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Quest Means Business
ECB Raises Interest Rates for First Time in Three Years; Trump Speaks to Reporters; FIFA World Cup Underway
Aired June 11, 2026 - 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, "QUEST MEANS BUSINESS": The closing bell ringing on Wall Street.
We are back in New York and what a difference a day makes. Very sharp losses yesterday giving rise to gains. You'll see the numbers here as the
gavel is hit, and a one and a two and a one, two, three, four.
We are up just off the tops of the day. We were over a thousand points up. Triple stack shows that the NASDAQ had the best of the session. We will
show you the triple stack as the hour moves on so you will see all three.
Now, we will show you now -- thee we go. Two-and-a-half percent for the NASDAQ. Good, strong gains across the board. Those are the markets. And
these are the main events of the day.
A preemptive move reaction: The European Central Bank, the ECB raises interest rates as the energy shock stokes inflation.
Mexico and South Africa, the first match of the World Cup underway. We will keep you informed.
And within 24 hours we will know how SpaceX shot into the stratosphere. $135.00 shares values the company $1.75 trillion.
We are live in New York today, Thursday. It is June the 11th. I am Richard Quest, and back in New York, I mean business.
Good evening.
The European Central Bank has become the first major Central Bank to raise interest rates as inflation has taken off following the Iran War. The ECB
raised its benchmark rate a quarter point to two-and-a-quarter, the first hike in three years. You can see from the chart, it has been a gradual step
down in rates.
We will now go to Donald Trump in the Oval Office who is answering questions.
REPORTER: -- deal, sir.
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES OF AMERICA: I understand, the answer is yes.
REPORTER: And when the -- and when this deal is signed, is the United States going to immediately lift the blockade?
TRUMP: Yes. That's true. That's part of the deal.
REPORTER: And just one more --
TRUMP: And we will have oil prices dropping like a rock.
REPORTER: And, sir, have you actually secured an agreement on the discussions about the nuclear material and the nuclear negotiations? Has
Iran --
TRUMP: Yes, especially on that and nobody is getting close to it because its buried under a mountain, basically -- basically. There's B-2 bombers in
the --
REPORTER: Mr. President, but has Iran committed to not pursuing a nuclear weapon, or will there be more negotiations on that down the line?
TRUMP: They will not have a nuclear weapon. They've agreed to that. There will be no -- which is the whole reason, which is a big part of the reason.
REPORTER: Is that going to be in your agreement, sir?
TRUMP: They will not only not have, they will not purchase, develop in any way, any shape -- in any way, shape or form a nuclear weapon.
REPORTER: Mr. President, a follow up on that, you will have said before that Iran and the united States were close to a deal, it has not happened
yet. Why are you so convinced that this time is different?
TRUMP: Because they have taken a pounding. They've taken a pounding like very few people could take, and they want to make the deal a lot more than
I do. And, we could have had it done the other way, I guess, but it would have taken longer.
They got hit very hard recently, as you know, and I don't like to have to do things that way, but I felt it was necessary. It is a great deal for the
United States and for the Middle East, and I think ultimately great for Iran, because they will be able to build up their country and I love their
country.
I really believe it is a regime change, because I find these people to be much more rational than the people that are no longer with us. We knocked
out the first team of leadership, the second team of leadership. There is a different group, there is a different level, and I think it is frankly a
smarter level, and it is a level that has reason.
And they've all approved the deal. Everybody has approved the deal. Now we will get it finished up and hopefully that will be done.
We will not have Iran having a nuclear weapon, which is very important to these people behind me. We can talk about fishing. There won't be anybody
to fish. The fish will still be around. I guess they are going to be affected, too. We are not going to let it happen.
So, Iran will essentially -- most important paragraph to me, Iran will in no way, shape or form have a nuclear weapon or purchase a nuclear weapon.
REPORTER: Mr. President, this is the concept of that agreement. When it comes to nuclear, you said this was just a concept of that agreement. So is
this just essentially setting the stage for deeper talks on nuclear?
TRUMP: Well, it is a very strong Memorandum of Understanding that is a little conceptual, but it is something that is going to get done.
[16:05:10]
And if it doesn't get done for any reason, which I can't imagine that not happening, they want to sign it as much as I do or more.
I would say they want to sign it more, maybe a lot more, but it is a very detailed Memorandum of Understanding, also agreed to by many other
countries that have great influence over them and everybody wants it done. So it is going to get done.
REPORTER: --- that Iran may be tapping along the U.S. Those were the words that you used. What makes you believe that they are sincere this time in
wanting to pursue this --
TRUMP: The level of enthusiasm for getting it done and we are hitting them very hard for the last three days. We were going to hit them even harder
tonight. They knew that. We told them exactly what we were going to do. We explained it exactly because they have no Navy, they have no Air Force.
They have no -- any weapons of detection, they have nothing.
And so we could tell them exactly what -- there wasn't a thing they could have done about it and we won this war militarily very early on. The only
thing we didn't win was the fake news was, you know, no matter -- if they could have raised the white flag of surrender and the fake news would say,
oh, they did wonderfully. They didn't do wonderfully.
But you know what? They have got a chance to build their country. Their country is largely demolished. Again, their Navy is gone, their Air Force
is gone, their anti-aircraft is gone. Everything is gone. Their leadership is gone, many times over.
Even many people from this leadership is gone. But we found them to be rational and they're going to make a deal.
REPORTER: Mr. President, Mr. President --
TRUMP: And I will tell you what, it is a great deal. You know why it is a great deal? Because they will never have a nuclear weapon.
REPORTER: Mr. President, your specific amount of time that has to pass between this Memorandum of Understanding and a final deal being done.
TRUMP: Well, we hope it is going to go relatively quickly, but --
REPORTER: Is there a 60 or 90 --
TRUMP: I mean, the Straits are going to open immediately upon signing. Maybe it will be Saturday or Monday.
TRUMP: Is there a deadline, though, to get from this to a final deal?
TRUMP: We think it is going to go pretty quickly. I don't want to say a deadline because if I say a deadline, you'll say, oh, he didn't meet the
deadline. You know, this is like -- it is not going to matter much because it is going to get signed and the Strait is open, but the Straits have been
open for a number of months already, and you just didn't know about it.
You know, you, as reporters weren't able to get it. I just announced yesterday that we are bringing -- that we brought a lot of ships through
and nobody knew about it. I guess we did a pretty good job, Peter, right?
But we brought many, many ships across and millions -- hundreds of millions of barrels of oil were brought across.
REPORTER: Mr. President --
TRUMP: And there wasn't a thing that anybody could have done about that.
Yes.
REPORTER: Is the Kharg Island operation off the table? And are you ruling out boots on the ground --
TRUMP: Well, now, it would be, if we signed this agreement. It would be. They weren't so thrilled when they heard that. That's what I would have
done. And I just don't think -- I like it great. Look at Venezuela, how well that's worked out. We've paid for that war many times over and --
many, many times over. We have millions of barrels of oil from Venezuela going to Houston, and we are working great with the Venezuelan government.
Couldn't be better. It is a real -- it is a real good relationship, really good relationship. Venezuela has been amazing.
This is a larger situation, actually less oil, Venezuela has a lot of oil. But we -- think of it, we spend X dollars, we paid for it many, many times.
When was the last time you heard that? Many times over, we paid for it. Did you ever think you'd see that in this country? Right?
We go to wars, we end up with -- always, we end up with just blasting the hell out of people, and we come home. Nothing happens.
Venezuela was amazing and this is amazing. Yes.
REPORTER: Mr. President, are you considering using or drafting an executive order to extend FISA or to continue using Section --
TRUMP: Well, if Congress wants me to do it, let's see what happens there.
REPORTER: Republican leadership wants you to do it.
TRUMP: I will put out a statement, sure. That is very important. It is very important for our military.
Mr. President, on the SAVE AMERICA Act, you are now urging Republicans to add that to this third Reconciliation Bill.
TRUMP: Yes.
REPORTER: What is your perspective on why election integrity matters so much for national security from your perspective?
TRUMP: Well, we need it for our elections. We need to have voter identification which you don't have right now, on a national basis. We need
it for -- and the voter id is very important. We need it for proof of citizenship. Do you believe it? The Democrats are fighting. They don't want
you to prove your citizenship when you vote.
You know why they want that? Because they cheat. And we also wanted mail-in voting where you have people that are sent seven, eight ballots, two
ballots, four ballots, and a lot of them sign those ballots. Mail-in voting, we want to be very judicious. If you're in the military and you're
far away, or if you're handicapped, or if you're sick, or if you're on vacation, that you have a --
But you're not going to -- millions and millions. Look at California. They send out millions of ballots, tens of millions.
[16:10:19]
They have no idea what's going on. Those elections are so corrupt. So we have a mail-in ballot, then we have no men in -- and we had two more, no
men in women's sports. We are talking about Saving America, right? No men in women's sports, another one, very popular. I think its 99 to one. They
say it is 80/20. I think its 99 to one.
And we have no mutilation of your children for transgender purposes. So let's see -- transgender utilization of your children. Does that sound good
with you guys? Does that speak to you? You're not into transgender mutilation.
UNIDENTIFIED MALE: Not at all. Not at all, sir.
TRUMP: When your child leaves your house and they take your child from you. In some case, think of it, in six states, they take the child and do what
they want to do. What they do is -- I don't even want to talk about it.
We add that no transgender mutilation of your children.
REPORTER: Mr. President, do you intend to have Bill Pulte continue to serve as the acting Director of National Intelligence? And do you think it is
unreasonable that some Republicans have concerns that he has no Intelligence experience, even if he is serving in this acting role.
TRUMP: But he is intelligent, unlike a lot of other people.
REPORTER: But do you think that's -- no Intelligence --
TRUMP: He is only there for a little while. He is running it for a short while we get a very talented person, Jay Clayton, as you know, Jay Clayton
is an incredible talent. Head of Sullivan & Cromwell. He was head of the SEC. He is now Southern District, I mean, nobody has better credentials.
But Bill will run it for a short while. He has done a fantastic job at Fannie Mae, Freddie Mac -- created tremendous -- it is probably worth a
trillion dollars now, a trillion. He has done a great job.
He is a smart guy.
REPORTER: Mr. President, today is another example where you bring in these everyday Americans into The White House and listening to them. How
important is it for you to listen to everyday Americans when it comes to policy making?
TRUMP: Very important. These people built the country, not the complainers. The complainers didn't build the country. These people built the country.
Whether its fishermen or farmers or anything else.
Me, guys like me, they built the country. You know, I watch all of these ingrates. They are always complaining, complaining. They didn't build
anything. They couldn't build anything. Look at what's happened in Minnesota. Somalia -- all of these people came in from Somalia. They ripped
off our system.
You have the woman who married her brother. She came in and married her brother. Isn't that wonderful? And then she talks about the Constitution of
the United States. She comes from Somalia. They don't have Constitutions in Somalia. They don't have police. They don't have -- all they have is people
that run around shooting each other. And then she comes and tells us how to run our country. I don't like it.
These people don't like it, I can tell you. I think I can speak for you.
UNIDENTIFIED MALE: Yes.
TRUMP: She comes in, Ilhan Omar, she comes in, she tells us how to run the United States of America and she comes from a place without anything,
without anything, probably among the worst countries in the world. And she says the Constitution of the United States protects me. She shouldn't be
protected.
Honestly, she should be thrown out of the country. She is corrupt. And most of the people that came in are corrupt, and the whole voting system is
corrupt in Minnesota.
I won Minnesota three times easily. I won almost every county, but they didn't give it to me. It is a corrupt system, a very corrupt state. The
governor is terrible. The attorney general there
QUEST: All right, there we leave The White House. Donald Trump seems to have shifted off the news of the day into discussing U.S. politics as he
sees it.
The core point of what we've been listening to so far, and by the way, we are still monitoring what the President is saying. So, if he does come back
to something relevant to the Gulf, to the Iran War, to the economy, we will bring it to you.
Now, the story that we are following, of course, is that the European Central Bank announcing its first rate hike in three years. The ECB
President, Madame Christine Lagarde, says policymakers have to act fast.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, PRESIDENT, EUROPEAN CENTRAL BANK: If you let inflation start running out without control, then it becomes a much more difficult
situation to bring it back to the level of price stability that we have defined.
So, the good decision was actually to raise interest rates, to commit and to deliver on price stability.
(END VIDEO CLIP)
QUEST: Now, what the President is talking about is looking out for so- called second round effects. That's when the initial price shock spills over into the broader economy.
[16:15:09]
For instance, higher oil prices: That is the primary effect, but it can eventually raise prices across different sectors. Workers may eventually
ask for higher wages. Companies raise prices to make that happen. Consumers might reduce their spending, and economies start to slow.
The ECB probably won't be the only Central Bank to raise this year. Inflation in the U.S. hit a three-year high in May. Investors believe it is
likely the Fed will probably raise rates by the end of the year.
Mohamed El-Erian is the Allianz chief economic adviser. Now, Mohamed, the question here. Now, I've read your views on this to the extent that you
don't think that, you know, a cut or a hike is likely, but I think I am going to phrase it is should -- should the Fed be raising rates sooner
rather than later, bearing in mind the inflation rate is higher here than in the Eurozone.
MOHAMED EL-ERIAN, ECONOMIST AND ADVISOR, ALLIANZ: So because the Fed has to worry about two things, not one, the so-called dual mandate like the ECB,
it has to deliver price stability, but it also has an employment objective as you know.
I suspect the right thing for the Fed to do is to wait. The ECB is different as you know, Richard. They only have one mandate, inflation, and
I think they are absolutely right to hike. Had they had two mandates, they would have waited as well.
QUEST: So what do you think is the upper level of interest rates -- the primary rate in a sense as a result? Where do you think we are going on the
rate of inflation before the Fed would really have no choice?
EL-ERIAN: So the key issue is what is called core inflation. Core inflation strips out the volatile aspect. So you're absolutely right. The last
inflation print, which was yesterday, was 4.2 percent at the headline, but the core was only 2.8. And in fact the core came in slightly below what is
expected.
We would need to see the core above three percent for consecutive months. Now, I don't want to say everything is fine because we've got another price
data today, and that is PPI. That is the Producer Prices, what is in the pipeline, and believe it or not, that went up to 6.5 percent.
So, so far, the spillover you talked about has been limited, but we need to keep an eye on this.
QUEST: What would be the term -- not so much in numerical terms, but what causes Producer Prices and CPI to move into core inflation? Because if
you've stripped out the volatile bits, when do you -- what is the turning point in a sense?
EL-ERIAN: So the turning point is when companies believe that demand is strong enough in order to pass on the higher cost into higher prices. Right
now, there is some hesitancy to pass on the higher costs.
So what we are seeing is we are seeing them take it on margins. And as you know, profit margins are incredibly healthy. So most companies can afford
to sacrifice a bit of margin because they don't want to alienate their customers.
If they are not sure that this inflation shock is going to be long duration, the last thing they want to do is upset their customers, who
already are very upset about affordability and the cost of living.
QUEST: One can't help feeling and listening to what Christine Lagarde said is that, you know, the difficulty of bringing it back. The Fed seems to be
content to keep inflation. You know better than me how many months they've now been over their own target rate, but they seem to be quite content for
it to stay over two percent, over three percent for some months to come on the headline number.
EL-ERIAN: Yes. So they've been over two percent, that target for 62 consecutive months, over five years.
QUEST: Wow.
EL-ERIAN: So unheard of, and it will continue for at least another year. Deep inside, I think the Fed understands that two percent is too low a
target for an economy that's going through so many changes on the supply side. So I suspect that they are tolerating a three percent target, not a
two percent, a three percent target as long as this notion of inflation expectations stays stable.
And I think that is what is happening and that is why despite 62 months of having missed that target, they are not going to hike rates for this year.
[16:20:00]
QUEST: SpaceX tomorrow. I mean, it has got a sexiness to it. The market is going to go off to the races. Is there any major significance in a
macroeconomic sense for these three or four massive IPOs?
EL-ERIAN: You know, in the old days, we used to do an exercise. We used to look at who needed funds and who would provide funds. We forgot about that
exercise, but I think now we are.
The significance of these massive IPOs is that they come on top of governments having to fund high deficits, on top of companies having to
borrow in order to invest in A.I., and I scratch my head, Richard, where is all this money going to come from? I really cannot identify where all this
money is going to come from.
So, the macro implications is, I suspect that that's going to push borrowing costs higher for the economy as a whole.
QUEST: Back at the sofa, Mohamed, back at the sofa. They will find some more -- they will find some loose change. And if not, you rob the milkman
and pay him next week.
Good to see you, sir. Very grateful. Thank you. We've got lots more to talk. Thank you.
President Trump says there has been progress on a deal with Tehran and it could be finalized. He has called off planned strikes on Iran only hours
after threatening them.
Oil has fallen on the news, but this is so volatile except it is interesting. You know, we are now under $90.00 a barrel. The President had
threatened to seize Kharg Island, which, as you know well handles 90 percent of Iran's crude.
Kevin is at The White House, and Kevin Liptak. Kevin, I listened very carefully to that part of the President's address, where he was talking
about these things. He seems very confident he has a deal. If something doesn't materialize, I mean, he will have some answering to do.
KEVIN LIPTAK, CNN SENIOR WHITE HOUSE REPORTER: I think so, and I think it is important to note that we have not heard from Iran yet, that they have
signed off on this deal. There have been some positive signals. You talk to White House officials. They say that they received this updated draft
through the Qatari mediators last night. They think it is something that they can sign off on.
And so yes, the President sounding very confident, but he has sounded confident a lot of instances before this. You know, we counted it up. It is
38 times that the President seemed to suggest the deal was imminent, only to see it all collapse.
But it does seem like this is different. The President is saying that this is actually going to be signed sometime over the weekend. He thinks J.D.
Vance will head to Europe to participate in the signing ceremony and laying out, at least in some vague details about what is in this proposal, which
is that it would reopen the Strait of Hormuz and that it would include a commitment from Iran that it not obtain a nuclear weapon.
What is in the rest of it? We are not exactly sure. It is going to be very important, I think, to look at some of the details and the wording,
particularly on the question of what the financial relief for Iran looks like as part of the deal, that had been a sticking point that the two sides
had been unable to agree on over the last few weeks.
So the President very confident, he noted there that the markets were surging and I think it seems evident that the President was watching that
very closely over the last several days as this tit-for-tat back and forth went on with Iran, the President calling off those strikes and also saying
explicitly that Kharg Island is now off the table as well, because this deal seems to have been agreed.
QUEST: It is just hard to know what is market driven and what is politics and what is actually. So, Kevin, grateful for you. Thank you. At The White
House. Lovely afternoon there. I bet it is stonking hot, actually, it certainly is here. It is certainly is here in New York. Thank you.
The World Cup is underway. Mexico is leading one-nil, South Africa.
Valeria Leon is live. There you are. We will be with you in just after the break assuming you can hear us and we will hear you.
QUEST MEANS BUSINESS live in New York.
(COMMERCIAL BREAK)
[16:26:42]
QUEST: The World Cup is officially underway at last. Mexico is taking on South Africa on home turf in Mexico City, and the home team is leading one-
nil at the start of the second half. There are a few protesters using the occasion to draw attention to their causes, taking to the streets near the
stadium -- education workers, family members who have disappeared and the like.
But the football is now underway. Valeria Leon is in Mexico City.
I know that you may have some difficulty hearing me, so I will, as they say, speak slowly and shout, but the atmosphere looks good.
VALERIA LEON, CNN EN ESPANOL CORRESPONDENT: It is a great, Richard. Absolutely. This is because Mexico City's zocalo has turned into a temple
of football. This is the largest fan fest of the tournament, big enough for 50,000 people. And we arrived here early this morning and we saw people
already lining up to get into this FIFA Fan Fest in Mexico City with the biggest screen. It is a 510-square meter screen where fans can watch, of
course, the opening match right now, but also the other World Cup matches for free.
And this is important because ticket prices were so costly for many Mexicans and also visitors to get into the stadium. So this fan fest will
turn in this celebration. Thousands are gathered here and one of them is Tina. She is from Las Vegas, and she was one of the ones who lined up early
in the morning. What did you experience there?
TINA, FROM LAS VEGAS: Well, by the time we got here, there was a lot of people already lined up, so we were keeping our fingers crossed that we
could make it in. And we've been waiting since 6:00 in the morning, and we finally got up to the gate to get in, and everybody was rushing from the
outside that wasn't in the line trying to beat us in and pushing and shoving and people everywhere.
LEON: People everywhere. Thank you, Tina. And yes, there is a lot of excitement. Actually, the government has set up part of metal barriers
surrounding this, Mexico City's main plaza, and we saw just a few hours ago, Mexican fans trying to jump through these barricades and try to get
into the fan fest, but Mexico City's authority has said that it is in its maximum capacity.
Richard, more than 50,000 fans and many fans from all over the world celebrating here this opening match, as Mexico makes history as the first
country to host the World Cup for a third time -- Richard.
QUEST: I can feel the energy and the excitement and I can see the flags. Thank you for joining us.
Now, World Cup matches, there are three countries, of course, involved. It is North America from Mexico through the U.S. up to Canada. Brazil will
play Morocco on Saturday outside New York City.
The opening weekend presents a massive opportunity for businesses in the area. The shops and restaurants in New York City, borough of Queens
certainly don't want to miss out.
The Chamber of Commerce is helping them with marketing and promotional material. The businesses could get an even bigger boost this weekend. The
New York Knicks are playing for their first NBA title in 53 years.
Tom Grech is the chief executive of Queens Chamber of Commerce. It is a tricky one here. I mean, you know, you've got the Knicks, you've got the
FIFA World Cup. You don't really care over in Queens, as long as the business comes in, you'll take it all.
[16:30:26]
TOM GRECH, CHIEF EXECUTIVE OF QUEENS CHAMBER OF COMMERCE There is no question. Thank you so much for having me.
And you can't forget those New York Mets who finally won a game this afternoon. They had a day game and this game is tomorrow as well. So we are
becoming quickly the sports mecca, I would say of our country. And right now with the focus on FIFA, in a regional way, we are really, really
excited about our small businesses and the success They're going to get from the World cup being in our region.
QUEST: Okay. Now I choose my words carefully because the statistics show there aren't the same number of hotel rooms. There aren't the same number
of visitors, inbound flights.
And so I am guessing that from your point of view, you've got to focus on making good business from those who are here, not worrying about those who
are not.
GRECH: You're absolutely right. We are -- we would be the fourth largest city in America if we were a separate city with 2.3 million people and
Queens' time is now.
And so this hotel issues, these transportation issues going from New York City over to New Jersey, but we are really, really happy to have many of
the people that are going to be flying here to JFK less than five or seven miles away from where I am sitting in the middle of in the heart of Queens,
we want those people to come to our restaurants or bars.
We put together an activation plan last week that within 24 hours, over 250 applicants to help them activate their restaurants. So when Colombia plays
a certain country and when Mexico plays a certain country, we want those Mexican and Colombian bars and restaurants chock full of visitors and
locals alike to show their home country pride and their American pride as well keeping New York and the spotlight on Queens in particular.
QUEST: Why is this? I mean, you know, obviously you want the business, so I understand that. But you are competing against all the other boroughs. You
are competing, of course, against Manhattan itself and the other surrounding areas. So I guess the goal is you've got to make your voice
heard louder, in a sense from Queens, accent with the tremendous Queens accent and all.
GRECH: You bet, and I will tell you something. We have a ride. I said it before, but as the as the largest geographic borough today, we have over
$35 billion of all private investment going on. It has been going on for a few years.
Two brand new airports, two recently approved casino opportunities with the New York Mets and Hardrock and Resorts World, plus a brand new soccer
stadium. I am wearing my jersey.
Today in New York, I am always a New York City Football Club fan, but today the Hard Stadium is being built and the USTA, matter-of-fact, this
afternoon we were over at USTA for the launch of a viewing party, where tennis will be held in a few short months. That's been activated as well.
QUEST: We need to bring QUEST MEANS BUSINESS for a Summer Friday at some point to where you suggest in Queens, and hopefully you'll join us when we
do so, sir, because its extraordinary. Thank you for joining us. Very grateful.
GRECH: Thank you very much. I appreciate it. Come to Queens. Thank you.
QUEST: Come to Queens. I was there this morning. I landed coming on my way back from Sao Paulo, landed this morning at Kennedy Airport.
The World Bank believes this year will be the worst year for global growth since the pandemic and the projections could get much uglier.
The economist, Paul Krugman, there you are. Good to see you, Paul. We will talk about economics and anything else that's on your mind after the break.
QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
[16:37:05]
QUEST: Hello, I am Richard Quest. We have a lot more QUEST MEANS BUSINESS.
The Nobel Prize winning economist, Paul Krugman is with me. We will discuss resurgent U.S. inflation and warnings from the World Bank. And the CEO,
you're to hear from CEO of Air-France KLM, Ben Smith. His airline is not comfortable fully returning to the Middle East yet.
We will hear from them and others after the news, because this is CNN, and on this network, the news always comes first.
President trump called off planned U.S. strikes on Iran today. He claimed a deal between the two nations will be finalized over the next few days.
The U.S. President made the announcement after issuing a series of major threats to Tehran, including a warning the U.S. would soon seize Kharg
Island, which handles 90 percent of Iran's crude oil exports.
The 2026 FIFA World Cup is finally underway, with Mexico taking on South Africa at the historic Azteca Stadium in Mexico City. The singer Shakira
was the headliner for the opening ceremonies. Mexico is co-hosting with the U.S. and Canada.
New York Knicks fans are celebrating the largest comeback in NBA Finals history. The home team heroes erased a 29-point deficit to win game four
against the San Antonio Spurs on Wednesday at Madison Square Gardens.
The Knicks lead the series three to one and one more away from their first championship since the early 1970s.
The oil shock from the Iran War led to a spike last month in U.S. wholesale inflation. The PPI rose an annual rate at 6.5 percent, highest in nearly
four years. Now, more than half of that is attributable to rising price of gasoline.
With me, Paul Krugman, the Nobel Prize winning economist. When you hear those sort of numbers 6.5 on PPI, 4.2 on CPI, but core is still down much
more muted. What does that economic scenario tell you?
PAUL KRUGMAN, ECONOMIST AND COLUMNIST, "THE NEW YORK TIMES": Okay, basically, you can take the idea that the Fed is going to cut rates any
time in the you know, as far as we can see ahead off the table. Anyone, you know, like Donald Trump who thinks that the Fed should be cutting rates,
they are just not part of the conversation.
It is probably not enough for a rate hike yet, because core is still relatively muted. And normally the Fed tries to look through shocks to
energy prices, shocks to food prices. They are getting a little nervous because there are some signs that expected inflation is ticking up, but it
is not drastic yet.
So right now, it is kind of a wait and see and let's find out if the 38th time that Trump has announced that we have a deal is the term.
QUEST: What about what the President said? Have a listen, Paul, to what he said on inflation. I know you know the quote, but for those viewers who
have not heard what the President said, have a listen.
[16:40:10]
(BEGIN VIDEO CLIP)
TRUMP: I love the inflation. You know why? Because as soon as this war is over, you know, I can say it now, something you didn't know. Do you know,
we've been taking out millions of barrels of oil. I think they are going to want to make a deal, but we are going to find out.
REPORTER: Inflation will come down between now --
TRUMP: When the war is over.
REPORTER: Yes.
TRUMP: It is coming down.
REPORTER: I know you can't --
TRUMP: It is going to come down like a rock.
(END VIDEO CLIP)
QUEST: Okay, two questions. Paul, do you understand what he meant by I love the inflation? And is he right that the price will drop like a rock?
KRUGMAN: So I don't actually know what he means. He may have -- someone may have told him that the latest core inflation reading was slightly below
expectations and not knowing, you know, he obviously doesn't know any of this stuff. He probably thought that was really good news or that somehow
penetrated.
As far as I can tell, you know, there are a lot of damage that have been done to oil facilities. All the people I know who study these things think
that we are going to have elevated oil prices for quite a few months, even if -- you know, even if this latest -- even if Iran deal number 38 is for
real, we are not going to be looking at low prices for a long time to come.
QUEST: On the current situation, bearing in mind the ECB raised rates today, we know what is happening in Asia, in Southeast Asia, where there is
some serious, serious economic problems as a result of all of this. What worries you most about what we are facing at the moment.
KRUGMAN: Okay, two things. I am still worried. I mean, I don't quite understand why oil prices aren't higher. Theres a -- you know, where
inventories are still being drawn down. There is a mystery decline in Chinese imports, which has been helping to ease the situation. But you
know, can that continue?
So I am worried that we still may have despite everything, especially if this peace deal is like all the others, that we may have a spike in oil
prices and then, you know, the thing that's been buffering the U.S. economy and a fair number of other countries' economies from everything else has
been this enormous A.I. boom.
And in some ways, we still have no clarity. Some people saying it is a bubble, some people saying it isn't, but then there are all kinds of
constraints. There are lots of reasons why we probably cannot maintain the -- actually, even the data center construction that's supposed to be in the
pipeline is -- apparently a lot of it is not happening.
So, all of this, this economy is -- I am about to say inflated, but that's a different story. But this economy is being propped up by this enormous
A.I. boom. What if that alters?
QUEST: So tomorrow, when we have SpaceX, that will be the rocket to the moon. This is just going to feed arguably, arguably, it just feeds this
very difficult scenario.
KRUGMAN: Yes, I mean, you know, if you believed in efficient markets, you would say, well, everybody knows the SpaceX thing is coming, right? This
shouldn't actually move anything except, you know, we know that the markets aren't that efficient.
QUEST: Right.
KRUGMAN: I do worry. I mean, if I had to identify a point of risk, really in this whole thing, I would put Elon Musk at the center of it. I am going
to have a Substack post tomorrow calling him a human Ponzi scheme.
I mean, there are a lot of strangeness about this whole SpaceX IPO and so on. So this is -- yes, I mean, but yes, we are still in kind of a frenzy
and you know, frenzies never last forever.
QUEST: I am grateful, Paul. Thank you. Thank you. We will frenzy our way through tomorrow and see what happens. Thank you.
On that frenzy from rocket launch to market debut, SpaceX NASDAQ tomorrow.
(COMMERCIAL BREAK)
[16:46:36]
QUEST: SpaceX is on the verge of making stock market history. It could be the largest IPO ever. The company is seeking to raise an astronomical $75
billion, but the public offering has a fixed price of $134.00 a share.
Paula Newton reports.
(BEGIN VIDEOTAPE)
PAULA NEWTON, CNN INTERNATIONAL HOST AND CORRESPONDENT: From ground rattling rocket launches to a record shattering NASDAQ IPO, investors are
suiting up for SpaceX under ticker symbol, SPCX.
Space industry investors call it a transformative event.
CHAD ANDERSON, FOUNDER, SPACE CAPITAL: I don't think that there is a comparable company to benchmark SpaceX against. I think you have to go back
to the 1900s and the vertically integrated industrial giants like Standard Oil, Ford to sort of understand the magnitude of what is happening here.
ELON MUSK, CEO, SPACEX: Welcome to SpaceX.
NEWTON (voice over): It has been a supersonic ride from SpaceX's early days to this IPO.
MUSK: That's my office over there.
NEWTON (voice over): Elon Musk founded the company back in 2002. Twenty- four years later, SpaceX generates billions in revenues from its satellite internet service, Starlink, and its rocket contracts with the U.S.
government, one of its largest clients.
It is, however, currently unprofitable, with 2025 losses of some $5 billion. Some Wall Street watchers fear turbulent times for the stock.
UNIDENTIFIED MALE: I would personally stay away from it because it is too risky. It is too highly valued already compared to the underlying business.
The good business in here is Starlink, but will it grow sufficiently to justify which probably by then will be a $2.5 trillion valuation, $3
trillion valuation, possibly. I doubt it.
NEWTON (voice over): SpaceX, however, believes the sky is the limit. Its IPO prospectus sees a head spinning $28.5 trillion in potential revenues.
It is looking to build a network of artificial intelligence data centers in space, and it will work to perfect its next generation Starship rocket.
UNIDENTIFIED MALE: I don't think it is possible to understate how important Starship is. A whole economy is waiting for this vehicle to be able to do
all kinds of new things in space. People are designing large satellites right now that need Starship to get there.
NEWTON (voice over): Elon Musk himself is a true Starship believer.
MUSK: This is a spaceship that is designed to make life multi-planetary, to carry millions of people across the heavens to another planet.
NEWTON (voice over): Musk has a lot of money riding on SpaceX's IPO, as it rockets him to trillionaire territory. His biggest corporate payout,
however, comes later when and if SpaceX establishes -- get this -- a permanent human colony on Mars, with one million inhabitants.
Sky high, perhaps pie in the sky ambitions for a company that has caught the attention of global investors hoping for heavenly returns.
Paula Newton, CNN, New York.
(END VIDEOTAPE)
QUEST: I love to watch it when he grabs hold of it.
Now we know the volatile oil markets are driving up jet fuel. The CEO of Air-France KLM told me his biggest concern isn't fuel prices themselves, it
is the uncertainty that they generate.
(COMMERCIAL BREAK)
[16:52:48]
QUEST: Higher jet fuel prices leads to greater uncertainty, and that's the biggest problem worrying, the chief executive of Air-France KLM, Ben Smith,
who I spoke to at the IATA Annual General Meeting.
(BEGIN VIDEOTAPE)
BEN SMITH, CEO, AIR-FRANCE KLM: Lack of visibility, I would say is the biggest worry both on price of fuel and availability of fuel, but we do
have good visibility through the end of the summer.
QUEST: So what is your concern over the summer?
SMITH: Nothing unusual. I think the one difference -- major difference we are seeing is the booking curve. People are booking a little closer in. So
our revenue management teams are having to adapt, but we are seeing the traffic come in. Demand is surprisingly holding up. So that's great.
And we've got some -- we've got some opportunities flying nonstop to Southeast Asia or to India that we weren't able to take advantage of before
now that the Gulf capacity is not quite up to where it was.
QUEST: The Middle East, you're starting to put stuff back into place there. How long do you think before you do go fully back?
SMITH: Well, we've just recently restarted Riyadh. We are not yet back into Dubai, Tel Aviv, Beirut.
QUEST: Why not? When their carriers are flying backwards and forwards, you know, I mean, the safety argument, does that still apply?
SMITH: Well, we have three stakeholders that we've got to align for. We have our pilots, our cabin crew and the authorities in France and The
Netherlands and we are not comfortable going forward if all three are not fully aligned.
You know, we've got other opportunities for the airplanes. We don't want to take the risk.
QUEST: How pleased are you with or the way the group responded to the crisis?
SMITH: I think look, the group, KLM is over a hundred years old, Air- France, almost a hundred years, many, many crises over the last decades. It is not new.
As you mentioned, COVID is probably the most challenging. This is not fun. But they -- you know, the teams are adapting, I think, as well as they can
and I think they are probably doing one of the better jobs of all the different airline groups around the world.
QUEST: The decision on how much of a fuel increase to pass on.
SMITH: Yes, that's a tricky one because, you know, you either take it on the chin with the margin or you pass more on to the consumer and you risk
killing a bit of demand.
[16:55:08]
What's your thinking on it?
SMITH: Well, so it is that balance that we try to find. So, we do know based on the fuel price today we are going to be paying over $2 billion in
incremental cost, our group. How much we can recoup to be seen, as you just said, you know, the balance between demand margin and cost. It is a very
fine line.
So right now, as I said, based on the prices you put in, which have been pretty hefty on some of the markets, the demand is holding and if fuel
remains high or goes even higher, we are going to have to see what the balance is, and if it gets out of line, then we will have to look at
removing some capacity, it is normal.
QUEST: Right. And your next -- you will be starting to think about your next hedging period.
SMITH: Yes.
QUEST: Which must be coming up anytime.
SMITH: Exactly.
QUEST: Now, what do you do? I mean, because you don't want to go into a hedge at these levels, it could fall back and then you basically lost them.
It is very tricky. What is your thinking?
SMITH: My approach to hedging is, you know, our business is really difficult. It is really challenging. I am not an expert at fuel. We've got
some people with experience, a bit of expertise in-house. What makes me comfortable is that we are hedged at the same level as our main
competitors.
So if we take a basket of hedging policies or our long haul and short haul competitors, and it sort of takes that variable out, then I feel a little
better.
(END VIDEOTAPE)
QUEST: And we will take "A Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment: So the ECB has raised rates, and now the question becomes what happens to everybody else. Well there seems to be
a consensus that the U.S. won't do it just yet because core inflation seems to be still under control. But there is no question the inflation hare is
out of the gate and is often running, and it is only a question of how much one is prepared to tolerate before doing something about it.
Christine Lagarde is having absolutely no truck with it, moving as soon as possible, pointing out that the quicker you get started, the quicker you're
going to finish and the easier it becomes.
The U.S. is going to play around both for political and economic reasons, it is not going to deal with it just yet. And that, of course, will create
its own problems.
For us, tomorrow, we will be having our first Summer Friday. We will be at Lincoln Center. That cultural, magnificent organization right in the heart
of Manhattan. There we are.
Join us. It is going to be stonkingly hot, hundred-degree temperatures, but we will be at the Lincoln Center to talk about exactly what is happening
there. Summer Fridays.
Of course, that's QUEST MEANS BUSINESS for tonight. I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it is
profitable. Join me at Lincoln Center tomorrow.
[17:00:43]
END
