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Quest Means Business

Fed Hikes Rates By 0.75 Percent For Third Meeting In A Row; US Stocks Fall After Fed Raises Rates By 0.75 Percent; Putin: The Territory Of The Motherland Will Be Defended; New York Attorney General Sues Trump; Kenya's Central Bank Sees Signs Of Easing Inflation; Call To Earth; IKEA Raises Furniture Prices. Aired 3-4p ET

Aired September 21, 2022 - 15:00   ET

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

[15:00:23]

RICHARD QUEST, CNN INTERNATIONAL HOST: An hour to go on trading. What a day.

The Fed has raised interest rates by 75 basis points, three quarters of one percent, and the signal is that there is more to come. Look at the markets

and you'll see how they've digested it, all over the place. That sharp drop immediately after the statement and then a rise back into the green.

We'll analyze what it was he said that made the markets decide things weren't as bad.

The markets and the events of the day, they are one and the same.

Jerome Powell says the Fed will keep at it, raising rates until inflation is brought under control. "Strongly committed" is the word he uses.

Meanwhile, higher interest rates, food prices, and fuel. It is creating challenges for Africa's economies. Kenya's Central Bank Governor with me

tonight.

And New York's Attorney General is suing the former President Donald Trump and three of his children. It's fraud, he says related to the family

business.

We are of course live at the New York Stock Exchange. It's a busy day for business, economics, and finance. This is the place to be.

It is Wednesday, September the 21st. I am Richard Quest. I mean, business.

Good evening from the stock exchange. The Federal Reserve is making good on its promise to stomp out inflation at any cost. In the last hour, the Fed

announced interest rates will rise 75 basis points, three quarters of one percent. It is the third time in a row it has raised rates by that amount,

and you have to go back decades to find a previous rise of even one three- quarters of a percent.

The Fed has increased its projections for unemployment and inflation and lowered its forecasts for economic growth. The Chair, Jerome Powell is

speaking at the moment. He said Central Bank is ready to inflict short-term harm in order to reduce inflation.

(BEGIN VIDEO CLIP)

JEROME POWELL, US FEDERAL RESERVE CHAIRMAN: My main message has not changed at all since Jackson Hole. The FOMC is strongly resolved to bring

inflation down to two percent, and we will keep at it until the job is done.

(END VIDEO CLIP)

QUEST: Now the Fed is raising rates, it is because of course, you and I have talked about it many times, inflation.

So tonight, we're going to look at this on several different sides. The war in Ukraine, which drives volatility in energy markets. We will consider

that bearing in mind the offensive in Luhansk.

We will speak to Governor of Kenya's Central Bank about the fragility in emerging economies. Will they get clobbered as rates go up, and the CEO of

INGKA Group will be here to discuss supply chain challenges.

Let's begin though with the Fed and the US economy and what they expect. They have this document, it's called the dot-plot. It shows where they

believe rates are going to go in the next year.

They also have this chart of economic projections of the members. Rahel Solomon is with me.

What stands out from you on the dot and the projections?

RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: Well, I think what is interesting, Richard, as you know is this is the first time we're getting

the dot-plot since June and when you look at it, you can see that FOMC participants see rates rising much more than we had seen in the last dot-

plot.

I want to show you that document you just pulled up there, the dot-plot from this most recent report, and you can see six out of 19 FOMC

participants see rates hitting the 4.75 percent to five percent range in 2023.

I want to compare this dot-plot, however, to the last dot-plot, Richard that we got in June and that I think tells the better picture, right? You

can see directionally that we weren't close to the five percent the last time the FOMC provided this update.

So, what does it mean? Well, it means that rates are moving higher and the FOMC knows that. It means that they are not done yet.

When we look at sort of when might we start to see the first rate cuts? Well, we're not looking at until 2024, at least, not according to this

data. So, we are in the early days of this.

QUEST: Right, and Powell made it clear. They will remain higher for longer, but the projections as well, also extremely relevant. So for

instance, the new medium projection now on growth this year is 0.2 percent down from 1.7. Unemployment rate next year goes from June's projection of

3.9 to 4.4. So, what we have here is a classic stump on the brakes to bring down inflation, which will also raise the level of unemployment.

[15:05:10]

SOLOMON: Absolutely. I mean, what you have here, Richard, is the Fed acknowledging at the outset, there will be some pain, right? There will be

some darkening in economic conditions. As you pointed out, it expects the unemployment rate to rise to 4.4 percent.

Now, arguably we're at 3.7, which is historically low, but still sees unemployment rising, meaning people will lose their jobs, sees GDP growth,

barely eking out any positive growth for the year, as you pointed out two- tenths of a present.

So this is an acknowledgement from the Fed that look, we are raising rates because we feel like we must contain inflation, but that will cause some

darkening on the economic front, and as Powell has said, now repeatedly over the last few months, that will mean pain for Americans and arguably,

many around the world.

QUEST: Okay, so Rahel, we now put this into the bigger picture of the week. We have -- we already had the first Central Bank -- Sweden, raised

rates, a whole one percent. Now the Fed, we've got the Bank of England. It's not coordinated per se, but it is coordinated rate rises across all

major Central Banks and economies, except Japan -- except Japan.

SOLOMON: Fair enough, except Japan. It is interesting, because yesterday, we showed sort of all of the major Central Banks and you're right, I mean,

it is not coordinated, per se, but you can see that they are moving in lockstep.

Here is the thing, I mean, globally, many of us are dealing with the same issue, right, which is the global inflation. The challenge, however, the

risk, however, is that we are all facing the same threat, which is a global recession.

So the risk of this could not be more pivotal. It could not be -- the stakes could not be higher here. But you're right, Central Banks around the

world. And by the way, we're hearing from 12 this week, including the US Federal Reserve and the Bank of England, as you pointed out, most of whom

are planning to raise rates.

QUEST: Rahel, we will talk more. Thank you.

Markets initially fell sharply after the announcement, and then they recovered losses as the news conference got underway. Take a look, the Dow

is now up 156 points. Investors are believing this chances of a soft landing are shrinking. So, why it's up? That begs a good question.

JPMorgan's chief executive, Jamie Dimon told Congress, policymakers should be prepared for the worst.

(BEGIN VIDEO CLIP)

JAMIE DIMON, CHIEF EXECUTIVE, JPMORGAN: I think there is a chance, not a big chance, a small chance of a soft landing. There is a chance of a mild

recession, a chance of a harder recession. And because of the war in Ukraine, I think there -- and the uncertainty that causes in global energy

supply and food supply, there is a chance, it could be worse.

And I think policymakers should be prepared for the worst, so we take the right actions if and when that happens.

(END VIDEO CLIP)

QUEST: "Prepare for the worse." Anna Han is the Vice President of Equity Strategy at Wells Fargo. Anna is with me now.

The market fell sharply initially and then recovered its ground and more, why?

ANNA HAN, VICE PRESIDENT OF EQUITY STRATEGY, WELLS FARGO: Well, I think you saw a knee-jerk reaction to what was changes in the Fed's expectations

on where they think Fed Funds will reach not just this year, but also next year.

And like you hinted before, the willingness to tolerate a little higher unemployment to continue battling inflation. That hawkish tone caused that

knee-jerk down in equities. But you're seeing that rebound already, and I think consumer positions are getting used to on trying to figure out what

does this mean for the consumer for the next rest of the year and for 2023.

QUEST: You see, that is the interesting bit that I don't follow today. Why the rebound? I can see the knee-jerk fall, and I could see it coming back

to zero, sort of, but why -- I mean, is the market ready for worse?

HAN: I think in some ways, it is prepared for worse, but also remember, if we are getting more hawkishness that also may shorten the time or do better

in battling inflation. And those inflation pressures have been eating at consumers' pockets and consumer spending.

So, the quicker those are addressed, I think that there is also the good side that we have to consider, which is it helps consumers by bringing down

prices. It helps corporates with their margins by bringing down those inflationary pressures and helping them grow those margins.

QUEST: Are you concerned that that shift -- the change in both medium and central tendency on the projections essentially, the FOMC is saying that

the US economy is not going to grow this year?

HAN: We are concerned to see that slowed down growth expectation. Of course, everyone has been eyeing very carefully how to achieve a soft

landing that were very coveted. At the same time, with that slowing growth, I think that there is still some positive catalysts left for the equity

markets this year, and part of that could be to see a decent earnings season and some positive tone from the conference season that's on the way

already. That should give us a better insight into US corporate health.

And keep in mind with the midterm elections coming --

QUEST: Sorry, Anna, except on this earnings question, if the US economy is slowing down, then surely consumers -- as unemployment goes up -- will be

more skittish for making purchases.

Now, admittedly, they will be coming down from a very high level, so perhaps that will mitigate it, but a slowdown in consumer activity is very

much on the cards.

HAN: Certainly, a slowdown in spending is something we've been watching carefully, because when we think about what spending did, it really is what

pulled us out of the recession post COVID.

So right now, it is a hotspot, but at the same time, a slowdown in spending does not necessarily mean a full stop, or too aggressive a contraction. And

again, that's that fine line that we're all targeting.

QUEST: Right, now, you are Vice President of Equity Strategy. So, let's have a bit of strategy here.

For those in the market, those holding, because listen, we all know there is a wall of money waiting to go on a shopping expedition in the market,

when they believe the time is right, even at these valuations.

So when is the time right do you think to start buying?

HAN: I think what we're looking forward to be those key indicators as one, that earnings season that we're getting to see how corporate health is

holding up even in the pressure of having a continued inflation.

If we see somewhat of a not a horrible sign there, we can see that consumers are still continuing to spend, perhaps pivoting their spending

choices, but continuing to spend, that would be an encouraging sign. And as well, we would like to see how the European energy crisis is handled as we

go into the winter.

If there is some improvement on that respect, and we see that the bleed over into the US economy can be controlled or maintained, I think those are

the kinds of aspects we look for the rest of this year.

QUEST: Anna, excellent to have your perspective. I'm grateful. Thank you.

As we continue, Jay Powell says Russia's war on Ukraine is driving inflation higher. The exact words, he talks about tremendous human and

economic hardship. Now, President Putin is escalating the conflict, partial mobilization of hundreds of thousands more troops, and even the specter of

nuclear war, in a moment.

(COMMERCIAL BREAK)

[15:15:02]

(BEGIN VIDEO CLIP)

POWELL: Although gasoline prices have turned down in recent months, they remain well above year earlier levels, in part, reflecting Russia's war

against Ukraine, which has boosted prices for energy and food and has created additional upward pressure on inflation.

(END VIDEO CLIP)

QUEST: The reference there from Jay Powell that the invasion continues to disrupt the global economy. It was reflected in the statement as well, but

Vladimir Putin continues to raise the stakes in Ukraine.

The Russian leader said he is mobilizing reservists and veterans to join in the fight, and as a result, we're seeing demand for one-way flights out of

Russia surge, as the Defense Ministry called up 300,000 troops.

On the battleground and the plans to annex parts of Ukraine under Russian control with various referenda, the Kremlin is laying the groundwork to

claim that these regions where the referenda will be held, assuming that they vote to join Russia, which is pretty much a raising certainty, Russia

will claim them as part of the Motherland.

Vladimir Putin accused the West of trying to divide and destroy Russia, and he evoked the threat of nuclear retaliation to defend it.

(BEGIN VIDEO CLIP)

VLADIMIR PUTIN, PRESIDENT OF RUSSIA (through translator): This is not a bluff. The citizens of Russia can be sure that the territorial integrity of

our homeland, our independence, and freedom will be ensured and those who tried to blackmail us with nuclear weapons, should know that the prevailing

winds can turn in their direction.

(END VIDEO CLIP)

QUEST: Ben Wedeman is in Kharkiv.

Ben, you and I, over several months have danced around talking about the nuclear question, because it is so horrific to contemplate. But here in

this speech, he not only talks about it from a western point of view, he also says we have a range of weapon options, and we will not hesitate to

use any of them.

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, people heard those words very clearly here. But before I get to that, let me tell you,

Richard, within the last half hour, there have been several missiles fired in the direction of where we are, the City of Kharkiv.

This video shows what we saw. There were several interceptions of those missiles, but one of them did hit a non-residential building. Local

authorities say nobody was injured in that instance. And the fear at the moment is that given that it's going to take months to take those 300

reservists that have been called up and equip them, train them, and deploy them, that in the meantime, perhaps the Russians are going to be using some

of their heavier weapons to remind Ukraine of its power, certainly after the rather humiliating defeat it experienced in the Kharkiv region.

So, there is a fear that apart from nuclear weapons, that the Russians have far heavier weapons that they have used so far. And in this moment of, you

can say desperation, after they have suffered this humiliating defeat on the battlefield, that they may resort to other weapons that we haven't seen

yet -- Richard.

QUEST: Why would they -- besides the nuclear or chemical, God forbid, why would they not have used the heavier weaponry so far as the war has clearly

gone against them?

WEDEMAN: That's a good question, but you speak to experts and there are weapons that they haven't used, even heavier missiles that they haven't

used, more sophisticated weaponry, perhaps because until now, and also now, for the Russians, this is not a war. This is a special military operation.

They do have reserves. They do have weaponry that, let's keep in mind, they are a superpower. They were prepared to engage in war with the NATO bloc

with the United States. And certainly, what we've seen being used on the battlefield here in Ukraine, some of it is very sophisticated weaponry, but

a lot of it is old weaponry.

For instance, we are hearing that some of the troops in the so-called Donetsk People's Republic are using rifles predating the Second World War -

- Richard.

QUEST: Ben -- Ben is in Kharkiv, thank you.

Ukraine is the central focus of the UN General Assembly taking place here in New York. The Ukrainian President is to speak to the UN in the coming

hours. We expect in about two hours from now.

President Biden today took to the podium and accused Putin of making irresponsible nuclear threats and urged the world to stand up to Moscow's

aggression.

[15:20:10]

(BEGIN VIDEO CLIP)

JOE BIDEN, PRESIDENT OF THE UNITED STATES: This world should see these outrageous acts for what they are. Putin claims he had to act because

Russia was threatened, but no one threatened Russia and no one other than Russia sought conflict.

This war is about extinguishing Ukraine's right to exist as a state -- plain and simple -- and Ukraine's right to exist as a people. Whoever you

are, wherever you live, whatever you believe that should not -- that should make your blood run cold.

(END VIDEO CLIP)

QUEST: Ian is with me. Ian Bremmer, President of Eurasia Group. He joins me.

Ian, so today's speech by or message from Vladimir Putin taken with what we now know to be the territorial gains is very worrying indeed.

IAN BREMMER, PRESIDENT, EURASIA GROUP: It's a disaster, particularly for Russia in the long term, but of course, a great danger for Europe and for

frankly, all of the advanced industrial democracies.

Look, this is a war that's gone very, very badly for Russia. He has been forcibly decoupled, cut off economically, culturally, diplomatically from

Europe, from the United States, from all the rich economies of the world. And not only that, Richard, but last week at the Shanghai Cooperation

Organization, even Putin's friends, like Kazakhstan, China, India, at the Head of State level, were telling him privately, and were sort of saying

publicly, this war is going very badly, we need it to come to an end.

And Putin's response to that was unabashed, doubling down escalation, I don't care. I'm ignoring all of you, I am going my own way and if that

means I'm going to destroy myself in the process, so be it.

QUEST: All right, except he could destroy the rest of us as well, as he does it. You said in an article. And when I read it, it was extraordinary.

You said over the course of 200 days, Russia has gone from being a small China to a large Iran. That's an extraordinary shift, unprecedented, even

for a major country in the last decades. I understand the pariah bit, but how do we now square this circle?

BREMMER: Yes. Russia has basically become a gas station, the world's largest gas station with nuclear weapons and a grudge. That's not where

they were on February 4th when Putin and Xi Jinping was standing up talking about their friendship. At that point, Russia was China's most important

friend on the global stage. Yes, they were smaller, but they actually saw eye to eye on most issues. That isn't true anymore.

And the danger of making Russia into a powerful Iran, well, look at what Iran means on the Middle East stage. If you go and talk to the Saudis, or

the Emiratis, yes, they worry about nukes, but they talk to you about ballistic missile attacks, cyberattacks, espionage, drones. It talks about

proxy wars, radicalism, terrorism, all of which comes from Iran.

I see that coming from Russia, to threaten not just Ukraine, as of course is happening today with the war, but also all of the countries of NATO.

Remember Putin and Russian media for the last week, he has been saying we're not fighting a war against Ukraine, we're fighting against all of

NATO. That's why we're losing. That's why we're doing so badly.

QUEST: So, all right, so on that point, the moment these referenda are held, and there is the fig leaf of these regions are part of Russia, do you

worry that he does use continuing Ukraine attack to basically say, you're now attacking domestic Russia. NATO is attacking domestic Russia.

BREMMER: Of course, he can say that. I'm sure he will say that.

Let's keep in mind two things, Richard, that will just nuance that a bit. First is that, there have been Ukrainian attacks into territory that Putin

already considers to be Russia. Into Crimea, we've seen a lot of that. The Russian response has been escalatory, but certainly not weapons of mass

destruction.

So to direct attacks into the territory of Russia like we've seen with artillery strikes into Belgorod, an infrastructure and weapons depots in

the past months. Also, you will remember Richard, when Finland and Sweden said that they were thinking about joining NATO, Putin at the time said

that there would be directly diplomatic and military consequences if that were to occur.

[15:25:01]

I was yesterday with my friend, the Foreign Minister of Finland and I asked him, ever since you've actually gone ahead and announced you're joining,

have there been any consequences from Russia? And the answer has been unequivocally, "Absolutely not."

So Putin's capacity to talk tough and bluff is proven. It doesn't mean he is doing it this time, but let's recognize that this game has been played.

QUEST: Right. But it's not a Potemkin army that he has and he is bringing in 300,000 or so admittedly, it's going to take months to do that.

BREMMER: Months.

QUEST: So if you are Ukraine, do you have a window of opportunity to suck in as many missiles and NATO weaponry to advance as far as possible?

BREMMER: You clearly try. The next three months, you absolutely try to take as much territory back as has been taken from you since February 24th.

Very unlikely they could take further territory beyond that, that the Russians have held since 2014, but let us keep in mind, Russia initially

engaged in this war in Ukraine, across the entirety of their territory with 190,000 troops. They are now talking about an additional 300,000. Maybe

they can't raise all of them focused on a smaller piece of territory.

If you're Ukraine, you've done incredibly well over the last seven months given what you're facing, but this is not going to get any easier for you

even with the extraordinary support that's come from NATO.

QUEST: Ian, it is good to you in UN GA week. I'm grateful.

Ian Bremmer, who is with us.

It is QUEST MEANS BUSINESS tonight. As we continue, we have got a lot more. A raft of Central Banks are set to raise rates this month. Kenya looks set

to buck the trend. We will speak to the Governor of the Central Bank in just a moment.

(COMMERCIAL BREAK)

QUEST: I am Richard Quest. A lot more QUEST MEANS BUSINESS as we continue.

The fight against inflation around the world, Kenya's Central Bank Governor is with me to give us some perspective from emerging markets.

[15:30:08]

And spiking inflation or every day inflation tonight is a flat pack furniture, IKEA's chief executive will be with me after the news headlines.

This is CNN and, here, the news always comes first.

(MUSIC PLAYING)

QUEST (voice-over): Anger and outrage is intensifying in Iran. Women are cutting their hair and burning head scarves, showing their anger toward

Iran's security apparatus. Demonstrators following the death of 22-year-old Masha Amini, in police custody.

Dramatic and veterans captured in Russian forces while fighting in Ukraine have now been freed. Alexander Drueke and Andy Huynh were released as part

of a prisoner swap in Russia and Ukraine. It was brokered by Saudi Arabia. Five Britons have also been released.

Officials in Puerto Rico say power has been restored to a quarter of the island's homes and businesses after hurricane Fiona. A million customers

are still without running water in the DR. The storms are now heading toward Bermuda.

(MUSIC PLAYING)

QUEST: New York's attorney general is accusing the former president, Donald Trump, of a platinum fraud. It's a lawsuit in which Letitia James is

alleging Donald Trump and his company repeatedly lied about the value of assets. Trump's lawyers accuse the AG of having a political agenda. She

says the former president is not exempt from the law.

(BEGIN VIDEO CLIP)

LETITIA JAMES, NEW YORK ATTORNEY GENERAL: Claiming you have money that you do not have does not amount to the art of the deal. It's the art of the

steal. And there cannot be different rules for different people in this country or in this state. And former presidents are no different.

(END VIDEO CLIP)

QUEST: Kara Scannell is with me in New York.

So these rumors, these stories of inflated asset prices, in terms of taxation relief, they've been around for a very long time.

What's different this time?

KARA SCANNELL, CNN CORRESPONDENT: That's right, Richard, so these valuations have circulated forever. What we saw now was the New York

attorney general, Letitia James, launched this investigation in 2019, after Michael Cohen, Trump's former fixer, testified before Congress.

He made these allegations public. He also had provided the Congress and the public financial statements that showed that some of these valuations and

how they fluctuated from year to year.

Now James' office has been conducting this three-year investigation; they interviewed more than 60 individuals, including taking the deposition of

several Trump family members.

But the former president and his son Eric Trump refused to answer questions, citing their Fifth Amendment right not to incriminate

themselves. But she's very dug into this. They've done an expansive investigation.

Their allegations today showing or alleging that the Trump had inflated his net worth by billions of dollars by using these inflated valuations on

various assets, including his own apartment at Trump Tower, membership fees at a number of his golf courses and even at Mar-a-Lago.

According to the AG's lawsuit, he valued Mar-a-Lago at $739 million. She says that it should've been closer to $75 million, because it made just

about $25 million in revenue. So a significant allegation there.

Trump's lawyers have said that these claims are baseless. They have said that this is a part of James' political agenda. She's running for

reelection as New York attorney general.

The two of them have been barbing (sic) for sometime. But now the Trumps will have to face these allegations in court. And James is seeking $250

million, also trying to put a permanent ban on the former president and his adult children from serving as a director of any New York business.

Another issue she's seeking, a five-year ban on these properties doing any new real estate transactions in New York, which could potentially cripple

the Trump Organization.

QUEST: Kara, thank you.

The Federal Reserve isn't the only one with a typical task at the moment. High inflation is testing central bankers around the world. To Kenya, where

inflation is at 18.5 percent. And the central bank raised its key rate from 7.7 back in May and they'll meet again next week.

It's a time when the country's new leader still letting himself in. President William Ruto was sworn in only last week. The governor of the

central bank of Kenya is with me now.

Governor, good to see you. Thank you.

[15:35:00]

PATRICK NJOROGE, GOVERNOR, CENTRAL BANK OF KENYA: Good to see you, Richard

QUEST: We'll come to your rate in a moment but first of, all how much more difficult does it make it when for instance, the Fed raises rates like it

has today?

NJOROGE: Quite a bit, actually. But first, it's important for the Fed to regain its credibility. So in terms of raising rates and aggressively,

that's all well.

The problem is there will be a huge outflow of capital from our country, emerging markets and from key markets. That obviously complicates not only

the external position but also the physical position and, obviously, the investment position for our countries.

QUEST: There's nothing you can do about, it really, you can ask the Fed not to do it but they won't. You could ask the ECB, same reasons not to do

it.

But they'll say, well, we need to do it because getting rid of inflation is our number one priority.

So in that scenario, you are between a rock and a hard place.

NJOROGE: That is correct. It's important for them to work on inflation as the number one problem at this moment. I think also they need to consider

the spillover is on the emerging markets and these, I think the solutions for that, include, for instance, a little more consideration for tightening

the stiffness of the countries that we are in.

And the certain that's here in (INAUDIBLE), for instance, to the IFIs, which is where we go for capital, when the capital markets are close to us.

So that's one major consideration.

And secondly, of course, is to help us strengthen our macro framework. So to the extent that they can provide us with bilateral lending, et cetera,

that I think would be appreciated.

QUEST: This is exactly what the World Bank was writing about, wasn't it, its latest report, when it said that we're facing a global recession.

In Kenya, do you now believe there'll be a recession?

NJOROGE: Not at all. Actually, we think that, this year -- last year we grew at 7.5 percent. And this year we expect growth to be somewhere near

5.5 percent. But I think that's on the bark of already a week global economy.

QUEST: If 5.5 percent, 5 percent, it's not apples and oranges in a sense. That is essentially, in a recession, in Kenyan terms, it might not be in

NBR terms that level of low growth is worrying.

NJOROGE: I think it's still -- it's not a shabby level of growth, let's begin there.

Why?

Firstly, there's still positive regrowth of capital growth. So we start there.

But I think also compared to other economies, it's true that global economy is supposed to grow at about 3.2 percent although that would scaled back,

we expect, in the new few weeks.

But I think the point here is that in a bad sort of situation, we generally would grow at 4 percent, maybe 3 percent. So I think 5 percent is still

good growth.

QUEST: In terms of your next rate move, you're not going to tell me what you're going to do. That much I don't expect. But you're already at 7

percent to 7.5 percent. If you do raise rates, you'll go positive, not just on the nominal but on the real rate as well.

Would you say, as far as Kenya is concerned, that the ongoing increases in target range will be appropriate?

NJOROGE: I guess you're right; we're between a rock and a hard place and I think what is clear is that whatever we do, we won't do it in the context

of data that is coming to us. So that is --

(CROSSTALK)

QUEST: But that data includes one of the central banks --

(CROSSTALK)

NJOROGE: That is correct. So in a sense, we would also be reacting to what has happened. So that is correct.

QUEST: And in terms of using the policy rate, I mean, as the currency weakens, purely on technical factors against the euro, at what point do you

become worried?

Firstly on how it's affecting your exports; secondly; how it imports inflation for the rising level of imports.

NJOROGE: I think more important or more immediately, is the impact on financial flows right off the bat. For instance, already we have had maybe

18 percent decline -- strengthening of the U.S. dollar against our currency. So that is important.

And just today, after the announcement, it strengthened by about 1.8 percent, just like that. You know. So I think that is providing, that is

pushing quite hard -- or pulling quite hard on the capital that is in our country.

[15:40:00]

So that is the initial and I think most important thing. But the pricing of exports and sort of -- those are -- this will only happen in the medium

term. I think that is held back by other considerations, like supply side protection, capabilities, et cetera. So I think in the first instance we

will have to fight strongly against the capital outflows.

QUEST: Governor, very grateful. Thank you sir.

NJOROGE: Good to see, you and I look forward to you continuing to drink our Kenyan coffee.

QUEST: And tea and coffee both. Absolutely, some of the best in the. World

Don't all start writing to me about your coffee and your tea, it's all good. I'll enjoy them all at various points.

As we continue, boxed in inflation pushes the price of flat pack furniture. The CEO of IKEA is with us on tonight's program. Thank you.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

QUEST: Starting today and throughout the rest of the week, Call to Earth, looking how to protect our planet by listening to it. That's the key point,

listening to it. For our first story, we're going to a biodiversity hot spot in India, where a local scientist has developed a device to alleviate

the growing issue of human-elephant, conflict.

(BEGIN VIDEOTAPE)

(MUSIC PLAYING)

UNIDENTIFIED MALE (voice-over): Sunset on the border of Kaziranga National Park in Northeast India and former computer engineer Seema Lokhandwala

stands in the field of a neighboring village, scanning the edge of the forest for one of her favorite animals.

SEEMA LOKHANDWALA, ELEPHANT ACOUSTICS PROJECT (voice-over): I went to Nepal as a very young kid along with my uncle and aunt and saw elephants

for the first time. We interacted with them, saw them. That itself fascinated me that there is this huge, intelligent animal and that we know

very little about them.

[15:45:00]

I started watching documentaries and what fascinated me about elephants is just the way they communicate.

UNIDENTIFIED MALE (voice-over): That child of passion never went away and now, as a conservation scientist, she is less interested in getting closer

to the animal as she is in keeping them away.

LOKHANDWALA (voice-over): Human elephant conflict is a big issue in India.

UNIDENTIFIED MALE (voice-over): India has the largest population of wild Asian elephants, around 26,000. They are an endangered species. And each

year, approximately 500 people and 8,200 elephants die in the ongoing struggle to coexist.

Here in Assam (ph), deforestation has led to a staggering loss of habitat, driving the elephants out of the forest more often, just looking for a

meal.

LOKHANDWALA (voice-over): Eighty percent of the people in this area has agriculture as their primary occupation. And because of this there is a lot

of human-elephant conflict.

UNIDENTIFIED MALE (voice-over): Determined to find a solution for people and pachyderms to live in harmony, Seema founded the Elephant Acoustics

Project.

LOKHANDWALA (voice-over): The idea is to understand the Asian elephant communication.

UNIDENTIFIED MALE: (INAUDIBLE).

LOKHANDWALA (voice-over): And use acoustics as a medium to mitigate human- elephant conflict.

UNIDENTIFIED MALE (voice-over): Her team of like-minded engineers are currently developing the elephant call detector.

LOKHANDWALA (voice-over): What is the frequency that you mobile (ph) these microphone?

UNIDENTIFIED MALE (voice-over): And using a combination of hardware, a vocalization database, artificial intelligence and local cell networks, the

device is designed to detect an elephant sound, alert local officials of its presence and then make the right kind of noise to hopefully send the

animal in a different direction.

LOKHANDWALA (voice-over): We're trying to use a combination of all the natural sounds that are occurring in the elephant landscape. We're trying

to use bee sounds, tiger calls and leopard calls, which the elephants don't like.

And we will try to do it in a round robin fashion so that the elephants don't get adapted to these sounds. In our sound variable, 229 human deaths

that happened in the last few years because of somebody (INAUDIBLE) to elephants. So we're trying to reduce this death.

UNIDENTIFIED MALE (voice-over): She's conducted an estimated 500 interviews and finds that the majority of people are eager for a solution

like the elephant call detector.

LOKHANDWALA (voice-over): I have been working in the Kaziranga and Karbi Anglong landscape since 2015. And with a new technology, most of the people

are a little apprehensive in the beginning. But then they started working with the community, understanding the language, speaking in the language. I

think they've been very, very accepting of new ideas and how they can be implemented.

(END VIDEOTAPE)

QUEST: Call to Earth, let me know what you're doing to answer that very call. The usual hashtag, #CallToEarth.

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[15:50:00]

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QUEST: I say IKEA, they call it IKEA. It doesn't make a difference, it's the world's biggest furniture brand, which takes pride in affordability.

IKEA's prices are not quite as low as they were in the past. The company said prices will go up an average of 9 percent. Now it March they said that

will be more like 12 percent.

But if you look at the famous furniture, you see some differences. The desk it's called a mound in U.K. stores. It's about $112 last year. It's $170

now, an increase of about 50 percent, everyday inflation.

And this set of drawers, fine drawers, but they are up about 30 percent since last year. Jesper Brodin is the CEO of Ingka Group, which is

operating nearly 400 IKEA stores.

We can't avoid the fact this inflation is everywhere. And you no longer can contain it in your price margin. You have to pass it on.

JESPER BRODIN, CEO, INGKA GROUP: Well, you know, I think we work incredibly hard every day for (INAUDIBLE). You mentioned a couple of

numbers. And of course, if you look at that there, I would say we're more affordable now relative to our competition based on the prices (INAUDIBLE).

But we're not immune to inflation. I mean, this is (INAUDIBLE).

QUEST: Where are you seeing that inflation come from?

Is it supply side, is it demand led?

(CROSSTALK)

QUEST: Obviously it's fueled by raw materials -- what's the principal drive of it?

BRODIN: So basically it started as a bull whip effect of the -- as a consequence of the pandemic. So I would say, (INAUDIBLE) like IKEA started

with an inflation on transport. It moved upstream still to raw material and also (INAUDIBLE) costs like energy. Varied sorts of deflation going on. We

have recently started to decrease our prices again, it's just very volatile. U.S. likely the other window here.

QUEST: Well, that's true. The reason -- the noise has increased because we're into the last 10 minutes of trading --

(CROSSTALK)

QUEST: -- no, no, no; it's not the IKEA share price -- at least I don't think it is.

The way, though, in which you handle this very difficult economic time, how do you do it as (INAUDIBLE)?

Yes, you closed a certain number of stores, you can cut back in certain ways. But that doesn't do you long term.

BRODIN: No, I mean, the last years have been absolutely, there is no schoolbook here, nothing to look at. So we had to navigate with a compass

and no map really. But I'm (INAUDIBLE). We tracked this slightly the first pandemic (ph) in all the U.S. continue to grow.

I would say we have great timing because we decided a few years before (INAUDIBLE), so we had periods with 100 percent closure where we could

actually operate on long life. I would say that was one of the thing that saved the day for us.

Then we have continued to invest, so it's not only the pandemic going on; it's climate change. It's, of course, retail disruption going on. So I'm

happy that we've been continuing (INAUDIBLE).

QUEST: This omnichannel retail disruption, the beauty of IKEA was that you went there, you looked at it, you picked it up on the way out.

BRODIN: It still is.

(LAUGHTER)

QUEST: (INAUDIBLE).

But this up -- but buying it online, now, still requires assembly. Still requires parts.

BRODIN: (INAUDIBLE) for most people.

No, no, you know, it's interesting, because our customers know us. It's interesting; people like to think it's offline and online. But it's the

same customers. So more than 86 percent of customers are actually always using different channels.

So we have basically done is to listen to our customers. They said, you know, (INAUDIBLE) tonight when I come home from work, I put the kids to

bed, it's difficult for me to go to the store. But I still want to go down (INAUDIBLE).

QUEST: I was talking when I was in Stockholm recently, I notice there you have city center stores that are smaller, selling more household rather

than major furniture.

Is that is viable model is more expensive cities?

BRODIN: I would say we started it I think about five years ago. We started it as an experiment. And we have today I think about 30 different smaller

formats out there. We see that customers are very happy with them. We're bringing IKEA a bit closer to them.

In the beginning we struggled with all sorts of operations and we're still learning but I would say it's probably part of the future.

QUEST: If you look now, obviously climate change is the biggest thing -- but what is the number one difficulty that you're dealing with?

BRODIN: Well, you know, if we weren't (INAUDIBLE) without any doubt, climate change. So we see that (INAUDIBLE) in the future but we experience

it.

[15:55:00]

We see the calamities in Pakistan, within Europe. We see in large parts of the U.S. It's basically in drought as we speak. So both the cost and how it

impacts people and how it drives I think the need for us to act with urgency. That's why we're here this week.

QUEST: Good to have you in New York, I'm grateful to you, sir.

I need to update you at the markets. The noise has increased considerably. That is why -- well, I'm not surprised, down over 400 points. This is the

moment when you swear the books for the day, how do you want to go into tonight?

You've heard Powell, you've seen the numbers, you've made your judgment and you've decided to head for the door. We're off 136. We've got four minutes

left of trading. The Nasdaq is sharply lower, down 1.5 percent, (INAUDIBLE) pretty much all the same.

We still haven't tested June's lows yet. We still have some time to go before we reach that. And there's only one stock that's up and that's

Walmart. Others are down in a way, Caterpillar which is off sharply. I'm betting Walmart is benefiting because (INAUDIBLE) been the more affordable

end of the market.

We'll have a "Profitable Moment" after the break.

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(COMMERCIAL BREAK)

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QUEST: Tonight's "Profitable Moment" -- knowing something is going to happen and then responding to it when it does, well, that's two sides of

the same coin. That's what we're seeing today.

We knew the Fed was going to raise rates. We knew it was going to be probably about 0.75 percent. But when you pass the statement and you look

at the results, it's not surprising the market is down so sharply.

Remember what the Fed -- the Fed chairman says. We expect ongoing increases will be appropriate. There's more to come. The Bank of England will tell us

the same. We've heard it from the Swiss, the Swedes, again and again.

We now know that rates are going to go higher and there will be spillover effects, as the central bank governor of Kenya told us tonight on this

program.

It doesn't mean financial calamity but it certainly means there are difficult days ahead.

They're clapping, not for my performance; they are clapping because the closing bell is about to start ringing. That's QUEST MEANS BUSINESS for

tonight. I'm Richard Quest at the New York stock exchange.

END