point hikes. Many of them to boot.
I think that even though the Fed has done something today that they haven't done since 2000, this is still being perceived as somewhat dovish -- that's
a somewhat strange thing to say after a half-point a hike.
But I think the fear was that Powell was going to come out guns a-blazing so to speak. And we're going to whip inflation now, no matter what it
takes, if we have to do three quarter-point hikes. He was very blunt when asked about a 75 basis point hike, saying it's not on the table.
QUEST: Right. But if it's not on the table, we are still looking for a neutral rate of between 2.5 percent and 3.25 percent. I guess is a question
of we know where we're going, it just depends on how fast we get there.
LA MONICA: Yes. That is definitely, I think, the right analysis, Richard. It will probably take longer to get to neutral, if the Fed wants to go in a
more gradual pace with rate hikes. But I think Powell really made it clear that he knows that there is a lag between when rate hikes actually impact
Forget about the market; it's that immediate impact. But for consumers, he has to wait and see. And they don't want to tighten too aggressively and
create a recession. He said that he thinks a soft landing is still possible.
There were a lot of snickers probably around Wall Street when he said that, because I think most people think it's impossible to have that soft landing
and engineer it really well. But he's holding out hope that the Fed will be able to raise rates, slow the economy and inflation gradually but not
create a recession.
Or if they do, at least not a severe recession.
QUEST: And that plays into this question of the market.
QUEST: And how there's a general acceptance that prices, the asset prices have to fall to meet this. And employment probably has to rise as well.
Do you see probably signs of capitulation, where the market has, is the market reaching a bottom, falling a bottom or still somewhere off the
What is the consensus view on that?
LA MONICA: Yes, I think right now there is still really not a consensus, Richard, because there are so many questions about what the economy is
going to do next.
Was that GDP number that showed a contraction of the economy a one-off or the start of a troubling trend?
Is the Fed still behind the curve? There are people that I've talked to, I'll have a story on this soon, probably tomorrow, about how they are now
worried about a double dip recession.
The Fed may prematurely declare the war against inflation won, only to have it escalate again and they're going to have to come back and raise rates
more aggressively later on. That could lead to a double dip recession, like we had in the early 1980s.
QUEST: I shall let you get back to your duties of writing the article so I could read it tomorrow. Thank you. Paul La Monica.
We will have our "Profitable Moment" after the short break.
QUEST: So rates went up by 50 basis points today. The last time we saw that was in 2000. In those days, inflation was under 4 percent but interest
rates were 6.25 percent. There has been a major shift in the economy since then.
If you think since 2000, we've not only had the great financial crisis, we also had the debt crisis and we had the pandemic and now we've got the war
in Ukraine. So the economic undercurrents are very different.
And even reading the transcript of that meeting, back in 2000, where they raised rates, there was much more nuance (ph) for that inflationary
pressures and worries about what might happen next.
Today, it's a full five-alarm fire. Put out inflation fast, as it's gone over 8 percent and the possibility of higher than the Fed is not messing
around. And that was the message today. Whether or not they had to do a three-quarter point or half a basis point, half a percentage point,
whatever, does not matter.
The message that Powell wants again and again is that the Fed will take no truck with inflation and that means doing whatever it takes, if you like,
taking Draghi's words. Maybe he should use them. It might help convince the markets. Otherwise, we've got more of the same to come.
Now that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable. The
closing bell is ringing, the Dow is up, it's 930 points.