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Quest Means Business
EU And NATO Sending Power Generators And Heaters To Ukraine; Dow Climbs As Black Friday Sales Get Underway; Adidas To Investigate Misconduct Claims Against Kanye West; China Reports COVID Case High For Second Day In A Row; Turkey Cuts Interest Rates Despite Soaring Inflation; Fed Sees Smaller Rate Hike Soon. Aired 3-4p ET
Aired November 25, 2022 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: It is a half day for US markets. Wall Street clocked off at lunchtime for the Thanksgiving weekend,
and the Dow managed to carve out some modest gains closing up about half a percent or 150 points there.
Those are the markets and these are the main events: NATO pledges to step up aid to Ukraine as Kyiv races to restore power following Russian strikes.
Rising prices don't seem to be holding back US shoppers with early numbers showing record breaking Black Friday sales.
And Adidas says that it plans to investigate allegations of misconduct against Kanye West.
Live from New York It is Friday, November 25th. I'm Rahel Solomon, in for Richard Quest, and this is QUEST MEANS BUSINESS.
Tonight, Russia is trying to weaponize winter. That warning from NATO Chief Jens Stoltenberg as hundreds of thousands remain without power in the
Ukrainian capital. Stoltenberg is calling on allies to step up support and also slamming Russia's tactics.
(BEGIN VIDEO CLIP)
JENS STOLTENBERG, NATO SECRETARY-GENERAL: What we see now is that President Putin is trying to weaponize winter by indiscriminate and
deliberate attacks on cities, on civilian infrastructure. He tries to deprive the Ukrainians of gas heating water, and this just demonstrates
once again the brutality of this war.
(END VIDEO CLIP)
SOLOMON: And NATO says that it will soon increase shipments of generators, clothing, and other nonlethal aid, and multiple EU nations have made their
own promises to help get Ukraine's critical infrastructure up and running again.
In Kyiv, officials say that they are hoping power will be back to normal by Saturday. Residents there have faced massive outages this week amid
Russia's most devastating attacks on Ukraine's energy grid so far.
CNN's Sam Kiley standing by with us in Zaporizhzhia now.
So, Sam, how urgent are these needs by Ukrainians? I mean, how urgently are these needs.
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, they've got the short-term issue, Rahel, which is trying to get kind of sufficient power to
as much of the population as they possibly can, notwithstanding the damage that's already been done that can't yet be repaired.
Now, the Ukrainians are saying that to get their entire network back to where it should be, it will take a year or two. There simply aren't the
products in the world that they can actually bring in, a lot of switching stations and other highly technical stuff needs to be built, bespoke if you
They're combing the world in their words, trying to find the equipment but in the meantime, they can try and get by. They can get by with additional
generating capacity of the still being donated by the European Union and also by switching lines and trying to get their nuclear power stations
But of course, every time the network is attacked, the nuclear power stations are disconnected very often from that network. That means the
cooling system has to go into diesel generators, and they become vulnerable to meltdown in and of themselves since the diesel generators are on site
and vulnerable themselves to attack, break down, or running out of fuel.
So that is the sort of challenge that they face in the short term here in Ukraine, and the same time Ukrainians are saying to NATO, and others well,
of course, Putin is weaponizing winters. It is what Russia does. Winter is one of its major defensive and sometimes offensive cards that it can play.
Now, it is obviously Putin's aim here to go after the civilian population, try to break the resolve of the civilian population, puts so much pressure
on the population, that it weakens the resolve to prosecute the war effort on the ground.
The Ukrainians are insisting that's not going to happen, that they'll get through the winter by hook or by crook. They are also saying that they need
those more modern surface-to-air missiles, anti-missile missile systems to protect themselves against what they know, will -- be excuse me -- more of
these swarm attacks against their energy infrastructure.
SOLOMON: Sam, beyond just the cold weather, it appears that the weather is not cooperating with these efforts to get power restored. I mean, walk me
I mean, what type of winter weather are we seeing there? And how damaging is that to these efforts to get power up and running again?
KILEY: I mean, the weather at the moment is unseasonably warm to be honest. It is not catastrophic. There has been somewhat a degree of
exaggeration or dooms saying from the UN and others saying, in the worst case scenario that it could be the worst winter since the World War Two,
but at the moment, the weather isn't that bad. Efforts at repair are remarkably quick.
They are even talking about having Kherson connected to the national grid, perhaps even by tomorrow. That's nothing short of a technological miracle
in many ways, since Kherson was -- the connections to the to the rest of the country were broken deliberately by the Russians, as was its power
So just getting it connected to a national network is no mean feat. The conditions are muddy, wet, rainy, they're not pleasant, but they're a long
way off winter, and that is what Russia is really working towards, Rahel, it is a steady degradation of the capacity here.
They know that they won't be able to do it all at once, but if they break enough parts of the network enough times, the Russian argument will be that
in the end, they actually break the whole system.
SOLOMON: Sam Kiley in Zaporizhzhia there. Thank you.
US markets meantime have already closed for the day. It's a half day for the Thanksgiving weekend, and it is all eyes on the Black Friday sales.
The Dow was up triple digits, almost two percent higher this past week. The broader market and tech stocks, well, that was less impressive. The NASDAQ
finished lower half a percent. And we are already seeing record breaking retail numbers in the US just hours into Black Friday.
Sales on Thanksgiving itself hit an all-time high, and were better than expected according to new data from Adobe. They are expecting sales to hit
almost $9 billion today.
The President of Shopify, the online retail platform said the trends are looking promising.
(BEGIN VIDEO CLIP)
HARLEY FINKELSTEIN, PRESIDENT, SHOPIFY: We were already seeing numbers slightly up from last year based on Thanksgiving peak sales per minute, and
I think that, you know, one of the other major takeaways from this this season is, this Black Friday-Cyber Monday period is no longer just a
weekend, it's really become a season.
And I think that a lot of consumers were shopping earlier and looking for discounts, but the major trend here is intentionality. We really are seeing
that consumers are buying in a very intentional way. They want to buy from their favorite brands. They do want to find discounts, but they want to
support their favorite brands, and they want to buy direct as much as possible.
(END VIDEO CLIP)
SOLOMON: Okay, that was Shopify, an online player, but let's go to Alison Kosik. She is out with the real crowds in Herald Square in New York City.
So Alison, we talk so much about e-commerce, but it looks like based on what -- I can see behind you the crowds, brick and mortar is still alive
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Oh, most definitely, Rahel. Great to see you.
Yes, I mean, the crowds here outside Macy's, the iconic Macy's in the heart of New York City at Herald Square. The crowds have not led up all day and
take my word for it, inside the store, you cannot move. It is really, really crowded.
Today is Black Friday, the unofficial start to the Holiday shopping season, and it is expected to be one of the biggest shopping days of the year with
115 million people across the country shopping with more than half, shopping in store, 67 percent.
And you mentioned some of that online spend for Thanksgiving. On Thanksgiving, these numbers are eye-popping. Adobe Analytics says that $5.2
billion was spent online. And keep in mind, this is when people were supposed to be eating their turkeys.
So, I did speak with shoppers as well about the tone and the feeling of this year's shopping experience. And, you know, let's talk about the
elephant in the room, inflation, and it is really forefront on the minds of shoppers, and they are telling me that there's a new strategy that they
have to really think about how inflation is cutting into their wallet, so they have to stick to their budgets and really pay attention to those
discounts and decide what presents to buy based on what those discounts are.
Still the National Retail Federation is pretty upbeat about how the Holiday shopping season could wind up. They're saying that spending could increase
by eight percent over last year, adding up to a total of $940 billion to $960 billion, and I'm talking about November and December spending --
SOLOMON: Alison, what's the mood like of shoppers when you talk to them? Because we know in a lot of the data we see, shoppers continue to spend,
but they feel pretty lousy about the economy.
I mean, what are people telling you about the elephant in the room as you pointed out, inflation which is still at 7.7 percent on a yearly basis.
KOSIK: I'm not sensing any lousy feeling here today. I mean, we were here even before the doors opened here at Macy's, and those doors opened at 6:00
AM. Hundreds, a couple of hundred people waiting outside in the cold and before the sun rose and they were excited.
And once those doors opened, they were actually cheered on by Macy's executives who were waiting for them, and those shoppers coming in, they
looked excited to spend and I talked to a lot of the shoppers here today who just said they're going to navigate the situation a little differently,
let's say than they did last year because of historic inflation -- Rahel.
SOLOMON: We sure do love to shop.
Alison Kosik, good to see you. thank you.
SOLOMON: And some US retailers have been predicting the sluggish Holiday season, retail stocks have had a rocky year, with Target down almost 30
percent so far.
Last week, its chief executive lowered his outlook for the rest of the year blaming inflation and rising interest rates and international shoppers are
planning to spend less this year. According to Boston Consulting Group, shoppers across Europe are planning on spending up to 18 percent less on
Black Friday than they did in 2021.
Jerry Storch is the former CEO of Toys R' Us and the founder of Storch Advisors. Good to have you.
So Jerry, Black Friday, does it still mean the same as it used to? Because it seems like at least from my perspective, there have been Black Friday
deals for weeks now.
JERRY STORCH, FORMER CEO OF TOYS R' US, FOUNDER OF STORCH ADVISORS: Hey, you know, there have been Black Friday deals since July, but most retailers
started in earnest in early October calling all the sales Black Friday. The term has been so watered down, it is really just a buzzword, not a
And almost every item that's on sale today was available for the same price, starting Sunday of this week, because the entire week most retailers
ran one ad for the whole week. In the old days, there used to be one ad on Sunday, and another ad on Thanksgiving Day that started Black Friday. They
didn't run that ad this year, it is the same ad all the way through.
So, it is being spread like jam or jelly on a piece of toast, and there is no more jam or jelly if you just keep spreading it.
SOLOMON: Jerry, I'm not sure if you saw our last report with our correspondent in Herald Square, which I think also has a pretty significant
Toys R' Us store. I'm curious if you know -- she reported that there are still crowds there that people are still shopping there. Does that to you
signal a strong consumer or strong retail?
STORCH: No, not at all. And you know, I assume you don't want to hear the hype, you want to hear the facts is the new show. So, you know, the reality
is going to the store and asking people how they feel isn't going as far than asking people whether they drink or not, you know, and it's really
hard just to walk around the store and know how the crowds are compared to the same day on the prior year. Who remembers that? Who even knows, you
But I'm getting reports from all over the country that it's a very sluggish Day sales wise, is less than people expected in the stores, bricks and
mortar. Again, all these deals have been available online. It may not say what's going to happen for the whole season. And again, many of these sales
have already occurred earlier in the season.
So we'll see what happens. At the end of the day, Black Friday is nothing like it used to be used to be. It used to be mob to mob, walls of people
starting with giant lines outside the store the night before, and none of that happened this year.
You know, Macy's in Herald Square, hey, that's a one of a kind store. Goodness knows, again, I suspect they really aren't going to do that great
at the end of the day. But putting that aside, because I don't have their numbers, the reports from all over the country from Target and Walmart,
from everybody is -- and Best Buy, there haven't been the lines there were you know, pre pandemic. No one expects them anyway, everyone is trying to
do that with their approach to the season.
SOLOMON: So then what's a better indicator right now in this economy that we are all living through, what's a better indicator of consumer health?
STORCH: Well, you know, you look at retail sales report every month, and the last month report that came out, some people said, oh, the consumers
are healthier than we thought. Not really. We can look at the report, what you see is sales were up year-over-year, month-over-month, but they weren't
up as much in most categories as inflation. So you're actually losing ground versus inflation.
And the biggest growth rates were in necessities, like in groceries. So you look at growing groceries, health and beauty care. The items people have to
buy first, gasoline is up, too.
So that's where the money has been spent. There's little leftover in many consumer wallets for the optional goods like apparel, for example.
And so some retailers reported earlier in the week and the socks went up -- stocks went up. That's because they did better than expected. You had Best
Buy who is in a very challenged category this year, electronics reporting a negative 10 percent same store sales, and the stock went up because it
wasn't the negative 13 that was expected, but it's still not good.
SOLOMON: So then what industries, what parts of retail do you think should be most concerned right now? Is it the Best Buy players? Is it the
electronics players? Is it the apparel players? Who should be concerned in this environment?
STORCH: Yes. People who depend on discretionary items that you absolutely don't need, where you can trade down or trade off, they are the ones who
are going to struggle this Holiday season.
The ones who are going to do great, again, are the ones who are selling food, how can you lose? You know selling necessities and those that have
high value component and proposition like the Dollar Stores, like Walmart, who is both the nation's largest grocer and a great value player; like
Costco, same thing, lots of groceries, lots of value. That's where the money is going to be.
Consumers will spend money. And you know, most of the forecasts are single digits this year, but that's the same as inflation. So, we're basically
flat in a non-inflationary environment, which is pretty great.
SOLOMON: Jerry, unfortunately, I have to let you go and I'm sure my producers are going to be very upset, but I just have to ask because you
used to run Toys R' Us. Do parents think that toys are essential categories and periods of downturns, do parents still continue to buy toys?
STORCH: Generally that's been true, but we have been hearing some poor results this year. You can see the stocks, the toy makers Hasbro and Mattel
are up pretty sharply. I know Target who is the third largest toy seller in the country right now after Walmart and Amazon, they reported weak sales of
STORCH: So I think, we are seeing people trade down in toys, you know, to a lower price toy. You're still going to get a toy, but it may not be quite
SOLOMON: Okay, Jerry Storch, good to have you. Appreciate your insights today.
STORCH: My pleasure.
SOLOMON: In Qatar right now, an unexpectedly tight game between the US up against England. We will follow the action and see how the fans are
reacting, coming up next.
SOLOMON: Welcome back.
Adidas says that it plans to investigate allegations of misconduct against Kanye West after the company ended its partnership with the artist last
month. Adidas cut ties with Ye after he made a series of antisemitic comments. Since then, "Rolling Stone" Magazine has reported that Adidas
Board members ignored inappropriate behavior from Ye including claims of verbal abuse, bullying, and sexual harassment. The company had partnered
with the rapper since 2013.
CNN's Vanessa Yurkevich joins me now.
Vanessa, good to have you. So, what more do we know about these allegations?
VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT: Well, Adidas announced that it was launching this investigation into Kanye West over
these alleged misconduct claims after "Rolling Stone" reported that they got their hands on a letter that was sent from former high-level employees
at Yeezy that was sent to the Board at Adidas.
And in this letter, they detail this misconduct and they are urging in this letter, Adidas, to ". address the toxic and chaotic environment that Kanye
West created." This letter that was exclusively obtained from "Rolling Stone" details some of this misconduct, which includes verbal abuse,
bullying, offensive remarks especially aimed at women and sexual harassment.
Also in this letter, it goes on to say that Adidas knew about Kanye West's behavior, but chose to do nothing about it, that they ignored it. So now,
we have Adidas coming out with their own statement on this which says in part: "It is currently not clear whether the accusations made in an
anonymous letter are true. However, we take these allegations very seriously and have taken the decision to launch an independent
investigation of the matter immediately to address the allegations."
And of course, Kanye West and Adidas had a very successful partnership for the better part of 10 years, but the company went ahead and just about a
month ago ended that relationship, Rahel, because of antisemitic remarks that Kanye West made.
SOLOMON: Vanessa, it was a partnership that some valued at more than a billion dollars, so it was a very successful partnership to your point.
Has Ye responded? We know he's back on Twitter. Has he said anything about this?
YURKEVICH: Well, upon last check was which was just moments ago, he had not tweeted about this publicly, and right now, Kanye West doesn't have an
attorney or a publicist that is representing him in this matter. But we did reach out to an associate of Kanye West as well as to Yeezy, the brand to
try to get some sort of a statement on these allegations. But Rahel, we haven't heard yet back from them or about anything publicly directly from
SOLOMON: Vanessa Yurkevich, thank you.
SOLOMON: And to the World Cup now where England is taking on the US. It is one of the most anticipated matches of the group stage, and we are into the
second half and neither side has managed to score and it is the Americans however, making a lot of the play so far.
So here is something that might surprise you. England has never beaten the USA at a Men's World Cup. Yes, they've only met twice before. And yes, one
match was a draw, and the other game was more than 70 years ago. But still, there's plenty of pride on the line and if you can't be in the stands, the
next best place to be is at the pub, or at the bar, or watching us at the pub or at the bar.
That's where Anna Stewart and Andy Scholes join us. So Anna is in London and Andy is in Atlanta. Andy, I want to start with you. So no one has
scored as of yet. As I said the last time these two teams played in the World Cup, it was a draw. Might this be history repeating itself?
ANDY SCHOLES, CNN WORLD SPORT: Well, look at so far, I'll tell you what though, the US, they have been super aggressive in this game. They've had
the ball on their side, England's side in the field pretty much the entire time.
Rahel, I'll tell you what, there is so much nervous energy built up in this bar. I don't think I've ever seen anything like it.
These fans, as you can hear, they just want a USA goal. They can feel that it's coming. This place holds about 600 people. It has been in capacity for
five hours. Everyone is waiting and hoping to get a goal, it hasn't happened yet. But I'll tell you what, as soon as it does, this place is
going to explode.
SOLOMON: I bet. So let's check it down with Anna Stewart. Again, she is in London. Anna how are people feeling there? Are they feeling still pretty
competent about how they might do?
STEWART: Rahel, the mood here about an hour ago was loud, it was very electric, and I would say people who are just hoping for the best. They
were expecting the best. England, spiritual home of football, this is going to be a great victory.
I'll bring you down here and show you the room. It is going to look quiet though, honestly. And you see a few worried faces as we are approaching
really the last half hour or less than half hour at the moment.
Now, I've made some friends over here. How are you feeling right now? It's getting a little tense.
UNIDENTIFIED MALE: It is. To be fair, America is playing really well. But I still think England have got this. We've got this. It is going to be
STEWART: Yes, so we shouldn't lose heart yet?
UNIDENTIFIED MALE: I think it's going to be like -- I think we've got a couple of goals still to go, England. Two nil.
STEWART: All right, still some fighting talk. And your friend, how are you feeling?
UNIDENTIFIED MALE: I'm a bit nervous to be honest. I think it's been a bit of a scrapping game. I think both sides have been fairly even, but I'm
quite nervous. I don't know. I don't know if there's many goals in it, to be honest.
STEWART: This is not what we were expecting at this stage, but it isn't over yet. We've got another 24 minutes to go, Rahel. I for one am very much
hoping at this stage that there is a victory, because I didn't think I could bear to see so many hundreds of sad faces.
SOLOMON: I don't know, Anna. I don't know. Andy, I want to go back to you very quickly. Anna talked to a fan there who said he's feeling a bit
nervous. I don't know. I'm not seeing nerves in that crowd behind you.
SCHOLES: No, no. There is not really many nerves here. The people here have been saying the goal is coming. The goal is coming. Sir, are you
nervous at all? Are you feeling -- what are you seeing?
UNIDENTIFIED MALE: The goal is coming.
SCHOLES: See, the goal is coming. The goal is coming, Rahel. The fans are confident here despite the fact that US has the scored one goal since June,
but they feel another one is coming and it would be a big one.
SOLOMON: So then correct me if I'm wrong, Andy. So, if the US actually wins, this would be again, they've remained undefeated against England in
the World Cup.
SCHOLES: They would and the fans have been pointing out to me all day, not only have they never lost the England in the World Cup, they've never lost
a war against England either. They were pointing back to 1776 Revolutionary Wars. And so, a reason why they were going to beat England again today and
I was skeptical about that earlier, but so far, so good.
SOLOMON: Okay let me go back to Anna.
So Anna, walk me through again. So, you said it was about an hour ago that things really started to turn, that the mood there in London really started
to turn where people were starting to realize, yes, this just might not be their game.
STEWART: Oh no, I think, an hour you go, you could hear singing, chanting. At one stage, that was very near a goal, I can tell you, beer flew through
the air, and actually all over me, I've got nice crusty beer-smelling hair right now, Rahel.
But no, I think the mood actually changed maybe just before the first half, when suddenly everyone realized how much time had passed, and really, yes,
no ground game at this moment. The fact that people are getting off and getting a beer, cheering here says it all, but hold up, there seems to be
It is not over yet. I think we're going to celebrate every single moment. We've got a substitution right now, I think, and that's what all that
cheering as well, I can tell you here, it was in the room.
SOLOMON: Anna Stewart in London and Andy Scholes in Atlanta. It is not over until it is over, but still not looking good for England.
Well, another day of record COVID cases in China. Take a look. This video of a protester going viral after he broke lockdown rules and took to the
We will be back after the break on the growing unrest in some parts of the country.
SOLOMON: China just recorded its highest ever number of coronavirus cases for the second day running, and that is despite the country's tough
lockdown rules. In some parts of the country, unrest is growing.
This video of a protester in China's Southwest Changqing region went viral. That's after he broke lockdown and took to the streets shouting "Without
freedom, I should rather die." You can see him here being taken away by police, and the video has now been censored in China. The spike in cases
casting new doubts about China's Zero COVID Policies.
CNN's Selina Wang reports from China's capital, Beijing.
SELINA WANG, CNN INTERNATIONAL CORRESPONDENT: Anger is rising and tragedies are mounting, but China is showing no sign of budging on Zero
COVID, and for the second straight day, China reported its highest number of new COVID cases since the start of the pandemic reporting more than
30,000 new cases, and authorities are responding with more lockdowns, mass testing and quarantine and people here are getting more and more
Adding to that anger is a fire that broke out in the capital of China's far west Xinjiang region on Thursday night, 10 people were killed and nine
injured in a fire at an apartment building. Most parts of Xinjiang have been under lockdown for more than 100 days. The deadly fire sparked
nationwide outrage because widely circulated videos, which have now been censored in China show that COVID lockdown measures very likely delayed
firefighters from getting to the scene.
State media claims that people in the compound were allowed to leave the building. However, videos show fire trucks unable to get close to the scene
because the compound entrance was partially blocked. The video shows it's blocked with fences, tents, and metal barriers that are normally used as
part of COVID measures. The video shows smoke and flames coming from a high floor of the building, but the water failing to actually reach the fire.
What adds to the tragedy is that those who died in the fire likely spent their last three months largely confined to that building, if not entirely.
This tragedy really struck a chord with the public here because the scenes of suffering and tragedy have played out over and over again since the
start of the pandemic. So, many stories of people struggling to get into food, necessities and emergency care and locked down.
Three years into these harsh policies, frustrations or more frequently turning into protests, which are normally rare in authoritarian China. So
last week in the southern city of Guangzhou, some residents revolted during lockdown by tearing down barriers and marching through the streets. Then
there were violent clashes at the Foxconn factory at Zhengzhou this week, but still, there is no end in sight to zero COVID.
SOLOMON: As well central banks raise interest rates to fight inflation, Turkey is perhaps providing a cautionary tale. It's going the other way,
cutting interest rates by one and a half percent on Thursday to nine percent. It's the fourth month in a row that the central bank has dropped
rates. And it's doing so on the demands of President Erdogan who favors lower rates as part of a strategy to encourage growth.
Mr. Erdogan believes that this path will lead to lower inflation despite historic evidence to the contrary. The results so far, well, Turkey's
inflation rate is now above 85 percent. And at the same time, the value of the lira has tumbled against the U.S. dollar. Selva Demi Rob is a professor
of economics at Koc University and a former economist at the Federal Reserve Board. And she joins me now from Istanbul.
Selva, good to have you. So walk me through one just this logic, because at a time when central banks including the Federal Reserve had been hiking
rates, I think the fed has raised rates about 375 basis points since March. And Turkey, it's the opposite. Help me understand the logic.
SELVA DEMIRALP, PROFESSOR OF ECONOMICS AT KOC UNIVERSITY: So the idea is to promote growth. And it was expressed by the government officials that
Turkey prefers -- I mean, if we have to choose between growth versus inflation, Turkey chooses growth, which is understandable but that strategy
doesn't last very long because if you cut interest rates, despite inflationary pressures, at some point, it's going to backfire.
Now, since the last quarter of last year, Turkey cut interest rates by 10 percentage points. And inflation rate was 20 percent when central banks
started the easing cycle, and now as you express is 85 percent. If you look at the growth numbers in the first half of 2022, Turkey did grow positive -
- it was a point -- 7.5 percent growth rate. However, it wasn't the low interest rate environment that generated this growth, because during the
time when central bank was cutting interest rates, market interest rates were actually going up.
That's what I would call a contractionary expansion. And why is it happening? Because inflation expectations are going up. Then where did
growth come from? It was either because of the strongest growth in Europe, our major trade partners, so it was the exports component, or it was
consumption because of something like the Black Friday effect, because you know, on Black Friday, people think that you can buy the same goods at a
And you wait until Black Friday to increase your consumption. Well, Turkey has been going through this Black Friday effect for half a year. Because if
you think more inflation is coming, and if your income is not adjusting -- to try to buy whatever you can before it gets more expensive just like the
Black Friday which contributed to stronger growth in the first half. But just like Black Friday, it's not going to be sustainable.
And you can't keep buying more refrigerators or consumer durables. Once you are done, you are done.
And in the second half of the year there is going to be an inevitable slowdown in the Turkish economy because consumption for durables is not
going to last in the second half. And the decline in purchasing power due to inflation is going to hit the domestic consumption along with the
Russian war, which is going to unfortunately affect Turkish exports.
SOLOMON: I see. So I take your point that it's -- at this point, just all about growth, so is fighting inflation is that just no longer part of the
DEMIRALP: It's not. I mean, it is already expressed by the government that inflation is not a priority, and they are going to promote growth. But I
think the point to be emphasized here is that even if you do that, even if you say inflation is not going to be my priority, you cannot even sustain
growth, there's not going to be a sustainable growth, where you completely disregard inflation, there's a reason that about 90 countries since the
beginning of the year hiked interest rates, because they probably also want to promote growth.
But it's important to sustainable growth and in the absence of price stability, you cannot really have sustainable growth. You can have strong
growth in one quarter, but it is bound to come down eventually.
SOLOMON: So there is no data at this point to suggest that this orthodox approach will actually work or is even working?
DEMIRALP: It is not working. It is not working because as it was admitted by the central bank's policy statements, the Monetary Transmission is
stuck. With this monetary transmission. usually, when Central Bank's change interest rates in one direction, they hope that market interest rates will
follow. So when the fed tightens, long-term interest rates go up. When the Turkish central bank cuts interest rates, long term interest, interest
rates actually go up, they don't go down.
So, it shows that this unorthodox policy, the transmission from the central bank to the markets is not working, then they come up with macro prudential
tools, which is like making the banks buy more government bonds as part of the reserve requirements, which increases the demand for bonds and lowers
interest rates. So when monetary policy is not working, you kind of interfere with the free market mechanism and generate demand in order to
lower interest rates on bonds and the rest of the markets.
SOLOMON: Selva, I want to also ask the more fed specific question at this point in the inflation fighting game, I mean, we're at 7.7 percent. I mean,
do you think the bigger risk right now is inflation expectations becoming entrenched or the risk of unnecessarily causing a recession?
DEMIRALP: I think recession is the risk, but it's not unnecessary. I mean, because the fed was late in the game. And when you are late in achieving
price stability, unfortunately, you have to be more hawkish and it will hurt when you become hawkish. So there's a recession concerned. But when
you look at the inflation expectations, I mean, long term, like five-year inflation expectations actually never exceeded the target too much.
It wasn't really more than three percentage points. And if you look at the short-term interest rate inflation expectations, we see that they did start
to come down with the feds tightening cycles. So the fed I mean, compared to let's say, Turkish Central Bank is still a much more independent and
credible central bank. Yes, they made a mistake in studying their tightening cycle, and they are paying the price for it.
But in the end, the markets do by that when they see a central bank that admits its mistake, and then tries to correct it, then they give credit to
the central bank and inflation expectations, even in the short term are gradually starting to come down towards the target. So it still has a long
way to go. And therefore, there might be a recession. But I think inflation expectations will be anchored because that's the game. That's what the fed
If they are not anchored yet, then they are going to continue with your title.
SOLOMON: Right. Absolutely. Selva Demiralp, we'll have to leave it here. Thank you.
DEMIRALP: Thank you.
SOLOMON: And Black Friday is one of the year's biggest days for shopping and while trucks will help transport most purchases, and the not so distant
future, drones could be making deliveries to your doorstep. CNN's Anna Stewart has the story.
ANNA STEWART, CNN REPORTER: As drone deliveries become more common, one city in the Middle East is working to help this kind of technology
literally take off. This special pilot area to develop and test drones is in the heart of Dubai's silicon oasis.
LEWIS DICKINSON, HEAD OF FLIGHT OPERATIONS, SKYPORTS: The Dubai future flight foundation have offered us a sandbox to trial, the types of drone
technologies that we're using, we're able to create a safe test environment where we can understand what the commercial value is.
STEWART: Skyports is a U.K.-based drone company that was formed in 2018. Its drones currently fly in London and Singapore, delivering medical
supplies and transferring light cargo between shores and ships. The company hopes to launch similar services in Dubai, a city with more than three
million people mostly rely on motorbikes or deliveries.
DICKINSON: The idea there is that by removing a vehicle off the road that would normally provide that delivery service. What we're doing is allowing
our customers to achieve some of the low emission sustainability targets.
STEWART: Air, rail and vehicle transport is linked to more than a quarter of carbon dioxide emissions worldwide according to the International Energy
Agency. But experts believe drones could reduce that figure because they're electrically powered.
JACQUES KHORIATY, MIDDLE EAST CHIEF OF COMMERCIAL OFFICER: So if we can provide solutions that will be more efficient, and that will, of course
have almost zero emissions, then this is the biggest impact I see.
STEWART: More than 660,000 drone deliveries have been made globally in the last three years. According to McKinsey. That figure is projected to rise
up to 1.5 million. But widespread adoption depends on many factors such as regulations, customer acceptance, and operational costs. Over 100 companies
are piloting drones for delivery today according to McKinsey.
KHORIATY: The major challenge will be on the airspace to make sure that skies will be safe.
STEWART: Skyports operates about 30 drones and countries where they have the green light to fly. And now that the company has completed its testing
phase in Dubai, the team hopes to soon add another country to the list.
Anna Stewart, CNN Dubai.
SOLOMON: And that is QUEST MEANS BUSINESS. I'm Rahel Solomon. It was a pleasure being with you this week. Up next, Africa Avant Garde.