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Quest Means Business

Fed Cuts Interest Rates By Half A Percentage Point; Israel: New Era Of War; Sean "Diddy" Combs Appears In Court To Appeal Bail Denial; U.S. Fed Cut Rates For First Time In 4 Years. Aired 4-4:45p ET

Aired September 18, 2024 - 16:00   ET

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

[16:00:08]

RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Closing bell ringing on wall street. The market, absolutely befuddled. Not sure what to

make of those rate cut that we got. Down in the morning, a rocky rise when it happens and now almost the lowest of the day, if not the lowest of the

day at the closing bell.

The main events that's driving -- oh, one, two, three, thank you, sir.

The main events that's driving the markets today. The era of easing has begun. The Fed cuts rates, half a point and signals more to come this year.

More devices exploded across Lebanon. This time its walkie talkies.

And more court hearings for Sean "Diddy" Combs who is back in court, asking a judge to release him on bail.

We are live in New York, Wednesday, September the 18th. I am Richard Quest and I mean business.

Good evening.

We begin with the Federal Reserve now moving aggressively to cut interest rates. Chair Jerome Powell says it will help maintain economic growth and

the US jobs market. The Fed slashed the benchmark rate by half a percentage point.

Now, economists have been divided over whether it would be a quarter or a half. The markets surged on the decision and then promptly gave back the

gains after listening to the Chairman speak.

Mr. Powell said inflation is nearly tamed, and now employment is a growing concern.

(BEGIN VIDEO CLIP)

JEROME POWELL, US FEDERAL RESERVE CHAIRMAN: Our patient approach over the past year has paid dividends. Inflation is now much closer to our objective

and we have gained greater confidence that inflation is moving sustainably toward two percent.

As inflation has declined and the labor market has cooled, the upside risks to inflation have diminished and the downside risks to employment have

increased. We now see the risks to achieving our employment and inflation goals as roughly in balance.

QUEST: The Fed members have signaled through the dot-plot that they plan to cut rates more at future meetings. In June, the dot-plot indicated they

would maintain interest rates above five percent. Now, if you look, you can see, where most members believe rates will finish the year below four-and-

a-half percent.

Matt Egan is at the Fed in Washington. Matt Egan is with me now.

Matt, Chair Powell says, if he had seen the employment data back in June, they could have cut in July. He says he did this half a point is because

they don't want to get behind the curve. But de facto 50 percent -- sorry, 50 basis suggests they are behind.

MATT EGAN, CNN REPORTER: Richard, it does, and it is a tough argument for Chair Powell to make. He is trying to make it, right? He is stressing that

he is not alarmed with what he is seeing in the jobs market that unemployment is still historically low.

At one point, he even said, the labor market is in a strong place and we want to keep it there. But as you know, he could have opted for a more

gradual interest rate cut of just a quarter of a point. And I do think that that would have signaled more confidence about what he is seeing on the

jobs market front.

So the fact that they are -- they went big here, right? They went with the first rate cut since COVID and the decided to do a half an interest rate --

a half a point is really, really telling. It shows they are very confident on the inflation side. But Richard, it does suggest that at least some

people in this building, they are concerned about the jobs market.

QUEST: There was a dissenter that wanted one percent, which was never really likely to have and politics plays a big role in all of this, they

say, or at least the critics say, the Fed says otherwise. You took that up with the chair.

EGAN: Yes, I did ask Chair Powell about the political element here because obviously some critics of the Fed are going to suggest that politics played

a role here. And Powell, he denied that and said they really just focused on the real economy.

But I did ask him about former President Trump's suggestion that the sitting president, whoever that is, should play a role and have a say in

where interest rates go. Take a listen to what Powell said.

(BEGIN VIDEO CLIP)

POWELL: We do our work to serve all Americans. We are not serving any politician, any political figure, any cause, any issue -- nothing. It is

just maximum employment and price stability on behalf of all Americans and that is how the other central banks are set up, too.

[16:05:07]

It is a good institutional arrangement which has been good for the public and I hope -- and I strongly believe that it will continue.

(END VIDEO CLIP)

EGAN: Powell went on to say that the data are clear, that Central Banks that are independent, they have lower inflation. So if I can translate that

Fed speak there, messing with the Fed means you're playing with fire because you could actually make the cost of living worse.

It is something that they care about deeply here and could become more of an issue in the months ahead, particularly if former President Trump is

back in the White House where again, he has argued, Fed Chairs should at least listen to what the president of the United States says -- Richard.

QUEST: Just do the quick TikTok. There are two more meetings, I think for the rest of the year, and if the dot-plot is to be maintained and we are

not going to have more 50 cuts, then it is a quarter in each right.

EGAN: That's right. The dot-plot is signaling that they expect to have another half a percentage point of interest rate cuts know how you divide

that if it is a quarter and a quarter, or if its 150 basis point cut and nothing in the final meeting, that's up for debate.

But I think that good news for borrowers is, yes, this means you're finally going to catch a break, whether it is on mortgage rates. We know a lot of

people are struggling with credit card debt. It is extremely expensive right now and thankfully, those costs are coming down.

I think the big takeaway though, Richard, is that they are coming down for two reasons. It is because inflation is improving massively, but it is also

because they are a little bit worried about the jobs market.

QUEST: Matt Egan in Washington, thank you, sir.

The Fed has not reduced rate since March 2020 at the start of the COVID pandemic. As an emergency measure, the Fed slashed rates a full percentage

point to zero. You can see there, and there they remained for two years until inflation kicked in and there were 11 increases. It took rates to 525

basis points. It was a two-decade high and that is where we have seen for the last 14 months.

Ryan Sweet is the chief US economist at Oxford Economics, joins me now.

All right, let's just be -- are they behind the curve? The fact, is its ergo by definition, they went twice as much as the smallest, therefore,

they were telegraphing us something.

RYAN SWEET, CHIEF US ECONOMIST, OXFORD ECONOMICS: Yes, the Fed is never going to publicly admit that they made a policy error, but arguably,

hindsight is always 20/20, looking at the employment revisions, looking at some of the softening in the labor market, it has probably been a little

bit more a noticeable limp the Fed was anticipating, so there is probably a meeting behind the curve, you know, not a big deal. They were able to catch

up and I think that may have played a little bit into the decision today to cut by 50 basis points.

The last thing the Fed wants to do is fall behind the curve further and be chasing the economy through this fall and into next year. Now, they are

roughly where the economy says it should be.

QUEST: Which is of course is interesting because they haven't hit two percent. I mean, the chair admitted it. They have not hit two percent on

their preferred measure or indeed on any real measure. And now they are about to stoke flames a bit.

I suppose the hope is that the monetary tightening that is still there will land the plane gently. What do you think?

SWEET: Well, inflation is a lagging indicator and we know where inflation is headed over the next few months and it is going to move closer and

closer to the Fed's target. In fact, we do now a casting estimate, taking all the real-time data, kind of mapping into what it means for the Fed's

preferred measure and that means all indications are we are going to hit two percent in September.

Now, does that mean the Fed is going to say all clear, you know, mission accomplished? Probably not. I mean, inflation is going to be choppy

throughout the rest of the year, but we are at the point where inflation is within spitting distance with their target.

The concern is the labor market, and if they wait too long to do more rate cuts, then the odds of a recession would increase.

QUEST: Looking at the dot-plot on the longer-term basis, we are looking at a terminal rate, or at least a neutral rate of about three, three-and-a-

quarter longer term. Now, that's a long way out. So there are many things that could happen between now and then.

Is that your best prognosis? About three, three-and-a-half as being, if you will, the holding rate?

SWEET: We are right around three percent. I mean, a little bit -- a hair below that.

The issue with the neutral rate, I mean, the Fed does need to say where this final destination is with some confidence, but it is hard to have a

lot of confidence where the neutral rate is because no one really knows. The Fed doesn't know where it is; economists, we don't know where it is.

[16:10:07]

More often than not, you don't realize we've hit the neutral rate until you've gone past it, but the Fed -- it is clear that monetary policy is

restricting.

Even with today's rate cut, the Fed still has the foot on the brake. The economy is slowing down, inflation is moving back to their target. They

just need to normalize interest rates because the job market is roughly where it should be. Inflation is getting back down where it should be.

The only thing that has been really out of whack is interest rates.

QUEST: How far -- just let's go right down the rabbit hole of geekery -- how far the tightening, the implicit tightening that comes about from the

unwinding of the balance sheet is still a drag on economic growth? We saw the Bank of England having to deal with that recently in terms of its

runoff of guilt, the fed is still committed to the runoff of the balance sheet, but that is going to still tighten monetary policy.

SWEET: Yes, it is tightening on the margin. It is not a huge source of drag on the economy. I do think the Fed is going to end this quantitative

tightening sooner than they're alluding to, because, you know, as we get through towards the end of the year, even on the other side into early

next, the financial market conditions are going to, you know, potentially tighten.

I mean, the Fed wants to end this process before they drain too many reserves. I mean, they want ample reserves into the system. And again kind

of, no one really knows where ample reserves are going to be and they kind of learned with the repo crisis that happened several years ago, the last

thing they want to do is end this process -- or wait too long for the end process and run into another repo crisis.

So I do think the Fed is going to err on the side of ending quantitative tightening sooner rather than later.

QUEST: I am grateful, sir. Thank you for putting this into perspective. We've got more rate cuts ahead that you and I can chew over a great length.

As we continue tonight, Israel says, a new era of war the beginning as more devices explode across Lebanon. We are live in Beirut.

(COMMERCIAL BREAK)

QUEST: An Israeli source is telling us that Israel launched Tuesday's pager attacks only after it believed that the whole plot and capability had been

discovered by Hezbollah. Now, 12 people have been killed with the pagers, with thousands more people injured.

[16:15:03]

And at the same time, we are hearing from Lebanon's Health Ministry that several people have also died as a result of walkie talkies exploding. At

least 14 people have been killed and hundreds of people have been injured.

So we now have exploding pagers and we have exploding walkie talkies and the Israeli prime minister has reiterated his pledge to return Israel's

northern residents to their homes near the border. They have been displaced due to cross-border attacks. Lebanon's foreign minister says Israel needs

to focus on diplomacy in order to make that happen.

(BEGIN VIDEO CLIP)

ABDALLAH RASHID BOU HABIB, LEBANESE FOREIGN MINISTER: I don't understand the Israelis because if they want to go to get back their people to the

north, those who are displaced to the north, to their villages and settlements, they have to negotiate, and they have to negotiate with the

Lebanese government through mediators like the Americans as well.

(END VIDEO CLIP)

QUEST: Ben is with me, Ben Wedeman in Beirut.

Ben, let's do two things we really have got to get to, to understand from you tonight.

Firstly, obviously the walkie talkie aspect of it and how many more devices? And secondly, this idea that Israel detonated the explosives after

they realized that Hezbollah knew about their existence.

Let's do first of all, the walkie talkies -- an escalation or another realm to yesterday's attack?

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, it is no question, Richard, given the number of dead and injured that this is a

serious escalation by Israel against Hezbollah. The question is, where is it all leading?

Now, what we are seeing is that clearly, Hezbollah's intelligence and security apparatus has been seriously compromised. The problem is, what is

Hezbollah going to do next to respond to all of this? Because it certainly has completely changed the atmosphere in this country as we've seen two

consecutive days of hundreds of explosions around the country.

(BEGIN VIDEOTAPE)

WEDEMAN (voice over): A funeral for those killed the day before is disrupted by another explosion. A wave of walkie talkie blasts across

Lebanon killed more than a dozen and injured hundreds Wednesday, coming barely 24 hours after hundreds of pagers blew up across the country at food

markets and shops killing at least 12 people, including two children, and injuring around 2,800 others in what CNN sources say was an attack by

Israel's Mossad and military against Hezbollah, unprecedented in its scale and nature.

Outside the American University of Beirut Hospital, distressed family members wait for updates on their loved ones.

WEDEMAN (on camera): Friends and relatives of the injured don't want to speak on camera, but off camera, one told this for instance that a friend

of his received a message on his pager. He looked at it and the pager blew up in his face damaging his eyes and his fingers.

And in fact, the chief medical officer here told us, the majority of the injuries are to the eyes, to the hands, and the hips where of course people

were holding their pagers.

DR. SALAH ZEIN-EL-DINE, CHIEF MEDICAL OFFICER, AMERICAN UNIVERSITY IN BEIRUT HOSPITAL: when it seemed that on 200 patients and we receive them in

a very short time, about within an hour or two, almost all of them went inside our doors.

So this stretched us pretty much too thin.

WEDEMAN (voice over): A Lebanese security source says the militant group bought the devices that exploded in recent months from a Taiwanese company,

Gold Apollo. However, Gold Apollo denies manufacturing the devices and says a distributor in Hungary is responsible.

A Taiwanese security official said, there is no record the pagers were shipped to Lebanon or anywhere in the Middle East.

Hezbollah has vowed to retaliate, a message echoed by one of the group's lawmakers.

HUSSEIN HAJ HASSAIN, HEZBOLLAH LAWMAKER AND FORMER LEBANESE MINISTER (through translator): The resistance will continue, the support for Gaza

will continue and the Israelis will regret what they have done.

WEDEMAN (voice over): The tension between Israel and Hezbollah is nothing new. For most of the past year, cross-border skirmishes have been common.

These device explosions represent a new level of escalation.

On Wednesday, Israel's Defense minister said the explosions mark a new era in Israel's war against Hezbollah.

Worried citizens are now suspicious of every day devices including one found in a parking lot near a busy hospital. Security detonated it in a

controlled explosion.

(END VIDEOTAPE)

[16:20:10]

QUEST: Ben Wedeman reporting.

Now to the questions over who made the exploding pagers, how they got to Lebanon.

So as Ben was saying, the Taiwanese company's brand is on the devices and says those models are made in Hungry.

The Hungarian government says not us. They said the pagers were not manufactured in the country.

Anna Stewart joins me.

Now somebody made them, Anna. They were manufactured somewhere.

ANNA STEWART, CNN REPORTER: Someone made these pages. It should be no surprise, I think that nobody has come forward today to claim that they

have manufactured these explosive devices.

The brand says, Gold Apollo, that is a Taiwanese company. They are a brand. They do license that brand to some other companies, including one in

Hungry. The CEO, the founder of the Taiwanese company, said, perhaps they had made.

It appears pretty unlikely they would have done. A local journalist working for CNN actually went to the business addressed outside of Budapest and

found a pretty residential area, an office that had multiple different businesses in it and certainly didn't look anything like a factory.

Both the Taiwanese government and the Hungarian government have now both said that the pagers in question never came from their respective

countries.

So a mystery there. Of course, there is the possibility that neither country and neither company had anything to do with these pagers and they

were created or mocked up to look like an innocuous device when of course, they weren't.

QUEST: Yes. But, to a point, Anna, because Hezbollah clearly made a contract with somebody to buy pagers. So that obviously will be traced

back.

What is interesting is when this took place, when were the pages bought? When were they adapted or made into lethal weapons? How long did they just

sit waiting to be detonated? And this idea that Hezbollah knew and therefore they were detonated?

STEWART: And we can now add walkie talkies that appear at least from the brand name, to be from a completely different company and country

altogether.

So we are now looking at an incredibly sophisticated, very targeted attack. These are very low-tech devices, but the attack itself is incredibly

sophisticated and would have taken months, you would imagine, to prepare.

Now, the awful reality of these booby trapped devices, which are of course banned under international law because they look like everyday objects, is

there will always be perhaps indiscriminate casualties.

We saw this yesterday, 12 people died and that included two children. There were also health workers being injured -- Richard.

QUEST: It is a miracle more weren't killed. Thank you, Anna Stewart, I am grateful.

Barak Ravid is CNN's political and global affairs analyst, and is with me.

Wow, now we really are -- I mean, how -- this idea that Hezbollah got an idea of what was going on, however that happened, and therefore Israel

detonated them regardless.

BARAK RAVID, CNN POLITICAL AND FOREIGN POLICY ANALYST: Yes, well, you know, I think the Israelis were working on this operation, as you can imagine,

for months, even for years. And this was supposed to be an operation that you save for very specific case and especially as a sort of a surprise

opening blow for an attack on Hezbollah, an initiated attack on Hezbollah by Israel.

But the fact was that the Israelis had serious concerns that this secret system has been compromised by Hezbollah. They had intelligence that showed

that Hezbollah officials are starting to get suspicious and then they said, okay, let's move forward. It was this, as one US official told me, this use

it or lose it moment and the Israelis decided to use it.

QUEST: And would you imagine, and I realize I am taking you well and truly into the realms of speculation, so please feel free to tell me to mind my

own business. Would you expect permission to have used it instead of lose it would have come from the very highest levels? In other words, almost

Netanyahu himself?

RAVID: Oh, there is no doubt. It is not speculation because when the first intel about Hezbollah suspicions came in, Netanyahu was briefed about it.

Minister of Defense Gallant was briefed about it.

Netanyahu called a special meeting of five top ministers together with all the security chiefs, the head of the intelligence community to discuss what

to do.

And it was his decision together with Minister of Defense Gallant to go for it.

QUEST: Okay, so now let's say, they decided to go for it, but -- and this is my words -- the sheer mendacity and the evilness of -- thousands of

explosive devices that could be sitting in trams, in shopping carts, in somebody's back pocket down the sofa exploding.

[16:25:10]

I mean, what rationale thought goes through somebody's mind? Oh, let's blow up several thousand people at once.

RAVID: Well, you know a lot of times, Israel is being criticized for indiscriminate airstrikes in Gaza or in other parts, and what I hear from

Israeli officials that they say this is the complete opposite, meaning this is the most targeted counterterrorism operation ever conducted, I think in

history, because basically, you knew almost, exactly who are the people that are carrying those pagers and you knew almost exactly who are the

people that are carrying those walkie talkies.

So you knew that when those devices with a few grams of explosives are detonated, you knew that -- you know, you can never know that there are no

innocent civilians that are being hurt.

But in comparison to airstrikes, so to any other counterterrorism operation, this is the most targeted one.

QUEST: You make a good argument, you make a strong argument. So now let me come back to you, but what happens now? In the sense that the retaliation

and revenge, not only we are now building on the assassinations of Hezbollah and other Iranian leaders in recent months. Now you've got all

this other stuff. The Lebanese and the Hezbollah will retaliate.

RAVID: They will definitely retaliate, although it is if you compare it to the previous retaliation which was for an Israeli airstrike in the middle

of Beirut, which was, it is very clear, a fighter jet comes, sends a missile. It blows up.

Here, it is more complicated because basically what this operation did is that it exposed Hezbollah operatives who maybe you saw the videos in the

grocery shop. The people in the grocery shop did not know that this guy was a Hezbollah operative. Now, they know, and it is the same for more than

3,000 people around Lebanon.

So for Hezbollah, it is very humiliating, it is very embarrassing, and it also creates a legitimacy problem.

So it is not that simple for Hezbollah to now go to war over this thing. Further than that, more than that, their military communication systems has

been neutralized, so now for Hezbollah to go to war without a command and control system, this is a much more difficult task.

QUEST: I am very glad we had you with us tonight and we will in future, thank you, sir. Good to talk to you.

RAVID: Thank you so much.

QUEST: It is QUEST MEANS BUSINESS. Sean "Diddy" Combs was back in court after pleading not guilty to charges of racketeering and sex trafficking.

Now of course, he is appealing against the refusal to grant him bail, in a moment.

(COMMERCIAL BREAK)

[16:31:55]

QUEST: Now, of course, close observers will have noticed that those numbers that we just showed you by were not correct. It's a computer issue that the

correct numbers hadn't loaded. So everything isn't zero in the financial world. It's just the way it is today.

Now Sean "Diddy" Combs is in court at the moment. He's appealing against a judge's decision to deny him bail. Diddy Combs pleaded not guilty on

Tuesday to federal charges of racketeering conspiracy and sex trafficking. And racketeering the charges often used to target organized crime. It is

purposefully very broad and to convict of racketeering you're going to prove there was a criminal enterprise that affected interstate commerce,

that the defendant obviously was involved, and it was a pattern of behavior that included at least two racketeering events.

Elie Honig is in New York.

Racketeering RICO and all of those, they're the other ones they like, but the sex trafficking one and, you know, all the others, they're also pretty

serious as well. This, I mean, fundamentally even if a plea deal, a plea bargain is done, and remember of course he's innocent until proven guilty,

you would be looking at prison time in any form of agreement.

ELIE HONIG, CNN SENIOR LEGAL ANALYST: Oh, yes, Richard. The charges here are deadly serious and the two main charges are the ones you've already

discussed. First of all, there's racketeering, which is a very powerful tool that prosecutors have and can use. I charge it all the time when I was

a prosecutor at this same office, the Southern District of New York.

The paradigmatic example where I used to charge it was with the mafia families. However, it can apply beyond that. What prosecutors have done

here is they've said that Sean Combs ran a criminal organization that committed almost any crime you can think of, guns drugs, assault,

extortion, obstruction of justice, arson, in order to promote his image, to satisfy his sexual urges and to intimidate witnesses.

And then there's a separate crime. This is count two, that is forceful transportation of a person across state lines for sexual purpose. Forceful

sex trafficking. And the penalties there, Richard, are extraordinarily serious. If Sean Combs is convicted on that count, he is facing a mandatory

minimum of 15 years in prison. There's nothing a judge can do. He has to sentence him to 15 years and up to life as a max.

QUEST: So where do you -- and well and truly into the realms of speculation here because this has got such a long way to go evidentiary. But where do

you plead that down to? I mean, you know, you don't go from sex trafficking and racketeering to a driving ticket and a slap on the wrist.

HONIG: So well over 95 percent of all federal charges do end up pleading guilty. It's a feature of our system here in the United States for better

or for worse. What you do usually is you will find some sort of lesser charge. So in a case like this, there are lesser versions of interstate

prostitution.

QUEST: Right.

HONIG: That said, Richard, I don't think this this case is going to plead guilty. First of all, the defense lawyer for Sean Combs was on air with

Kaitlan Collins last night here on CNN and said it's going to trial.

[16:35:02]

Now, everyone kind of says that. That said, I don't see a middle ground here. I don't see a place where Sean Combs is going to be willing to admit

a crime and do some time. There's no way they're going to give them a probation plea. And I don't see a way that prosecutors are going to come

down far enough that they can sort of reach that middle ground with Sean combs. So I really do expect this case to end up at trial.

QUEST: Do you expect him to get bail? I mean, there's a presumption of -- or towards bail. There's got to be a strong reason why you want to keep him

locked up. You've heard us all this stuff about he won't have any female visitors, et cetera, et cetera. Can you see a judge saying, all right, if

the money is enough and the restrictions are high enough, we'll do it?

HONIG: So we will find the answer out to that any minute now. Yesterday, he was denied bail by a magistrate judge, which is sort of a ministerial level

judge. Today, they refer to the district judge, which is the judge who will handle the actual trial.

If I have to guess, Richard, and, you know, let's say we're speculating here, I think he's going to get held without bail. I think he's going to

remain locked up. The law, the federal law in the United States actually says that if somebody is charged with a crime of violence as Sean Combs is

here, the presumption is in favor of detention.

QUEST: Right.

HONIG: The presumption is no bail, you get locked up. And prosecutors are dead set on getting him locked up. It doesn't mean they always get their

way. But they submitted a 13-page memo to the court yesterday saying he's a danger to the community. He's a risk of flight. You need to keep him locked

up.

So, Richard, if you took the name Sean Combs out of this based on having argued hundreds upon hundreds of these and just said this is defendant John

Doe, and he's charged with sex trafficking, forcible sex trafficking, racketeering, firearms, there was guns found in his house, there was drugs

found that his house, that person gets locked up 99 times out of 100. So we'll see what happens here. You never know what happens when big money

gets involved and famed gets involved. But if I had to guess I think he's going to be locked up.

QUEST: You and I need to talk about exactly what goes through the prosecutor's mind at some point in these. There's a lot we need to talk

about, Elie. Good to see you as always.

HONIG: Always.

QUEST: Always. Thank you, sir.

HONIG: Thanks, Richard.

QUEST: Returning to our top story, the Fed began its monetary easing cycle, 50 basis points. The chair said economic strength can be maintained with

appropriately calibration. Inflation has moved closer to 2 percent, unemployment just recently ticked up.

Julia is with me.

And let's hold up our hands here.

(LAUGHTER)

JULIA CHATTERLEY, CNN ANCHOR, FIRST MOVE: We got it wrong.

QUEST: Prosecute me, milord. I did not think it would be 50. I thought that would be sign of crisis.

CHATTERLEY: Well, one could argue it's a sign or a warning sign. Crisis is the wrong word, but it is concern, isn't it, Richard? What they did was

they did a big rate cut. They also said we're going to do far more rate cuts this year than they said even three months ago. So it does play to the

point that you were making about look, things are worse than they thought or they're certainly worse than they thought three months ago.

But he did overlay that in a managing the message mode by talking about the economy being strong overall and it being solid. But bottom line is,

they've got inflation to a point now where they can really try and support the jobs market. And that's what they're going to do.

QUEST: Which, I'm not going to the criticize them per say because --

CHATTERLEY: No, you can. The message here is that they should have gone last month.

QUEST: Oh, that's easy for you to say. That's easy for you and I.

CHATTERLEY: Shoulda, woulda, coulda.

QUEST: Coulda, shoulda, woulda. But, but, going knowing back in July that you could do 50 if need be in a three months difference.

CHATTERLEY: Yes. Yes.

QUEST: And it's a messaging rather than anything else, isn't it? Because it's not going to make much difference one way or other.

CHATTERLEY: It is. But imagine what they're actually saying now if we look at this a different way. What they're saying is that they're going to cut

two percentage points in the space of what, a year and a quarter.

QUEST: Yes.

CHATTERLEY: Simply in order to maintain a higher unemployment rate than we have today. Now, it's lower than it is, you know, plenty of times in

downturns historically.

QUEST: Right.

CHATTERLEY: We're still talking about growth of 2 percent in the economy. It would be a soft landing, good job to them, but it is a lot of cutting to

maintain something worse than today. And there is an argument to be made that maybe they have to do even more.

QUEST: If you look back in July at the dot plot from July but I've got it here, but if you look at where they thought unemployment was going to be by

now that you've see why they've done what they've done, because their projections in July were much lower than the reality. And therefore, there

is this level of concern, if not panic. Here we go, yes.

CHATTERLEY: Much.

QUEST: So there you are. You see --

CHATTERLEY: Though much is a strong word.

QUEST: So if you look into June --

CHATTERLEY: I mean, we --

QUEST: Yes, but look at the June projections in brown and now look at the September projections. They clearly believed unemployment was going to be

lower by now.

CHATTERLEY: I know, but look, we're arguing over 0.1 and 0.2 and 0.3 percentage points.

[16:40:03]

Much is a strong word in this case, but we'll go back to the point that we were making. This is a relatively strong and solid jobs market. We are

still adding jobs, Richard. We're talking about 2 percent growth. But I take your point that they could have started earlier. Perhaps they wouldn't

have needed to do half a percentage point. Perhaps they wouldn't have needed to do quite as many cuts. Shoulda, woulda, coulda.

But we give them brownie points, Richard, because if they pull this off they went through the fastest rate hike cycle in four decades.

QUEST: Yes.

CHATTERLEY: And engineered a soft landing. Now maybe it didn't need to be that fast and it didn't need to be that aggressive.

QUEST: Right.

CHATTERLEY: But this is kind of working out.

QUEST: I'm going to quote that learned -- I'm going to quote that learned economist, the good game, Julia Chatterley, I think who recently said on

that top business program, QUEST MEANS BUSINESS, coulda, shoulda, woulda.

CHATTERLEY: Shoulda, woulda, coulda. Definitely in the right order, Richard. Last words of a fool. You and me, my friend.

QUEST: Does that make a difference, whether it's shoulda, coulda, woulda. Woulda, coulda, shoulda. All right.

CHATTERLEY: Of course not.

QUEST: Two more rate cuts. Do they do 50, 25-25, 50-0? What do you think? Come on.

CHATTERLEY: Good question. So the next meeting is two days after the presidential election.

QUEST: Right.

CHATTERLEY: If we don't have a result, if this financial market turbulence, anything quite frankly is off the table. They say they're politically

agnostic. They're obviously going to be accused of otherwise. Maybe 25-25.

QUEST: Thank you, Julia.

CHATTERLEY: Yes. See you.

QUEST: Thank you very much.

And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. I'll be back with Julia later. Whatever you're up to in the hours ahead, I

hope it's profitable.

"CONNECTING AFRICA" is next.

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(CONNECTING AFRICA)

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