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Quest Means Business

Biden Administration Offers Russian Arms Dealer In Potential Exchange Deal For Griner, Whelan; Federal Reserve Raises Interest Rates By 0.75 Percent; Ukraine Defends In The East And South Of Country; U.S. Fed Raises Rates Again Amid Earnings Week; Lufthansa Ground Crew Strike; Dash To The Bell. Aired 3-4p ET

Aired July 27, 2022 - 15:00   ET

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

[15:00:28]

ELENI GIOKOS, CNN INTERNATIONAL HOST: All right, we are watching two developing stories in Washington tonight.

Markets are robustly higher as they listen to Jerome Powell, Chairman of the Federal Reserve. You can see the Dow Jones up 1.2 percent. An hour ago,

the US Central Bank struck another blow in its fight against inflation raising rates by three quarters of a percent for the second month in a row.

And CNN exclusive reporting that the Biden administration has offered to exchange arms dealer Viktor Bout to secure the release of Brittney Griner

and Paul Whelan. We will bring you an update on that in just a moment.

Live from Dubai. It's Wednesday, July 27th. I'm Eleni Giokos in for Richard Quest, and this is QUEST MEANS BUSINESS.

All right, so a very good evening to you and we begin with that CNN exclusive report in what could be a major development on the Brittney

Griner case.

Now here is what we've learned: That the White House has offered to exchange Russian arms dealer, Viktor Bout as part of a potential deal to

secure the release of both Griner, as well as Paul Whelan.

In terms of what we understand, that the Biden administration is of course pro this exchange, but CNN exclusive reporting also tells us that the swap

overrides opposition from the Department of Justice, which is generally against prisoner trades.

We have Nick Paton Walsh joining us live right now. We also have Susan Glasser joining us as well to give us an update.

Nick, I want to start with you.

You know, we know that Viktor Bout, an arms dealer known to sell arms and actually fuel many Civil Wars around the African continent and other

vulnerable countries, as well. This swap is incredibly interesting to watch and many are saying that this could of course be in the interest of

Vladimir Putin, but wondering why this exchange would be, of course, one for an arms dealer, looking at Paul Whelan, and then Brittney Griner

whether this would be a fair exchange.

NICK PATON WALSH, CNN INTERNATIONAL SECURITY EDITOR: Well, also, the exchange hasn't happened yet and the fact that the Biden administration

through this press conference of Antony Blinken has suggested publicly that they're making this substantial offer and then appear to be telling my

colleagues in DC that it revolves around exchanging Viktor Bout suggests that possibly they haven't had the kind of reception from Moscow that they

would have expected.

Now, who is Viktor Bout? Well, it depends on whether you're reading the book about his life, which the facts of which he disputes. He is either the

merchant of death or if you're watching the fictional movie based on his life with Nicolas Cage, he's the Lord of War. He's a man who in the 90s,

was accused -- he denies it -- flying around Africa, other parts of the world and selling arms often to barbaric dictators that were often used to

fuel Civil Wars.

I interviewed him in a Thai jail in 2009, he denied much of the bad stuff, but still certainly wasn't keen, quite charismatically to shun the idea

that he had friends in powerful places.

He was a subject of a sting operation by US Drug Administration, drug enforcement administration officials, they essentially entrapped him into

agreeing to a series of deals, which could potentially hurt Americans. The whole thing was basically made up, but essentially, that was enough to have

him arrested and then extradited and convicted in the United States where he's been serving a lengthy sentence.

It is beginning to come potentially to the end. He may not have that much left to serve on it. All the same, this is one of the most prominent arms

dealers in history, frankly, certainly one of Russia's most prominent in the 90s.

And the man who was clearly very important then to, given the outcry we heard from Moscow after his arrest and eventual extradition to the United

States.

He has been put now quite publicly, it seems on display as a potential swap for Paul Whelan arrested on alleged espionage in 2018 and Miss Griner who

has admitted that she mistakenly brought cartridges of cannabis into Moscow.

Now, you're obviously looking at the charges against these individuals, some of which are heavily disputed under great scrutiny.

This isn't immediately an obvious fair swap compared to that which Mr. Bout is accused of. Does it show the Biden administration very eager to get

Americans home? Yes. Does it show possibly that they're willing to put more up than their critics might suggest a good idea in a swap? You might argue

that as well.

[15:05:08]

But it is very interesting that this man, Viktor Bout, who has clearly been the subject of a lot of Russian energy to try and get him home, certainly

when he was facing extradition in Thailand, but later wanted in the United States, is now on the table, but that hasn't been resolved yet, and now

we're seeing it leak out, I think it's fair to say from my colleagues reporting it in CNN, Washington.

So a very key move here by Antony Blinken. Will it have any impact? Will it have the effect they want? We don't know yet.

GIOKOS: Yes. I mean, interesting context there, Nick.

Susan, I want to bring you in here and the prisoner swaps are basically something that the Justice Department is against. And of course, President

Biden saying that he is supporting this potential swap overrides what the Justice Department is thinking right now.

What do you make of this? I mean, someone has called this a naive swap, that perhaps it favors Putin, but it all depends on what Sergey Lavrov

thinks of this once Antony Blinken brings us to the table.

SUSAN GLASSER, CNN GLOBAL AFFAIRS ANALYST: Well, first of all, just to say that Sergey Lavrov is not an independent actor, the Foreign Minister of

Russia is long serving, but does exactly what he is ordered to do by Vladimir Putin. So, you know, I don't think he's much of an independent

actor at this point, not the way the Russian system has evolved.

To the broader question of prisoner swaps, look, it has a real echo of the Cold War. Of course, there's a long tradition going back to the Soviet

Union. And even in the subsequent years after the fall of the Soviet Union, there have been numerous trades, but I think Nick is right to point out the

perceived imbalance between the significance of someone like Viktor Bout and Brittney Griner, not only is she -- you know, she seems to be

essentially someone who was caught in the wrong place at the wrong time.

She happened to be passing through Russia, right before Putin launched his illegal unprovoked invasion of Ukraine, and she seems to essentially have

been grabbed as a hostage as a result of that.

She has now pleaded guilty to having a small amount of cannabis oil and her representatives were in Court just yesterday, you know, making the argument

that essentially, this was a medicinal use. It's not legal in Russia, but certainly it's not anything like being an international criminal and arms

dealer convicted and sentenced to 25 years after a transparent legal proceeding in a rule of law country like the United States.

So there is an enormous imbalance. It may speak to the urgency that the Biden administration fails to do something to get both Griner and Paul

Whelan, who has been languishing in a Russian jail since 2018 back to the United States.

It is also significant in its own right, I think, that Sergey Lavrov and Tony Blinken, the US Secretary of State will be speaking directly to each

other for the first time since that February invasion of Ukraine.

I'm not sure that it heralds all that much in the way of actual diplomacy. This is a moment when relations between Russia and the United States are as

bad as any in my lifetime and I include the periods of the Cold War for which I was alive.

GIOKOS: All right, Susan Glasser and Nick Paton Walsh, thank you so much for that update.

And of course, this is CNN exclusive reporting that the Biden administration is offering to exchange Viktor Bout for Paul Whelan and of

course, Brittney Griner. We will be giving you updates on the story as it develops throughout the coming hours.

Now moving on, the Fed just took another huge swing at inflation raising rates by 75 basis points and that's for a second month in a row. Now the

cost of borrowing for Americans is rising at the fastest pace in four decades. The Fed's aggressive moves are raising fears about a possible

recession in the United States.

Let's take a look at the market reaction. The Dow spiked after the Fed announced its decision. You can see, it is up 1.4 percent. The move was

widely expected, though some were predicting an even bigger rate hike of around one percent. But it's not so much about the move itself, but more

about what they said.

Now, where does the Federal Reserve go from here? We also know right now in Washington, Fed Chair Jay Powell is speaking to reporters and investors are

hanging on every word. They're looking for clues on future rate rises.

Now Powell said he could slow the pace of tightening if inflation starts to come down. Take a listen.

(BEGIN VIDEO CLIP)

JEROME POWELL, CHAIRMAN, U.S. FEDERAL RESERVE: Over coming months, we will be looking for compelling evidence that inflation is moving down consistent

with inflation returning to two percent.

We anticipate that ongoing increases in the target range for the Federal Funds Rate will be appropriate. The pace of those increases will continue

to depend on the incoming data and evolving outlook for the economy.

[15:10:02]

Today's increase is in the target range, is the second 75-basis-point increase in these many meetings, while another unusually large increase

could be appropriate at our next meeting, that is a decision that will depend on the data we get between now and then.

(END VIDEO CLIP)

GIOKOS: All right, Rahel Solomon is in New York for us. Rahel, this was largely anticipated and when we see the market move to the upside, it is

because the Fed Chair actually said, well, maybe we're not going to tighten much more going forward and it is all about what's going to happen next.

So take me through what he said and how the market has responded.

RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: Well, it's interesting, because if we're turning our attention to what will happen next, beyond

what we just heard there, in that clip there, Eleni, he didn't say much in terms of whether we might see half a percent, whether we might see three

quarters of a percent.

In fact, Powell said that it will now be sort of a meeting to meeting, that decision will now be made meeting to meeting and will depend largely on the

data. So sort of pulling back on guidance. We won't get the level of specificity that we have grown accustomed to.

In terms of what we're seeing largely in the economy, while he pointed to continue to have robust labor conditions, of course, saying that he would

like to see -- the Fed would like to see a bit more balance in the demand of workers and the supply of workers.

He did however, say that it will be necessary to slow economic growth, and that we will see some softening in the labor market. Can't say that we have

seen that yet. Certainly, not in terms of the monthly jobs report, perhaps some of the weekly initial jobless claims you're starting to see some

weakness, but yes, markets really ripped.

I mean, not only is the Dow up one and a half percent, but the NASDAQ is up almost four percent, almost 460 points. So, the markets are really taking

off on this. The Fed showing that it will be -- it will do what it must, that it will be aggressive and raise rates another three quarters of a

percent, and Eleni important to note, even though we saw a rate increase of this magnitude, the last meeting before then, we haven't seen something

like this since 1994. So it really goes to show that we are in unprecedented times and Powell himself, you know, reacting to that saying

that, look, these are not normal times.

GIOKOS: Exactly. I was going to say that, you took the words out of my mouth, unprecedented times.

At what point then is it too much when rate hikes have the desired effect on you know, the inflationary environment? But of course, then, you know,

it basically means that growth is impacted negatively and extensively so.

SOLOMON: Well, it's a great point, because we're starting to hear many more market watchers and economists say, well, maybe they don't have to stick to

the two percent target, right? Maybe -- maybe inflation could ease to four percent headline or five percent headline, and maybe that would be enough.

Unclear to say sort of how this will all play out, but Powell did say that they are sticking to their two percent target.

You know, I don't know. I mean, that's the big question. He himself said that, look, we're not trying to have a recession. We don't think it's

necessary that we have to, but he did say that slowing growth will be necessary. He did say that softening in the labor market is coming.

So it's really -- it's really not an exact science, unfortunately, monetary policy, but you know, they're making decisions now that we will see play

out in the economy six to nine months from now, right?

So this is part of the reason why it is so tricky, and why it's so delicate for the Central Bank.

GIOKOS: Rahel Solomon, always good to see you. Thank you so much.

All right, let's put today's rate hike into context. The Fed is driving up the cost of money at the fastest pace since 1981. Now back then, inflation

was well into double digits as the US economy dealt with the after effects of the 1970s energy crisis with full rate rises under its belt.

Already, in 2022, the Federal Reserve is well ahead of its counterparts in the EU, as well as the UK.

Randall Kroszner served on the Federal Reserve's Board of Governors, he is now an Economics Professor at the University of Chicago, Booth School of

Business.

Sir, really good to see you. I'm hoping you could make some sense of this. You know, I laugh because I come from an emerging market and when I see

these numbers, they don't scare me. But if you've got the world's largest economy experiencing it, that it absolutely means that we're in danger

zone.

What did you make of Jerome Paul's messaging today and his move?

RANDALL KROSZNER, PROFESSOR OF ECONOMICS, UNIVERSITY OF CHICAGO, BOOTH SCHOOL OF BUSINESS: I think you're exactly right. I mean, we're

experiencing inflation like we haven't seen in 40 years. But inflation that is much more common in emerging markets, and we're starting to move rates

up rapidly, like emerging market countries do.

I think Jerome Powell said exactly what he needed to say that inflation is the priority. They're moving 75 basis points, because they really need to

make sure that inflation and inflation expectations don't go up any further and hopefully start to come down relatively soon.

They are front loading the interest rate changes, which I think is very important because they wait. As some people said, well, why don't you wait

and see, well, maybe the economy will, you know, turn down.

[15:15:13]

If you wait, you get into a late 1970s, early 1980s situation where inflation goes up, and interest rates have to go to double digit levels.

We're nowhere near that. Hopefully, we won't have to go anywhere near that. But that would be the consequence if we waited.

GIOKOS: So I mean, we're looking at this two percent inflation target, and we're wondering whether it is realistic under the current scenarios and

whether we should see the Federal Reserve take a more realistic approach on inflation, would you suggest that?

KROSZNER: Well, I think it needs to maintain its credibility. And in order to maintain credibility, it can't just start moving the inflation target

around to whatever is convenient for the moment.

So I think it needs to maintain that two percent target. The question is, when will they achieve that two percent target? So I think they're a bit

optimistic in thinking that they're going to achieve that very soon. I think it's going to be a while.

I think inflation will start coming down, some of the energy prices and some of the food prices have come down a bit in the US. And so I think the

headline numbers will be a little bit lower, but I think even by the end of the year, when Jay Powell says interest rates will probably be around three

and a half percent.

Inflation is probably still going to be more than that. And they're probably going to need to push interest rates up a little bit further.

GIOKOS: Yes, so you're talking about negative real rates scenario, but when would, you know, interest rates top out would you say? At what point would

you think that we are out of the danger zone because we're talking about now the Federal Reserve wanting to take a hardcore, proactive approach, as

opposed to being reactionary to inflation at the stage?

KROSZNER: Exactly, because obviously, they were behind the curve and they've admitted that they were too slow to pick up on inflation being an

ongoing force, rather than just simply being transitory. They're trying to make up for that. That's why they're moving expeditiously.

And so my hunch is that, well, we don't know, because there can be so many shots that come in from Mr. Putin, from other geopolitical risks that are

out there in the world. But assuming no major additional shocks than the ones that we've seen and anticipated, then probably, the Fed will be able

to pique in somewhere between, you know, upper three or four or so percent, sometime by the middle of next year, and then start coming down.

But I don't think they're going to start coming down until much, much later. Markets are assuming they're going to start turning down by the

middle of next year.

I think that's -- well, it could either be optimistic or pessimistic. The reason that they think that the Fed may start to move down is because they

are so pessimistic about the markets, and/or it could be that they're very optimistic that inflation is coming down.

I think the markets are pessimistic that in the sense that they think growth is going to slow significantly and that's going to lead the Fed to

move rates down.

But I don't think that's --

GIOKOS: Do you think there's a recession coming? Are you expecting a recession? Do you think that's a probability?

KROSZNER: It's certainly -- there's a heightened risk of that. Of course, the Fed is trying to say we'll just have slow growth rather than consistent

negative growth. Is that possible? Yes.

Is it likely, not so much because I think they're going to be continuing shocks outside of the Fed's control but they are not going to be positive

for the economy.

GIOKOS: Randall Kroszner, thank you, sir. Really good to see you. Much appreciated for your time.

All right, so up next, Estonia's Economy Minister joins me to discuss the gas crisis as fresh Russian supply cuts put EU solidarity to the test. Stay

with CNN.

(COMMERCIAL BREAK)

[15:21:22]

GIOKOS: Welcome back.

Ukraine's military says it has rebuffed Russian advance on a town in its eastern region of Donetsk, and in the south, its forces hits this bridge in

Russian-controlled Kherson leaving gaping holes like this. Those strikes aimed at disrupting Russia's ability to supply its combat units. Elsewhere,

Russian attacks continued on the northern city of Kharkiv where missiles struck an industrial area.

Now in Europe, gas prices are surging as Russia reduces natural gas supplies once again. Prices spiked today bringing this week's jump to 28

percent compared to a year ago, prices are up 400 percent.

In the US, natural gas hit a 14-year high. The Russian gas company Gazprom reduced supplies through Nord Stream 1 this Wednesday and the pipeline now

operating at just 20 percent of its capacity.

The big fear in Europe is that Russia turns off the taps completely. Now, on Tuesday, EU countries agreed that they would aim to reduce gas

consumption by 15 percent until next spring. The cut is voluntary, but Europe's Energy Chief says Europe must act as one against Russia.

She spoke to CNN's Becky Anderson a short time ago.

(BEGIN VIDEO CLIP)

KADRI SIMSON, EUROPEAN COMMISSIONER FOR ENERGY: We must respond to these challenges together. Yesterday's agreement was exactly on this -- guided by

this spirit, and just as this agreement is based on solidarity, everyone has to contribute.

And the fact that there is some flexibility to take into account doesn't change the fundamental principle. So if there is a serious or full

disruption, there will be negative impact on all countries, as we are part of one single market and that impact will be much smaller if we act right

now and act together.

(END VIDEO CLIP)

GIOKOS: All right, several nations are exempt from those gas cuts. Now one of them is Estonia. Its electric grid connects to Russia's and this means

if Moscow cuts off power, Estonia would need to use gas instead. But businesses and individuals have already switched to alternative fuels as

prices rise. The government says gas consumption is down 20 percent this year.

Estonia's Economy Minister, Rina Sikkut says the EU needs to preserve unity to show Russia, it cannot weaponize the supply of energy and she joins me

now from Tallinn, Estonia.

Minister, really good to see you. Thank you so much.

Estonia has already been able to cut back on its energy and electricity consumption, gas consumption, you're exempt from this, but many other

countries are also trying to get exemption.

Do you think that some countries are going to carry a bigger burden with this new gas cut, which is voluntary at this point?

RINA SIKKUT, ESTONIA ECONOMY MINISTER: Hello, Eleni and I must admit that I'm very proud of the agreement that the member states made yesterday. It

was an extraordinary decision made very quickly, less than a week from the Commission proposal to the member states' agreement.

And even when we talk about gas, we have war in Europe, then it can't be just about gas. So, it's sending out message that Europe cannot be divided

by Russia, using energy as a weapon, and the situation and the energy mix is very different in the member states.

[15:25:10]

Estonia is actually in a very fortunate position. We haven't used Russian gas since April. We are not planning to start using it.

And the voluntary reduction in the consumption so far has been more than 15 percent already. We just expect to reach one-fifth of total consumption by

the end of this year. It has been just based on the high prices outpacing the market signals, and we have local alternatives, biomass, and shale oil.

So we can shift or reduce the energy consumption, we have both options.

And our exception that we receive doesn't mean that we won't reduce our consumption, but in the extraordinary circumstances that Russia will cut

our grid from the system in order to keep the frequency, we might -- we use the gas station, and we might not reach the 15 percent but --

GIOKOS: That's interesting.

SIKKUT: We hope we never come to that.

GIOKOS: Minister, you said that Russia -- do you think Russia will catch you off the grid? Because you're synchronized with Russia right now, so are

other Baltic States as well. Are you trying to get synchronicity now with the EU power grid?

SIKKUT: Yes, Baltic States are working on synchronizing with the EU grid, but the plans are for the next two years to do it, but in the extraordinary

circumstance, of course, we have to be able to do it quicker, who have a positive example of Ukraine, who synchronize that with Moldova to the

European grid in March already. So, it can be done.

But it's not the likely -- the most likely scenario that we work on. But of course, the war is not just in Ukraine that Russia wages --

GIOKOS: You have to be ready.

SIKKUT: Uses all -- all -- yes, ways to pressure us.

GIOKOS: Yes. Minister, I have to ask you this. Do you believe that indeed, Russia is doing maintenance on Nord Stream 1? And do you think that there

is a very high probability that Russia could cut off gas completely to Europe as retaliation?

SIKKUT: For the past 30 years, as Estonia has said that Russia is not a reliable partner. It is a security threat in our region -- the only

security threat basically.

So I think this says everything what I think about the North Stream maintenance work or how much they reflect the reality, so in this

situation, I think the Energy Ministers understood that failing, meaning reaching an agreement, it's not an option.

If we fail to keep unity, if we fail Ukraine, it's not just the gas, it is a political message in a situation of war.

GIOKOS: Yes. Minister, it really good to see you thank you so very much for your time.

Now, frustration and delay for travelers in Germany today, a strike at Lufthansa leaves more than 130,000 would-be passengers stuck on the ground.

That's coming up next.

(COMMERCIAL BREAK)

[15:30:00]

GIOKOS: Returning to one of our top stories, the U.S. Federal Reserve has made history with its second major rate hike in two months.

U.S. stocks are soaring following the widely anticipated move. Speaking soon after the rate decision, Fed chair Jay Powell suggested that the Fed

could start to slow the pace of rate increases, if, if inflation begins to cool.

Now the supersized rate hikes are raising fears of a recession in the U.S. Powell says he does not believe that the U.S. is currently in recession but

added that slower growth would be good for the U.S. economy.

(BEGIN VIDEO CLIP)

JEROME POWELL, CHAIRMAN, FEDERAL RESERVE: You're also seeing tighter monetary policy and you should see some slowing. We actually think we need

a period of growth below potential in order to create some slack, so that the supply side can catch up.

We also think that there will be, in all likelihood, some softening in labor market conditions. And those are things that we expect. And we think

that they are probably necessary if we are to have -- to get -- be able to get inflation back down on a path to 2 percent ultimately.

(END VIDEO CLIP)

GIOKOS: All right, so investors earlier today were also latching onto the bright spots for a mixed batch of earnings. Let's look at Spotify, it says

it added 6 million subscribers in the second quarter. And that is more than analysts had expected.

Microsoft in the meantime, on its earnings, forecast double digit revenue new growth for the upcoming year. Now its shares are also in the green

today. We will take a look at those numbers.

And Alphabet's overall growth, meanwhile, is down. But its Google ad sales were stronger than expected and that stock is also doing much better than

what we saw on the previous days.

Now Boeing in the meantime is up as well, despite an earnings miss. It reported positive cash flow. Those are the numbers, there we go. We've got

Microsoft up almost 7 percent and Spotify up 13 percent, Apple 3.7 percent in the green, Alphabet 8.4 percent higher as well.

Paul La Monica's in New York for us.

Paul, really good to see. Let's start with Spotify, doing really well. Give us a sense of what the messaging is in those forecasts going forward.

PAUL LA MONICA, CNNMONEY DIGITAL CORRESPONDENT: Yes, I think what was really interesting, Eleni, is Spotify's CEO admitted that there are

concerns, obviously, about the economy and a potential recession.

But so far, advertisers are still flocking to the platform. And you are seeing solid growth in ad sales as a result.

And as you pointed out, too, subscriber gains were solid. So even though Spotify did report a loss, the revenue, the top line was better than

forecast. And I think it is showing that Spotify, as it focuses even more on podcasts, in addition to music, is holding its own, obviously with

Apple, in the subscription music arena.

GIOKOS: Yes, look, we are seeing all of these tech stocks doing really well today. I was really fascinated by Alphabet's growth, which they say is

going to be lower but its Google ad sales that, coming in stronger than expected, adding that extra boost.

[15:35:00]

LA MONICA: Yes, I think the big concern, Eleni, was that, if you are worried about an economic downturn, a recession, you might see that in

advertising spending. That would begin to slow down.

Big marketers would start to recognize that the consumer might be feeling the pinch, don't need to advertise as much. That definitely is not the case

just yet with regards to Google.

I think also Google, because of its market dominance, continues to be a place where advertisers want to be, because they know that the user growth

is there, the eyeballs are there, between Google, between YouTube and what have. You so, the results for Google and I think we saw with Microsoft too,

it is a case where less bad is good.

I think investors, after the first half of the year, stocks did so poorly, we were conditioned for really lousy second quarter earnings. And they

haven't been as lousy as, you know, feared. And the guidance has been much better, I think, as well.

GIOKOS: Yes. I am interested in Microsoft because, it lists on earnings expectations. But it says that it is still expecting good growth in the

next quarter, which I thought was quite interesting, that it is doing so well. In terms of market performance, today.

LA MONICA: Yes, Microsoft really, a cloud juggernaut now in addition to Google, obviously, as well as Amazon, who's going to reporting earnings

after the closing bell tomorrow.

Microsoft, definitely with its cloud computing business, has become, once again, one of the most dominant tech companies on the planet, not that it

ever really lost that dominance.

But it has had this shift, of course, to the cloud. It is no longer generating nearly as much revenue from the traditional old software

business. And I think that is good for Microsoft. Obviously, they've got the gaming side with Xbox. They've got LinkedIn. So there's an ad revenue

component there as well. Microsoft, very diversified.

GIOKOS: All, right Paul La Monica, thank you so much.

Now a strike in Germany has left over 130,000 passengers looking for new flights. Lufthansa's ground crews are staging a one-day walkout and they

said they are being overworked and underpaid. It has forced Lufthansa to cancel nearly all of its flights out of Munich and Frankfurt this

Wednesday.

The trade union wants a 9.5 percent pay raise, Lufthansa says it has offered substantial pay increases over the next year. Anna Stewart is in

London for us.

Anna, look, 130,000 passengers left stranded. And it feels like the unions have one up on Lufthansa.

Who is going to win this fight, as the big question?

ANNA STEWART, CNN CORRESPONDENT: Well, in terms of the wage increase, this trade union wants, that is anyone's guess. They've already had two rounds

of negotiations. This is the third round of negotiations to go next week.

And, if no agreement is met, you worry that something like this might happen again. The demand, here as you say, is to do the wage increase of

9.5 percent or $368 a month more for 20,000 ground staff for Lufthansa over a 12 month period.

By my calculation, that means it would cost around $80 million for Lufthansa. They have offered a bit more of a wage increase. They've done it

in more of a tiered system from the lowest paid people getting a slightly more bump, I suppose, but into the end of this year, it is just not what

the trade union wants.

Meanwhile, this disruption, Eleni, is absolutely huge. There have been so many strikes, haven't there?

From airports and airlines across the world. We've been covering them. But 1,000 flights being canceled in one day, impacting 130,000 passengers and,

of course, this is at a time when capacity for both airports and airlines is really tight.

So normally, if the flight was canceled an airline would, of course, would try to rebook them on the next available flight. That is increasingly hard.

And that is when we are hearing from people affected by this.

Not least of course, because Frankfurt is one of the most connected airports. This is where you go to for connections. It is usually top three

in the world for that. Listen to one passenger who found themselves stranded at Frankfurt.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The problem now, I cannot travel. I arrive from Africa now. I have to go to Paris. The flight was canceled. And they said,

tomorrow it will be rebooked. But nobody was here when we arrived in order to say what do we have to do?

Where do we have to go, where do we have to sleep?

And so, we are looking for some Lufthansa people that can help us. But when we ask, it will be very hard to find someone from Lufthansa today

(INAUDIBLE) so we don't know what to do.

STEWART: And, in real terms, having experiences myself, this is half of the battle. Really for the passengers, it's knowing what to do next.

[15:40:00]

Particularly if you are, for, instance on a very long haul flight connecting through Germany and then you're stranded.

Can you pay for the hotel?

Will you get compensated?

What about food, drink, transport?

When is your next flight?

Increasingly it is hard to find anyone to help, because airlines are so stretched. And of course, they're facing strikes. And this is 130,000

people that need to speak to airlines.

GIOKOS: Yes, Anna, I can't imagine what it must be like for so many passengers. A difficult spot to be in. Thank you so much for staying up.

Much appreciated.

All right so that is it for QUEST MEANS BUSINESS. I'll be back at the top of the hour as we make a dash for the closing bell.

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GIOKOS: Hello, I'm Eleni Giokos and it is the dash to the closing bell. And we are just two minutes away. Now the Fed hiked rates 75 basis points.

Investors liked Jerome Powell's comments. The Fed chair said future hikes may not be so big.

As you can see, the Dow Jones is up 1.5 percent and the S&P is up more than 2 percent. The tech heavy Nasdaq is today's winner, up more than 4 percent

with help from Alphabet and Microsoft. Both releasing earnings, yesterday.

Now the Fed is tightening at the fastest rate in four decades. We asked Randall Kroszner, a former Fed governor, whether it is moving too fast.

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RANDALL KROSZNER, FORMER FED GOVERNOR: They are front loading the interest rate changes, which I think is very important because, if they wait, as

some people said, well we should wait and see, maybe the economy will turn down.

If you wait, you get into the late 1970s, early 1980 situation, where inflation goes up and interest rates have to go to double digit levels. We

are nowhere near that. Hopefully we won't have to go anywhere near that. But that would be the consequence if we waited.

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GIOKOS: All right, now for the Dow components. Microsoft leading on strong guidance. Shares are doing quite well today. As you can see, pretty much in

the green.

And then Salesforce is close behind, as well. As you can see, the Dow Industrials leading the gains there. Very few sitting in the red. And, 3M

and Visa are among the stocks that are under pressure slightly today. All right, that is your dash to the bell. I am Eleni Giokos. The closing bell

is ringing.

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