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Quest Means Business
Fed's Hints About Slower Future Pace; Shipping Giant Maersk Warns Of Dark Clouds Ahead; Insurers Ready To Resume Black Sea Grain Cover; Fed Raises Rates Despite Fears Of Recession; Economy Top Concern For U.S. Midterms Voters; Bank Of England To Hike Rates; Viaplay Launches In U.K. Fed Chair Jerome Powell Said Wednesday That The Central Bank Still Has "Some Ways To Go" Before The Current Rate Hike Cycle Is Over; High Inflation Hardens Some Midterm Election Voters' Party Preferences. Aired 4- 5p ET
Aired November 02, 2022 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: Closing bell ringing -- closing bell ringing on Wall Street. There's a great deal of noise here at the Stock
Exchange. I'm not sure why when you look at the numbers. Look at that chart.
We are absolutely at the low point of the day, down more than 500 points, as the Fed raises rates, three quarters of a percent, 75 basis points in
the technical language, the volatility of the day, just look, we tiddled along, then we went up after the decision, then we collapsed and fell out
The markets and how they are trading and the events of the day: Rates have gone up and the Fed opens the door to smaller rises in the future. The
Chair says tightening is far from finished.
Grain shipments from Ukraine are back and open after Russia rejoins the global deal.
And the rapid rise in the cost of living has UK seniors asking: Where are their leaders?
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I just think that somebody at the top needs to come down to see the grassroots see what's going on?
(END VIDEO CLIP)
QUEST: Live from New York. We're at the New York Stock Exchange today. Obviously, it's a very busy day. It's Wednesday, 2nd of November. I am
Richard Quest, and yes, I mean business.
Good evening tonight from the New York Stock Exchange, the Fed has followed through on its promise in a sense, and raised US interest rates by three-
quarters of a percent, 75 basis points. It is the fourth such rate rise of that magnitude in as many months, and it has left everybody wondering
what's next? Rates are at the highest level since January 2008.
The Dow has just closed 500 points lower. It spiked after the Fed put out its statement. Now this was some might say naive view that all was rosy in
the garden, but the moment the press conference got underway, things turned turtle, and they went down very sharply. We close at the lowest of the day.
As for the Fed Chair, he signaled that rates will continue to rise.
(BEGIN VIDEO CLIP)
JEROME POWELL, US FEDERAL RESERVE CHAIRMAN: At some point, as I've said in the last two press conferences, it will become appropriate to slow the pace
of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our two percent goal.
There is significant uncertainty around that level of interest rates. Even so, we still have some ways to go, and incoming data since our last meeting
suggests that the ultimate level of interest rates will be higher than previously expected.
(END VIDEO CLIP)
QUEST: Now, I've got the Fed Statement here and there were some encouraging, arguably, perhaps ideas of what might come next. For instance,
they talk about being aware of the cumulative effect of tightening of monetary policy, and they refer to the lag with which monetary policy
affects economic activity.
They also make it clear that they are aware of the economic and financial developments.
Rahel is with me.
Rahel, now, what's interesting, I mean, let's forget about today. Today was a done deal. We knew it was coming. But now the waters get really murky.
RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: The waters have gotten murkier, and in fact, you could argue, Richard, that we are in uncharted
The Fed essentially acknowledging as much, Jay Powell admitting that the pace of rate hikes has certainly been aggressive and historic, but
appropriate. But also Richard, I just want to put this in context, because you and I spoke about this very issue earlier this week, in terms of how
this rate hiking cycle now compares to the most recent rate hike cycle, where you could see that they did less in a longer period of time, but also
this issue today of the monetary policy lag, which by the way, Jay Powell mentioned "lag," Richard ten times today in this press conference, but also
saying the way we think about that lag has changed. Take a listen.
(BEGIN VIDEO CLIP)
POWELL: It is commonly for a long time thought that monetary policy works with long and variable lags, and that it works first on financial
conditions and then on economic activity and then perhaps later than that even on inflation. So that's been the thinking for a long time.
There was an old literature that made those lags out to be fairly long. There is newer literature that says that they're shorter, and you know, the
truth is, we don't have a lot of data of inflation this high in in what is now the modern economy.
(END VIDEO CLIP)
SOLOMON: And Richard, what he is getting at there, essentially, is that we now see financial conditions tighten even ahead of monetary policy, right?
You see it in the stock market. You see it in terms of treasuries and the impact to the mortgage market.
So we are in again, uncharted territory. So the question is, do you do too much? Do you do too little? Well, Jay Powell made it clear today that the
risk is in doing too little, that is the greater risk.
QUEST: But I was fascinated by what we just heard him say, we don't have much knowledge or experience of the lag in the modern economy with this
sort of rate rises. Now, they could be -- I mean, we just don't know. We could suddenly wake up one morning and find the hot water rushes out
because it's been stuck by a bit of an airlock. We could find that we need to go much, much higher.
SOLOMON: Yes. Well, and here's that -- here is the really fascinating and perhaps, frightening thing. I spoke to an economist who used to sit on the
National Bureau of Economic Research, which Richard as you know, is the panel that officially caused the recession. And when I asked him, "Well,
how will we fare on the other side of this?" He said, "No one knows, not even the Fed."
It is a great mystery. I don't know if that instills a lot of confidence, but look, I mean, Powell said that they are aware of the financial
conditions, but it is a great mystery.
QUEST: Rahel, thank you. Rahel Solomon.
The markets dropped today. It comes after a strong October for stocks, which was fueled in part by expectations for a slower pace of rate rises.
The Dow at its best month since 1976 last month. It rose around 14 percent.
The optimism is misguided, says the former US Treasury Secretary Larry Summers, speaking to Wolf Blitzer yesterday. Inflation could come back
stronger, again, the issue is not doing enough.
(BEGIN VIDEO CLIP)
LAWRENCE SUMMERS, FORMER US TREASURY SECRETARY: Much greater risk is of not doing enough, because I look at economic history and I see there are
many times when the Fed didn't do enough, and so inflation reaccelerated and that I can't find any times in the last 60 years of American economic
history when the Fed did too much.
(END VIDEO CLIP)
QUEST: With me is Kristina Hooper, the Chief Global Market Strategist at Invesco. There was a cheer here when the decision came out. The market went
up, and then it went down. What changed?
KRISTINA HOOPER, CHIEF GLOBAL MARKET STRATEGIST, INVESCO: The press conference.
There is a good reason that the Fed didn't do press conferences after every FOMC meeting and they might want to go back to that. Now actually, I jest,
and usually what happens in the press conference is that Jay Powell gives more hope and provides some optimism. But this was the reverse today, where
they found comfort in the statement, and really had all their hopes and dreams trampled in the press conference.
QUEST: Right. Because in the statement, you've got this bit about, you know, tight -- with lags and cumulative tightening. That all suggest we're
going to not -- we're going to not pause, but we're going to ease the increases.
QUEST: But the reality is, monetary policy is not performing as one might have expected.
HOOPER: It's not. But no one ever expected that it would be a surgical tool. That's not how it is designed.
And in fact, if we look at inflation, some sources of inflation can be impacted indirectly by monetary policy, some can't.
Keep in mind, Jay Powell can't go to Ukraine and fighting the war and stop energy prices. He can't go to Long Beach and help unpack the containers and
improve supply chain issues, all he can do is soften demand.
QUEST: Where do you see rates going? I mean, December do they do fifty? Twenty-five?
HOOPER: My money is on 50.
QUEST: Fifty and will -- if they do 50 In December, will that be a strong enough telegraph to the market that they are waiting and seeing.
HOOPER: It all depends on what the market is expecting, because we saw the market get way ahead of itself before this FOMC meeting. I mean, October is
a testament to that. It wasn't great earnings. It was okay earnings. And what we saw was just a lot of hope that the Fed was getting ready for a
very significant pivot.
Now, we did get the sense there will be a pivot, but it's a subtle pivot and certainly not a pause.
QUEST: Yes, I'm not saying pivot, a pivot suggest something grander. This is going to be just a sort of a waiting and seeing.
HOOPER: Well, I think it is a subtle pivot, right? I mean, We have been at this very accelerated level of rate hikes, fast and furious, and we're
going to not so fast not so furious, I think.
QUEST: You've got global in your title, so we can look the BoE, tomorrow, what will they do? I mean, there are rate rises from the BoE as
well. The only one really is Japan, and even there, they're starting to look at it.
HOOPER: Well, the BoJ was pretty firm in their last meeting, that they're going to stick with their current monetary policy and continue to support
yield curve control.
So, I think the BoJ is in a different place, and certainly the People's Bank of China's and even a different place, but we did get some hope last
week from the Bank of Canada.
QUEST: They said they were done.
I mean, they said essentially, we're just about done. How can they say we are just about done north of the border, when in the United States, Jay
Powell is saying we've got a lot more digging to do.
HOOPER: Well, I mean, some of it is just how much of an impact rate hikes are having and we have to recognize that -- and I'm not giving you the
reason for Canada specifically -- but we have to recognize that there are many economies where there is more debt that is adjustable, that is
QUEST: The UK. Absolutely. Thank you. Thank you. Fifty basis points next month. I'm very grateful. Thank you.
HOOPER: Thank you, Richard.
QUEST: Now one of the barometers of global trade is -- one of the global barometers of the economy is global trade, and here of course, the shipping
giant Maersk, the largest in the world. The company has posted record profits last quarter.
The CEO told Julia Chatterley, he believes that demand has peaked.
(BEGIN VIDEO CLIP)
SOREN SKOU, CEO, MAERSK: But also clearly, a quarter where we see demand dropping, our volumes in our main business, ocean shipping was down seven
and a half percent. So, clearly a sign that the consumer is not spending as much money as he or she has done in the last few years and probably also a
sign that many of our customers have too much inventory.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, "FIRST MOVE": Let's hone in on Europe, just briefly, because again, this is a conversation that we were
having last month and you were already -- sorry, last quarter -- and you were already saying stockpiles are building up in ports, you can see it.
Warehouses are filling up.
Are we, in your mind, based on what you've seen in the past, in cyclical terms to talking about recession?
SKOU: Yes. I am not a macroeconomist, but I would be surprised if Europe is not in recession by now. And so I think, a chance that we will
also see that in the US sometime next year.
I do have to say, though, that while all of this is impacting our, if you will, our shipping business, our ocean business, we are still growing a lot
in logistics. I mean, we grew 60 percent in this quarter compared to the same quarter last year, 26 percent of that was organic, so we see plenty
of, if you will growth potential in our industry as our customers are still busy reconfiguring global supply chains after the pandemic.
(END VIDEO CLIP)
QUEST: The CEO of Maersk.
You remember last night, we were talking about Russia and grain and the Russia suspending itself from deliveries or preventing exports of grain
from Ukraine. Now, Russia says it will cooperate, and that means insurers once again, can give the assurance of safe passage and we'll talk about it
after the break.
QUEST: A major insurer says it is ready to provide new coverage to grain ships sailing from Ukraine. It follows Russia's recommitted to a UN-
brokered security deal, which guarantees the passage on the Black Sea.
In a statement to CNN, Ascot Group said: "In response to today's news, the Ascot led AsOne facility is quoting again for grain shipments out of
Ukraine effective immediately. We already issued multiple quotes this morning."
Ascot Group, of course, you heard yesterday from Chris McGill, who is head of cargo at Ascot, and he explained why Russia's involvement in the deal
was so critical.
(BEGIN VIDEO CLIP)
CHRIS MCGILL, HEAD OF CARGO, ASCOT GROUP: There's 21 insurance carriers supporting us on our facility. So, we're trying our best to spread the risk
as much as possible, so that we can actually provide this policy for our clients.
But yes, without Russia's involvement and engagement in this transaction, and helping to export these goods, it is very difficult for the insurance
market to respond as we'd like to.
(END VIDEO CLIP)
QUEST: Nic Robertson is with me. Nic is in Kramatorsk.
So the ships will sail again. But I sort of, I wonder what Russia was up to? It's really weird, isn't it, to say you're going to suspend and then
within 24 hours, say you're back again? And then you already having blamed the attack in the Crimea. What's going on?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Yes. I think listening to Ibrahim Khaled, a man you've spoken to, a Turkish official you've spoken
to many times saying look, when the -- and obviously, Turkey involved in brokering this deal and his President speaking to President Putin over the
past couple of days to help sort this out -- he made the very relevant point, I think that, you know, before the Grain Deal came into place,
global food prices were spiking, when the deal was in place, they were coming down.
Russia has made a big deal out of the fact that not much of that food was going into the third world. But in fact, you know, the fact that the food
was getting to the global market, wherever it was destined for, was actually keeping global food prices down.
And I think Russia recognized, despite making that point about, you know, not much of food going to the third world, that its friends in the third
world could also understand the economics of what was happening that Russia pulling out again, was detrimental to them and this was all on Russia.
President Putin says he has got an agreement from the Ukrainians not to use that maritime area to attack Russian forces. Ukrainians never admitted that
they did that in the way that Russia has suggested. So, I think there's a big gray zone there.
Russia seems to be able to sort of save face and come back in on this and besides the UN and Turkey and Ukraine were actually going ahead with it
pretty much as was. They'd already put out 800,000 tons of food commodities since Russia suspended its involvement.
QUEST: So on the on the military side, we are in a really difficult -- I mean, not that was not it was ever easy, but we're in a new area and era in
this conflict as we bed in for winter.
ROBERTSON: Yes, we are. On the one hand, you know, Russia is hardening its defenses in some places; in other areas, it is bringing more troops into
the frontline. You know, just north of here, you know, you have this sort of, well, country long frontline, but just north of here that is part of
the frontline, where actually the Ukrainians are making some incremental gains, and that's been really positive for them.
But actually, in the past couple of days, the frontline 20 miles from where we are now and south of there, the Russians have not only sort of ramped up
their numbers or strikes and barrages along the frontline, they've actually opened up a new sector, you know really come at it hard on a new sector and
the perception on this side is that the troops, these raw recruits that they've brought in that might not be good at the job, are actually making a
bit of difference.
They are putting more fingers on more triggers, working more artillery pieces, and this is allowing them to ramp up pressure. So I don't think
we've dug in and static for the winter yet, but Russia, you know, it has learned a lot and is learning a lot through this war, and it seems to sort
of stumble forward, day by day, week by week.
Perhaps, it is just recovering its balance a little from some big losses a month ago here.
QUEST: Nic Robertson, in Ukraine. Sir, thank you.
To Israel now, and where the latest election account suggests Benjamin Netanyahu's coalition will pick up 65 seats in the Knesset. That is more
than we were thinking last night.
If so, it gives Likud and its allies a convincing win. That was noted by Netanyahu, the former Prime Minister.
(BEGIN VIDEO CLIP)
BENJAMIN NETANYAHU, FORMER ISRAELI PRIME MINISTER (through translator): We are on the verge of a great victory. The change in public opinion is
incomprehensible. It's clear that the people want to go another way.
They want security, they want to lower the cost of living. They want us to be strong and not ashamed. They don't want to lower their head, they want
to stand tall. They want a smart and firm policy, and we'll give it to them.
(END VIDEO CLIP)
QUEST: Of course, to achieve this political comeback, Netanyahu joined forces with some of Israel's most far-right parties.
The market reaction in Israel was relatively muted. The Tel Aviv Stock Exchange down just off a third of a percent, but there were many other
factors, of course.
After five elections in four years, many in the business world, hoping for political and economic stability.
Jon Medved is with me again, he was with me last night, an entrepreneur and CEO of global online venture platform, OurCrowd. So when we spoke last
night, it looked like it was 60, maybe 61 or 62. Now it's looking like 65.
At 65, that gives an element of stability for a government that Israel hasn't seen for years.
JONATHAN MEDVED, CEO, OURCROWD: It's really true, Richard. And I think that this is a significant change, which will actually allow Netanyahu to either
do one of two things, to either stay within his natural partners and go forward with the government of 65 or try to reach out and bring others in,
because I think he doesn't like to be himself, the left branch of his coalition, he would like people around him in the side, he's ultimately a
He has been characterized as a right winger, but I think this is a center right government and I think that you might see him make some more moves
towards that center.
QUEST: And what do we expect on the economic front? Because we obviously -- we talked last night, about the judicial, the Attorney General, his
case, but as a business program, what should we expect in terms of policies on business and economics?
MEDVED: I think in general, you should look for professionalism, for stability and for continued focus on investment, climate, driving the high
tech, startup nation economy forward, things are really still firing on all cylinders in Israel, despite the worldwide slowdown.
We brought in $10 billion in the first half of the year and it is looking like we're going to continue to grow.
I also think that you're going to see, certainly next week, a little bit of Israel strutting its stuff in the area of environmental and climate change.
QUEST: You're buying the coffees next time we meet, Jonathan, because you use the phrase "startup nation" first. So the dinner is on you.
Listen, finally, before you -- this new relationship, the new Israeli BFF, which of course is Dubai and the UAE, which may or may not, in the fullness
of time, encompass others like Saudi, but Bahrain is there, Jordan -- but how real is this? How much is this a case of a meeting of minds between,
say, the UAE which is so entrepreneurial and business focused?
MEDVED: I think it is quite a real meeting of the minds. We have become, of course, the first Israeli venture platform at OurCrowd to actually get
registered to operate in ADGM. We will be going there in a couple of weeks for a big conference, and we are finding a huge commonality of interests
not only on obvious thing such as food security or you know desert technology or water, but also on healthcare, education, FinTech.
And actually, the Minister of Economy in the UAE predicted a trillion dollars of activity. Now, I'm not sure that's going to happen, but there is
enormous interests and cooperation. We're making investments there. They're making investments in Israel. There's a lot of interchange.
And I've got to tell you, it's really akin to the iron curtain having fallen. This is the sand curtain, which has been washed away by the winds
of history, never to come back, and I really believe that together the UAE and Israel and ultimately the Saudis and others will take a leadership role
in entrepreneurship and technology where we can do really great things together.
QUEST: Of course, we've met recently at FII in Saudi. Who would have ever thought of these changes?
Thank you, sir. Grateful. I look forward to the coffee when I'm in Tel Aviv next year.
Now, China has locked down the area where the world's largest iPhone factory is located. The restrictions are COVID related because of an
CNN's Selina Wang reports from Beijing.
SELINA WANG, CNN INTERNATIONAL CORRESPONDENT: China locks down a critical manufacturing zone for seven days that houses key Apple supplier, Foxconn.
It's in China's central city of Zhengzhou, home to the world's largest iPhone factory employing some 200,000 people.
This could severely curtail the shipments in and out of the world's largest iPhone factory. That means it could threaten the flow of additional workers
or key components ahead of this key holiday season. This is also just the latest disruption for Foxconn.
Recently viral videos have shown workers fleeing the factory en masse walking long distances across highways to leave the factory. They're trying
to escape COVID restrictions at the factory with complaints on social media from workers complaining about subpar living conditions and the poor
quality of food.
Foxconn has tried and quadrupled daily bonuses in order to convince workers to stay.
Now the impact here on Apple could be major. Analysts estimate that this Foxconn factory accounts for as much as 85 percent of Apple iPhone assembly
Counterpoint Research estimates that 10 to 30 percent of the iPhone 14 production in the near term could be at risk if the situation does not
Another key point in all of this is that part of what is driving the panic among the workers at the factory is just the general fear of getting COVID.
We spoke to a virologist at the University of Hong Kong who said the Chinese government's demonization of COVID, the exaggeration of its
severity means that many ordinary people in China are still scared of getting COVID.
This means that in the future, even if the government wants to change the narrative and situations like this, well, it may not be able to convince
Selina Wang, CNN, Beijing.
QUEST: QUEST MEANS BUSINESS from the New York Stock Exchange continues.
Coming up, the Fed is signaling more rate rises ahead, despite fears of a recession. That could be a problem for US Democrats in next week's Midterm
After the break.
QUEST: Hello, I'm Richard Quest. We've got a lot more QUEST MEANS BUSINESS as we continue.
New polling suggests public anxiety over the U.S. economy could cost the Democrats dearly in the upcoming election. That's next week.
And the CEO of Europe's largest streaming service is discussing launching into a crowded U.K. market. All that we will get to. But only after we've
got to the news headlines. Because this is CNN and, on this network, the news comes first.
QUEST (voice-over): The U.S. is accusing North Korea of secretly shipping artillery shells to Russia to use in its war on Ukraine. U.S. officials say
Pyongyang is trying to cover up the shipments, making it look like they're being sent to other countries.
Investigators probing the crowd crush that killed 156 people during Halloween festivities in South Korea have raided eight police. Records show
police were warned about a possible dangerous crush of people four hours before the tragic event.
Warring parties in Ethiopia have agreed to lay down their arms after two years of fighting. Negotiators say the Ethiopian government and the Tigray
Peoples Liberation Front have agreed to a permanent cessation of hostilities following a week of peace talks by the African nation.
QUEST: Now to our top story: slower for longer. That seems to be the message from Jay Powell's new motto. The Fed chair said raising rates are
far from over. The central bank hinted it could be preparing to slow down the pace of those rate rises.
That's created concerns for the White House. Speaking earlier, President Biden said he knows inflation is too high and he pointed to signs of
(BEGIN VIDEO CLIP)
JOE BIDEN (D), PRESIDENT OF THE UNITED STATES: The country's been through a tough 4-5 years. And folks are still hurting. Granted that we inherited
6.5 unemployment rate, it's down to 3.5 percent. But guess what?
Inflation is still hurting people. But we're making real progress. We're reasserting ourselves as a nation. That's why I want to look at everyone,
here and across the country, I'm more optimistic about the future than I ever have been.
(END VIDEO CLIP)
QUEST: Inflation's top of mind for the Democrats, with only days before the midterm elections. Senators, including Elizabeth Warren and Bernie
Sanders, have written to the Fed chair and they've asked him how many job losses in millions he expects, as the Fed raises rates.
Their letter echoes a warning from the U.N. that is about possible fallout. A CNN new poll has found economic anxiety is by far the biggest concern for
voters. Harry Enten is CNN's senior data reporter. He's with me now.
So let's -- our starting point is that the party in power always has a bad time in the midterms. But this is worrying because they're getting all the
HARRY ENTEN, CNN POLITICAL ANALYST: Yes. Look. You pointed out, Richard. The economy, inflation is by far the number one issue that voters say is in
their minds coming into this midterm election.
It's a majority of voters who say that. You compare that to these other issues, like abortion, crime, those really just register in the double
digits and the single digits. You see on your screen there, voting rights at 9 percent.
If you're the party in power and you've been in charge of this economy in the minds of the voters, it shouldn't be such a big surprise that voters
want to punish you.
QUEST: But Harry, obviously, we didn't get into this mess overnight. And Biden's comments about how things are getting better -- it just won't
resonate, will it?
Because all they will see is today's Fed rate rise.
ENTEN: Yes. Look.
Or, they just see what they see in the grocery store, right?
That they're paying more for the food that they once had, that they get for cheaper. This is something that happens in American politics.
Yes, it's true the president can't necessarily control what's cooking. But that doesn't seem to matter. The buck stops there. As Harry S Truman once
said, the former president.
And that's what we tend to see in elections. And we know that when we ask the folks who said, OK, the economy is your number one issue, which party
do you trust more?
Look at that, 71 percent said Republicans, just 18 percent said Democrats. That's clear.
QUEST: OK. If the economy is the number one issue and if Republicans are seen to be more trustworthy, is it going to be a landslide next week for
ENTEN: They're certainly favored. And the trend, the momentum is in their direction. On our genetic congressional ballot, what do we see for the
first time since Roe v. Wade was overturned?
Republicans have an advantage, up by four points. Last month, they were down by three points. I think the question isn't whether Republicans will
take back the House of Representatives. The question is by what margin.
And then on the United States Senate, will the four Republican candidates, that are seen as not high quality by the voters, does that cost them?
But when it comes to the U.S. House of Representatives, there's very little doubt in my mind at this particular point that Republicans are going to
win. It's just a matter of how big is the wave.
QUEST: Right. To be clear to viewers, our dear viewer, who's not as au fait courant with the U.S. -- you believe that -- so we've had unified
government for the time being, with both houses of legislature, with the Democrats. You believe that the House is going to go to the Republicans and
it's very much a likelihood that the Senate will, too.
ENTEN: So the lower chamber of the House, very high likelihood that Republicans will gain control of that body. In the Senate, which only has
35 elections up, individual candidates matter a lot more. There Republicans have clear momentum but it's not as clear whether or not they'll actually
QUEST: We'll talk about this a great deal more. Thank, you sir.
QUEST MEANS BUSINESS from the New York Stock Exchange change, we talked a lot about inflation across the U.S. Across the Atlantic, inflation is also
worrying many. The Bank of England is expected to raise rates for an eighth straight time.
QUEST: The Bank of England is expected to also raise its rates by 75 basis points, three quarters of a percent tomorrow. BOE hasn't gone that hard in
33 years, at least in one fell swoop. It will be the eighth straight increase since December.
And so far, as you can see from these numbers, there's little to show for it. Inflation was up last month, above 10 percent. The banks also warning
that the U.K. is heading into a recession and that could be made worse if the prime minister Rishi Sunak cuts public spending, as he's got to now
fill a large budget hole.
Scott McLean is in London.
We've been talking so much about interest rates here but the BOE is suffering the same issue, inflation won't come down, rates have to go
higher and the cost of living -- Scott McLean.
SCOTT MCLEAN, CNN CORRESPONDENT: The cost of living is biting, Richard, and it's very difficult to understate just how direct a link there is
between decisions being made at Westminster, decisions being made at the Bank of England and people's actual bottom lines in their monthly budgets.
I was at a senior center in south London, asking people about the cost of living crisis and how it's impacting them. I was pretty hard-pressed to
find anyone who said this is no big deal. Let me show you why.
If you draw state pension in this country, chances are you're living on $700, maybe $900 a month, depending how old you are. But also keep in mind
that the average household in this country spends about $420 a month on housing, power, fuel, that kind of a thing. They also spend $350 a month on
So if you are drawing a state pension, do the math. You can't afford to spend anywhere near these kind of average household numbers unless you have
a spouse or some other source of income.
I also haven't factored in, Richard, anything like buying a new shirt, buying a new pair of shoes, paying your phone bill, doing anything remotely
fun. I also have not factored in, in these numbers, the fact that inflation, since these numbers were calculated, has gone up some 10
So the bottom line is this. The budget was pretty tight for a lot of people to begin with. Obviously, inflation is making it tighter. The people I met
at the senior center in London just hope that the politicians and decision- makers don't make things even worse.
MCLEAN (voice-over): At this senior center in south London, the hot topic isn't about what's on the menu. But it is about --
UNIDENTIFIED MALE: Food. Food's the biggest thing.
UNIDENTIFIED MALE: Also food.
UNIDENTIFIED FEMALE: When you go to the shop --
MCLEAN (voice-over): -- it's precisely why Kenneth Bedford is here. With the price of groceries, he can get a hot meal and coffee here at less than
it costs to make at home.
KENNETH BEDFORD, SENIOR CITIZEN: You pick and choose a lot more than you did before. It was just (INAUDIBLE).
MCLEAN: You didn't really think a lot about money a year ago.
MCLEAN (voice-over): Bedford, who lives off a state pension, spent part of his career working for the circus. Now he walks the tightrope to balance
his monthly budget.
BEDFORD: (INAUDIBLE) today, I've still got 200 quid left of my money because I've been really careful.
MCLEAN (voice-over): Annual inflation in the U.K. hit more than 10 percent in September, with food inflation hitting almost 15 percent.
Now former prime minister Liz Truss announced state subsidies to help with soaring energy costs this winter. But even with that, 70-year-old Susan
Tume says she can't afford to heat her whole house on her state pension of just over $700 per month.
SUSAN TUME, SENIOR CITIZEN: I've got a little electric fan heater. If we're in one room, then that's where we'll have the heating on instead of
doing the whole house.
MCLEAN: How does that make you feel?
TUME: You've just got to get on with it, don't you?
MCLEAN (voice-over): Across the river in Westminster, newly chosen prime minister Rishi Sunak is trying to patch a massive hole in public finances
and will soon have to decide if the state can afford to raise state pensions in line with inflation.
Meanwhile, across the table at the senior center, 67-year-old Wendy Garwood is pondering what her own budget will allow.
WENDY GARWOOD, SENIOR CITIZEN: You know, at one time, you could afford to buy a pair of new shoes. Now you have got to think about it over the weeks.
I just think that somebody at the shop needs to comedown and see the grass where it's settled, what's going on. You know?
MCLEAN: They don't understand how real people live.
MCLEAN (voice-over): Back in the kitchen, the center's manager, Katrina Jinadu, was asking about dessert.
KATRINA JINADU, CENTER MANAGER: A bit of a custard?
But lately, she's also getting a lot of questions about the basics.
JINADU: They're asking about food banks, they're asking if they can pay for their food later. And anything keeps spiraling around them but their
income isn't spiraling in line with it.
In fact, we have stories of people traveling up and down with the bus because the bus is free, as opposed to staying at home, because keeping the
heat in their home was too expensive. So it's a bit like (INAUDIBLE) bus pass to go traveling around London. Not that I'm doing anything but I'm
traveling on the bus. It's warmer than staying in my house.
How can we get there in 2022?
MCLEAN: Of, course Richard, it's only going to get colder this winter. Let me show you. This is the Bank of England base rate over the last few
decades. You can see this half percent, a little lower, a little higher. People have gotten pretty used to low rates over the past 10 years.
Now we're up 2.25 percent. I was at the senior center here but of course some of the people who might feel all of this the most are actually young
people and I just want to run through you an illustration.
Let's say you're a younger person who bought a new home in this country, a home or apartment, for the average price of about 340,000 -- I should say
$US 340,000, the average price of a home in this country.
Let's say you put 10 percent down on the home. The monthly cost increase since the end of last year alone, $547. Now depending on the Bank of
England, if rates go up by another half percent and you're on a tracker rate, you're going to pay $127 more a month if they go up by what the
market is expecting.
Three quarters of a percentage point, you're going to pay almost $200 a month. So this hypothetical person who bought an average house in the U.K.
with 10 percent down is going to pay now, compared to last year, well over $700 per month more than they were at the end of last year.
That's why people in this country are playing such close attention to what the Bank of England is going to announce. It's also why they will surely be
paying attention to what Rishi Sunak, the new prime minister, and the new chancellor, Jeremy Hunt, will announce in about two weeks from now as they
try to patch this massive hole in public finances.
Of course, Liz Truss, the former prime minister, proved you can really make things worse for people in the blink of an eye. Rishi Sunak obviously
hoping to prove the opposite can also be true.
QUEST: Scott McLean in London, thank you.
Of course one of the issues in the U.K. is that so many of the mortgages are not fixed for very long. They're coming off their fixed rates for two
or three years and like in the United States, where mortgages are fixed for 15,20, 30 years at a time.
QUEST MEANS BUSINESS tonight. Growth in the streaming model, has its doubters. Viaplay isn't one of them. The Swedish streaming service just
expanded and now, it's set its sights on the U.S.
QUEST: Sweden's Viaplay wants to take on the global streaming giants, including our own HBO Max, parent company of the network, of course. The
Nordic noir-focused streaming service has launched in the U.K. and the company has its sights set on the United States, too.
Anders Jensen is the chief executive of Viaplay. He joins me from London.
Anders, I don't want to rain on the parade of a new business. But you are listening to Scott McLean just a moment ago, looking at your pricing
structure, which is reasonable and fair enough, except, as the U.K. goes into a recession and people start to cut back.
ANDERS JENSEN, CHIEF EXECUTIVE, VIAPLAY: Yes. Good afternoon to you, Richard. You're right. And I think it takes a bit more terrain in our
Nordic noir parade actually than that. But I think, jokes aside, recessions and tough times come and go.
We do have a cold winter in many ways ahead of us. We know from previous recessions and downturns how efficient home entertainment and paid TV is
when you want to stay entertained and have less money to spend.
Streaming is, by some margin, the most cost efficient way to do it. But we have to bide our time and be ready to sit out this rather cold winter we
have ahead of us. But we're here for the long run.
QUEST: The issue with streaming is what you bring to the table. Now there are some streaming services I'd like to think of obviously HBO Max,
perhaps, and Disney+ and Netflix and Prime or whatever, as being the ones that are more considered utility essentials than others.
What do you bring to the table that says, you really have to have us as well?
JENSEN: Right. Well, that's a very good question. That's the thing most important for anyone who wants to stand out in this very competitive
environment. All the names you mentioned are very good at what they do.
But they're also increasingly alike. It's harder and harder to tell them apart from each other. What we do, is we want to bring in a new perspective
to the table, with more international content. Of course, building on our Nordic heritage and our Nordic noir series for which we know there is a
large global fan base.
Last but certainly not least, we do a lot of sport. We're bringing that together, in that same proposition, that's actually quite unique, not just
in the U.K. or European context but in the global context.
And it's very cost efficient. The price of our premium sports here in Europe, as it hasn't been in the U.S., has always been very high. With
streaming, we can gradually bring down the prices and create a lot of new opportunities for the households.
QUEST: It's fascinating, isn't it?
You've just talked about two areas that are going to cost you an arm in the leg, sport, even given the price down, the cost of rights is just
And secondly, original content; we know -- and as anyone who wants original content -- no more repeats. And particularly, if you want to do it in local
language, which of course, Netflix has been very successful at. We can question how much more they can spend.
Can you do it in local language?
JENSEN: We do a lot in local language. We are producing 70 large-scale original productions in the Nordics this year. That makes us the world
leader, if there is such a thing, in Nordic noir.
And that's the way of standing out against also a global giant like Netflix and to carve out a position for ourselves. We've have proven -- in our five
Nordic countries -- that we can't just compete with the likes of Netflix. We can actually beat them as well.
We need to bring something different to the table. The price of sports, I think that's a whole sort of discussion in itself. But we do sports now in
11 European countries. We stream more live sports on streaming than probably anybody else in the world. We know how to synergize it and how to
work with the rights in an efficient way.
QUEST: Look, I would never bet against a Swedish company going into media, because we all thought that Spotify would never manage to do it. They would
just be eaten up by everybody and their brother. But of course, they weren't and they're the leaders in that sense. So I wouldn't say that.
But when do you open in the U.S.?
The U.S. is the big banana here.
JENSEN: Of course. With the U.S. and Canada, where we're launching in Q1 next year and we're taking a very humble approach. We will be a new service
for those who love the kind of Nordic and international European content we represent.
So will be a smaller niche service. But if you look at stats in the U.S. right now, which have the highest streaming penetration in the world, the
services there are actually driving growth on the new services.
The ones that are extremely pointy in their --
JENSEN: -- looking at a specific target group. And we are producing these thousands of hours of Nordic and international content that we have already
paid for. So we don't need all that many subscribers in the U.S. to make a profit. So will be in 11 European countries, where we do sports and
In North America, we're going to be the home of Nordic noir and the kind of series that is very, very targeted at a specific target group.
QUEST: Nordic noir, I'm very glad you came in tonight and talked about it with us. We'll watch closely. Thank you for joining us. I appreciate it.
JENSEN: Thank you very much, Richard. Thank you.
QUEST: Now I need to bring to your attention a final programming note: tomorrow, that's Thursday, join us for our second annual Call to Earth Day,
a 24-hour global day of action to raise awareness about the environment, issues and engaging conservation and education.
You can follow online at our special page, cnn.com/CallToEarth.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest at the New York Stock Exchange. Whatever you're up to in the hours ahead, I hope it's