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Fed cuts key rate by a half point, taking a more aggressive stance; Israel's Defense Minister: New Era of war beginning; Walkie- talkies detonate across Lebanon in 2nd day of explosions. Aired 2- 2:30p ET

Aired September 18, 2024 - 14:00   ET

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

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[14:01:06]

BRIANNA KEILAR, CNN HOST: We do have breaking news just into CNN. The Federal Reserve making its announcement on interest rate cuts.

BORIS SANCHEZ, CNN HOST: Let's take you straight to the Federal Reserve and CNN's Matt Egan. Matt, what did the Fed say?

MATT EGAN, CNN REPORTER: The Fed just delivered its first interest rate cut since COVID. And it is a big one, half a percentage point. This is a major milestone for the economy. And it does signal greater help on the way for borrowers who are struggling with painfully high interest rates on stuff like credit cards, and mortgage loans, and small business loans.

So why did the Fed end up deciding to go big instead of a more gradual interest rate cut? well, there's two reasons, then go through the statement. Some of this is encouraging -- some of it is a little bit concerning. On the encouraging front, the Fed says that they've got greater confidence that inflation is going sustainably back where it belongs to 2%.

So that is, of course, very good news for all of us who are concerned about the cost of living, about the cost of groceries, and rent, and car insurance. The Fed says that they are more encouraged by the further progress on that front. But the Fed is also, by going big, they're also acknowledging at least some level of concern about some softness in the jobs loan.

We could debate how much concern and we will hear from Fed Chair Jerome Powell during the press conference. But the fact that they're going big, does hint at this worry that maybe they feel like they're a little bit behind and they want to try to catch up. The Fed did insert new language into the statement, talking about how hiring has slowed. And they also importantly said that they think that the risks to the outlook have moved better into balance because remember, the Fed, they don't just -- they're not just worried about inflation. They're also worried about the jobs market. They have two goals and they're signaling that the risks there have become into better balance. Now, looking forward, the Fed is also projecting they're not done cutting interest rates yet. They are penciling in another half a percentage point of interest rate cuts during the final two meetings this year. Also, another full percentage point of interest rate cuts next year. They've also lowered, they've downgraded their outlook for the jobs market, projecting higher unemployment, lower inflation. And now, we're going to hear from Fed Chair Jerome Powell in the next few moments.

And I'm really interested to hear how he frames this. Is he going to talk about some real concern about the jobs market or is he going to simply say that this is an insurance cup, that they know rates are going lower, so why not get there faster? It's going to be a very telling press conference.

SANCHEZ: Yeah, we look forward to that. As the stock market is responding, you see that big spike right at 02:00 p.m. And the Dow (inaudible) industrials average. Matt Egan, thanks so much for the update from the Federal Reserve.

Let's discuss now with Chief Economist for Moody's Mark Zandi, CNN global Economic Analyst and Global Business Correspondent, and Associate Editor for the Financial Times, Rana Foroohar. And also with us, CNN Senior White House Correspondent Kayla Tausche.

KEILAR All right. Mark, starting with you, tell us what you're thinking about this rate cut, the size of it, what you were expecting versus what we got?

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: Yeah, I'm happy, surprised, happy. You know, I do think the Fed needs to cut rates quickly. They've achieved their goals, their mandate, which is full employment, that's the 4.2% unemployment rate. And inflation is back to the Fed's target. That's the 2% inflation target. So mission accomplished. And, you know, given that a 5.5% funds rate target, which is where they were before this cut, is just too high. And so it makes a lot of sense for them to start cutting interest rates and getting rates back down to something that's more consistent with the so-called neutral rate.

[14:05:03]

The neutral rate is that rate, which is neither supporting nor restraining economic growth. Unclear where exactly that is, but it's not 5.5%. So I'm really happy about it. Now, I am a bit surprised. I thought they'd be a bit more cautious, cut a quarter percentage point, signal that they'd be cutting in the future, but only a quarter percentage point. And I do think that does signal to, you know, Matt's point that they're probably a bit more concerned about what's going on in the labor market.

And in fact, if you look at the statement, they lead with, job gains are slowing. And I think that's a tell that they are nervous that, you know, perhaps things are slowing a bit more than they had hoped for.

SANCHEZ: Rana to you, what do you make of this size of cut? And what are you looking to hear from Jerome Powell in just about a half hour?

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: So I am also happy about the cut, although I'm not surprised. You know, most market participants were pricing this in. They're also pricing in a soft landing, which, you know, if that happens, if you get both an interest rate cut that really helps borrowers, makes the price of home loans and auto loans go down, takes pressure off consumers, and you get sort of a soft landing after several years of really tumultuous events in the global economy, that's going to be a good thing not only for consumers and for the American economy, but potentially for Kamala Harris in the run up to November.

I would be looking for Jerome Powell to really get into the details of the labor market, what's happening and why. One of the things that's been so interesting but also challenging over the last few years is it has not been a normal economic cycle, right? I mean, you know, COVID just put a spammer and everything. You got a lot of trends that were happening, that were different than in the past. So it's been really, really difficult to understand where we are and why.

If there is a slowdown, it wouldn't surprise me because if you look back, it's really been 15 years with the exception of that quick down and up vertical that we got after COVID. There hasn't been a recession in this country for 15 years. So, you know, we're potentially due for something of a slowdown. I think the White House and the Fed have managed it pretty well. But I want to know about the details. I want to know where unemployment may be rising. You know, what are the factors involved here? How much is global? How much is what's happening at home in the labor markets?

KEILAR And Kayla, talk to us a little bit about how this is factoring politically, how President Biden may be looking at this, how the White House is looking at this, and also how it's playing out just kind of on the trail between these two candidates. Because we just heard Trump yesterday saying, you know, basically await this move. It's a political move, even though obviously what the Fed does should not be about politics. We don't expect that it is and that it is instead about the economy.

KAYLA TAUSCHE, CNN SENIOR WHITE HOUSE CORRESPONDENT: Brianna, this is definitely a double-sided coin. On one hand, the White House will certainly see this as vindication that the economy has come full circle, the first rate cut of Biden's term. Biden even has softened his stance of very -- being very deferential to the Fed's independence and in recent months had started talking about the fact that a rate cut would come this year and even last month saying that the soft landing was here. My policies are working, in Biden's words. But certainly, it also signifies that the economy is slowing. And it's slowing perhaps at a faster rate than maybe the Fed had anticipated just a couple of months ago.

So details there are definitely necessary to understand a little bit more about what went into this decision. But that being said, the Trump camp is definitely going to take some umbrage with this decision, especially the fact that the Fed went for the 50 basis point cut instead of the 25 basis point cut. I know several members of Trump's team believe that the timing of this was political and that Trump himself just a few weeks ago said that he believes that an executive branch and a leader should be able to exert more influence over the central bank.

Earlier today, I spoke to Steve Moore, who is one of Trump's closest economic advisers. And he said that he personally thought that a 25 basis point cut was warranted, but that it should have happened months ago and that he said, why are they doing this on the eve of an election? And certainly, Moore went on to say that he doesn't believe that Trump in particular wants to be the one dictating, what monetary policy does in the future. But Trump does believe that there should be more transparency as to why the Fed makes its decisions and when and more even suggested that Trump would be calling for audits of the Federal Reserve and television cameras in Fed meetings going forward.

SANCHEZ: Mark, as you know, a noted, well-respected economist, I'm wondering what you make of that push to get more transparency from the Federal Reserve?

ZANDI: Well, you know, it's a bad idea to try to allow the President or the executive branch have input into the interest rate decision- making process, into what the Federal Reserve is doing. I mean, we've got a lot of history behind us saying that that does not work. I mean, clearly, the executive branch president, all else being equal, will want to maintain interest rates below where they would be in the best interest of the economy.

And ultimately, that's inflationary. You can go back, for example, the most -- the best example here in the U.S. is, you know, Richard Nixon and Arthur Burns of the Fed. And there's clear documentation that Arthur Burns did not raise rates when he should have. And that's one of the reasons why inflation took off in the '70s and in the early '80s. There's many other reasons for that, but that was one of the reasons.

And you can go look at the rest of the world where central banks have been captured by the executive branch, by the president or prime minister, and that has always turned out very badly. So that -- you know, a cornerstone of a well-functioning market economy, that's our economy, is an independent central bank that makes decisions about interest rates that are based solely on what's going on in the economy, what's (inaudible) for jobs and unemployment, inflation, all the things that we care about. If we lose that, then our economy is going to be meaningfully diminished.

KEILAR: Very good reminder. Mark, Rana, Kayla, thank you to all of you. We do appreciate the discussion.

We do have some breaking news from Lebanon where hundreds more people were, what we should say, there were some people killed, but hundreds more wounded in a second day of coordinated explosions will have the latest.

Plus, growing questions about the Secret Service following that apparent assassination attempt on former President Trump. KEILAR: And why House Speaker Mike Johnson is moving ahead with a

government funding plan that is largely expected to fail. Those stories and much more coming up on CNN News Central.

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[14:16:31]

SANCHEZ: Breaking news out of the Middle East. Israel appears to be giving its first public acknowledgement that its security forces were behind the deadly pager explosions in Lebanon. Just moments ago, the country's defense minister, Yoav Gallant, saying, quote, "we are at the beginning of a new era in this war and we need to adapt.:" Those remarks amid a wave, a fresh wave of detonations today involving walkie-talkies. Watch this.

You see it there, close to the passenger side of that ambulance, the blast today killed at least 14 people and injured more than 450 others. According to Lebanese health officials, they are also working to put out dozens of fires reportedly in homes and businesses.

KEILAR: Lebanon was already reeling from those deadly attacks yesterday when hundreds of pagers exploded in a near simultaneous attacks on Hezbollah. But a number of children were caught in those blasts, including among those killed.

CNN has learned those blasts were part of a joint effort between Israel's intelligence service, Mossad, and its military. Our correspondents are live now with the latest developments. So let's begin now with CNN's Ben Wiedermann. He is in Beirut. Ben, what more can you tell us about these attacks today?

BEN WIEDERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, these attacks, according to Lebanese security sources, are happening by the explosion of walkie-talkies as opposed to yesterday pagers. And what we've seen that these blasts of began in sort of about four o'clock, 4:30 in the afternoon local time.

In fact, we were at a hospital waiting to go inside with the Lebanese Prime Minister and the Health Minister when suddenly news came out that these explosions were happening around the country. Their visit to the hospital was canceled. We rushed to the main hospital here in Beirut, the American University of Beirut Medical center, where we did see one ambulance arrive with a clearly wounded individual in the back of it.

But at this point, the death toll, according to the Lebanese Ministry of Health for today's blasts, has been -- it's at least 14, more than 450 injured. That's compared to twelve people who were killed yesterday. Clearly, Israel is pursuing a completely new tactic, a tactic never used before in modern warfare. But for many Lebanese who are seen as we are, many of these videos where individuals in supermarkets, vegetable markets, out in public, suddenly their pagers or their walkie-talkies blow up. And it's a real danger to the people around them. I spoke with one elderly Lebanese gentleman who said this is

terrorism, that this is not a fight between two military organizations. It's drawing into it ordinary civilians who have nothing to do with the fighting. And as a result, there's a real fear spreading here in Beirut. Keep in mind, Brianna, that since October, by and large, with notable exceptions, the war between Hezbollah and Israel has been limited to the border. There, for instance, more than 100,000 Lebanese have had to flee that area, 62,000 Israelis, the area along the border on their side.

[14:20:10]

But in places like Beirut, life has gone on fairly normally. But now, the atmosphere has suddenly turned very, very dark. Brianna.

KEILAR: Yeah, certainly has been. Thank you for that report from Beirut. Let's go now to CNN Correspondent Jeremy Diamond. He's live for us in Tel Aviv. And to Ben's point there, Jeremy, this is a battle that has largely taken place along the border. And now, Israel is pushing this into Lebanon, very much affecting the day to day lives of so many as they're targeting Hezbollah.

JEREMY DIAMOND, CNN WHITE HOUSE CORRESPONDENT: Yeah, that's right. And there's no question that this was an escalatory action, one that is raising the temperature in this region once again, and a very sophisticated operation, very complex operation at that, in order to plant explosive devices in thousands of these pagers yesterday in what I learned was a joint Mossad, that's Israel's Intelligence Service, joint Mossad and Israeli military operation.

The Israeli government, its military, its intelligence services, they have yet to actually officially confirm their involvement in either yesterday or today's actions. But we did hear from the Defense Minister, Yoav Gallant, who talked about the Israeli military, the Shin Bet, that's Israel's domestic intelligence service, and the Mossad achieving, "impressive results," talking about a new era of Israel's war now beginning as we approach the one year mark of this war, not only in Gaza, but also, of course, of this cross-border conflict between Israel and Hezbollah.

And so what we're hearing with that is not only perhaps a tacit acknowledgement of Israel's role in these explosions in different areas of Lebanon, but also an acknowledgement that days after the Israeli cabinet decided to add, returning the northern residents of Israel back to their homes as an official goal of the current war, that they are also turning their attention much more seriously to Lebanon, much more seriously towards Hezbollah. And we are seeing that not only in rhetoric but also in action as the Israeli military's 98th division, which has been a key fight fighting force in Gaza since the earliest days of this conflict, is now being redirected away from Gaza and towards Israel's northern border.

Now, we should note, of course, that we have seen repeatedly over the course of the last year, perhaps most notably at the end of July when Fuad Shukr, Senior Hezbollah Commander, was assassinated, that we have seen these moments of tension in this region. We have seen these moments where it seemed like all-out war was really in the offing, like we were on the brink of such action.

And yet, time and again, we have seen the two sides ultimately step back from the brink. And that is important to note in this moment that even when tensions seem the highest, we have seen Israel and Hezbollah repeatedly make the decision not to engage in all-out war, deciding on both sides, it seems, that it is not worth it at this stage. But again, that could change. And so this is certainly one of those moments where we have to watch if indeed that calculus changes. Without a doubt, Hezbollah has been seriously embarrassed. This is having a significant psychological impact not only within Hezbollah, but also in Lebanon. And Hezbollah now vowing to retaliate.

SANCHEZ: We'll be watching that potential retaliation very closely. Jeremy Diamond, live from Tel Aviv for us. Thank you so much.

Coming up, the Republican Governor of Ohio says that false claims repeated by former President Trump and J.D. Vance about Haitian migrants in Springfield need to stop. Despite that plea, there may be more of a spotlight on the city soon. We'll explain.

KEILAR: Plus, a bid to keep the government funded appears to be dead before it even hits the House floor. Why Speaker Johnson is forging ahead all the same, as Congress runs out of time, certainly on the path two (sp?), to avoid a shutdown.

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[14:28:51]

KEILAR: House Speaker Mike Johnson is pushing a vote today on a short- term funding bill that is expected to fail. That plan would prevent a government shutdown, but it includes the SAVE Act, which is a controversial GOP-led bill that would require documentary proof of citizenship to register to vote.

We have CNN's Manu Raju on the Hill for us. Manu, Congress has to pass a spending bill by the end of the month. What's the play here?

MANU RAJU, CNN CHIEF CONGRESSIONAL CORRESPONDENT: Yeah, this is going to fail, this Johnson plan, even though -- not just because Democrats are opposed to that immigration provision. They say it's unnecessary because it's already illegal for undocumented citizens to vote in this country. Johnson said, it is necessary nevertheless.

But it's not just the opposition from Democrats. It's also some Republicans, people who do not like short-term spending bills rather than the annual funding bills that Congress is supposed to approve by the end of the month. Others are concerned about the six-month extension that Johnson is proposing, worried that it could hamstring the Defense Department at this critical time of threats from overseas.

But in talking to Republicans, there is no consensus about the way forward. Some are making clear to their colleagues on the right who are itching for a government shutdown. But now, is not the time to do that so close to an election.

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MARK ALFORD, U.S. REPRESENTATIVE FOR MISSOURI: There are some in my district who want shut down, shut down. But then what?