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Quest Means Business

U.S. Inflation Soars to 3.7 Percent in September; Ukraine: Operations Disrupted by Starlink Restrictions; DBS Bank CEO: Bond Market Tells Us the Real Price of Debt; Saudi National Accused of Bugging OpenAI's Offices; IMF Upgrades U.K. Economic Outlook, Citing A.I.-Driven Growth; Retirement Savings Under Pressure by Rising Prices. Aired 4-5p ET

Aired October 14, 2026 - 16:00   ET

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

[16:00:11]

PAULA NEWTON, CNN INTERNATIONAL HOST: So a miserable day for markets after the latest Consumer Price Index shows U.S. inflation hitting 3.7 percent.

That increases the likelihood that the Fed may raise rates sooner rather than later.

Those are the markets and these are the main events.

ECB chief, Christine Lagarde signals to Richard that the bank will not be intervening in the French debt crisis.

President Zelenskyy says Ukraine feels betrayed by President Trump's deal to buy Russian diesel fuel.

And a top Bank of America executive tells Richard the bank is working to improve its standards after a $1.2 billion Treasury Department fine.

Live from New York, it is Wednesday, October 14th. I am Paula Newton, in for Richard Quest, and this is QUEST MEANS BUSINESS.

And a good evening to everyone.

Tonight, new inflation figures out of the United States are showing just how difficult the path ahead is for Central Bankers. Headline inflation in

September came in at an annual rate of 3.7 percent, which is higher than economists had expected.

Fuel prices were a major factor. Gasoline jumped a whopping 9.1 percent in September, accounting for more than half of the increase in overall

inflation.

Now, the war in the Middle East has sent oil prices surging, as we've said before, which of course impacts the price of gasoline. Today's reading

could make it more likely, as I was saying, that the Federal Reserve will raise rates this month.

The president of the European Central Bank, meantime, agrees that the war has put a huge strain on energy.

Christine Lagarde spoke with Richard Quest at the CNN Global Perspectives Event in Bangkok. She said that Europe is well-positioned to handle the

effects of the conflict. Lagarde was also careful not to compare the current crisis to previous ones.

(BEGIN VIDEOTAPE)

CHRISTINE LAGARDE, PRESIDENT, EUROPEAN CENTRAL BANK: The measured response comes together with we are well -positioned. They come together. The fact

that there is so much uncertainty that inflation has been rising predominantly, but not exclusively as a result of energy prices is leading

us to be in a position where we can look at the situation, analyze the data, understand the development and determine how much indirect effects

are traveling through the economy and see how best we can anticipate if second round effects are showing up.

We are not seeing any of that yet, but we have to be extremely careful that little signs, indices of such secondary effects are visible.

RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": And the problem with secondary effects is by the time you see them, it is too late.

LAGARDE: Which is why I use the word signs -- indices -- hints of second round effects. Because you're right, we cannot wait until they are there in

full view, but we can anticipate.

QUEST: You were the only one that got inflation down to target. You've got inflation down to target. Then the war happens and now you're back to

square one.

LAGARDE: Well, not quite square one. I don't know what square one is, you know.

QUEST: Higher inflation and having to tighten monetary policy. You're at the upper end of the neutral band.

LAGARDE: Yes. All of that is correct.

QUEST: Well, on the question of the frustration, though, that you've got to go through it all again of trying to get it back down to target.

LAGARDE: You know, every shock is different, okay, so we were very high when we started tightening again because of COVID, because of the --

QUEST: Right.

LAGARDE: -- you know, the demand that occurred after COVID restrictions were lifted. That was a particular set of circumstances.

At the same time, we had the war in Ukraine. We had an energy shock. What we are seeing at the moment is different and every situation has to be

analyzed on its own merits. So what we have at the moment is this recurring, infamous war of Russia against Ukraine that is continuing, and

it is putting pressure on refinery capacities, as you know.

But since March 26th, we also have the war in the Middle East, which is also putting a huge strain on the supply and movement of oil and gas.

So this is more -- I mean, if I was to attribute the causes, it is largely energy prices, risk of energy shortages. It is also the other factors that

are weighing on demand that are weighing on growth.

(END VIDEOTAPE)

[16:05:15]

NEWTON: So a lot in that interview already. Now, Christine Lagarde also discussed the impact of rising bond yields and how countries can bring them

down.

Part two of her chat with Richard later this hour. You don't want to miss it.

In the meantime, David Goldman is in New York with us. Now, I have to tell you what caught my attention about this latest print on inflation is that

inflation did rise faster than expected, but it also rose more broadly.

DAVID GOLDMAN, CNN BUSINESS SENIOR REPORTER: Yes. What caught my attention was my microphone cord getting caught in my bright yellow sweater. But yes,

it was very, very broad. Right?

We are talking about services inflation going up significantly and housing in particular. And that is worrisome because that gets sticky, right? Those

services don't tend to fall that much. When was the last time your yoga studio said that they are going to lower prices?

Now, I think a big issue for a lot of folks is, what does this have to do with the overall economy? I thought that was doing really well. Well, it is

unemployment at 4.2 percent. That is full employment, retail sales, consumers just keep growing and growing their spending. GDP in this country

is expected to grow 3.6 percent this quarter. That is a lot.

But people hate the economy. A recent CNN poll says that only 27 percent of folks say that they approve of the economy, 73 percent said they don't. Why

is that?

Well, this is not anything new. This was because of inflation that happened under President Biden. Remember, four years of President Biden, we had 21

percent growth in consumer prices, 31 percent for gas prices and you lost out to inflation, real pay fell.

So President Trump gets elected, and what does he say he is going to do? He says he is going to lower costs and rates. He is going to cut spending and

taxes. He is going to grow jobs.

Did he do that? Well, let's take a look.

So fuel prices, that's certainly a big thing right now, the Iran War rates because of the Iran War, imports because of tariffs, and then there are

some A.I. related expenses, too, but these policies helped lift prices as well.

And so now we see inflation at 3.7 percent according to that report that we just got. Social Security, we got to gain there, 3.6 percent. That's not

three 3.7 percent; pay gains three percent over the course of the year, that's not 3.7 percent.

And so we now have a lot of making up to do. We did not get that promised lower cost. We did not get the cut in spending, even though we did get it

in taxes and jobs, well, you know, jury is still out. But Paula, it is certainly a mixed bag for the economy and inflation is a big part of that.

NEWTON: A mixed bag and when you were tangled up with your microphone, I think many Americans, when they go to the grocery store or the gas station,

are also looking at what is going on and are completely confused because this is not the way things were supposed to go given all of the indicators

you just showed us.

David Goldman, for us in New York, appreciate it.

Now, the U.S. Treasury Department has fined Bank of America $1.2 billion for failing to flag suspicious transactions. The fine is the third largest

ever issued by the Treasury Department. It says Bank of America failed to mitigate and report national security risks, such as Chinese money

laundering networks and illicit finance along the Southwest U.S. border.

Now, shortly after that fine was announced, Richard Quest actually spoke to Bank of America's President of International Activities at the CNN Global

Perspectives panel in Bangkok.

Bernard Mensah told him the bank is working to improve its standards. Listen.

(BEGIN VIDEO CLIP)

BERNARD MENSAH, PRESIDENT OF INTERNATIONAL BANK OF AMERICA: Financial crimes compliance is very serious and really important. We take it very,

very seriously. We spend a huge amount of resources trying to get it right, and we think we are getting it right.

But these are very high standards, and so we are working towards that.

QUEST: What have you learned from it? What's the message?

MENSAH: Okay. Look, I think throughout, you know, our industry is very highly regulated. Bank of America is an incredibly large -- one of the

biggest financial institutions in the world and we operate across 80 to 90 countries, moving a huge amount of money around the world.

So it is really important, I think, you know, that the systems and the people and the technology and the money that we spend on the systems are

important, very complex and I think we are constantly learning to get to a good level.

(END VIDEO CLIP)

NEWTON: Okay. When we return, Ukraine says it faces restrictions on key military internet services, adding that it is linked to the current

political situation. We will find out more right after this. We will be right back.

(COMMERCIAL BREAK)

[16:12:38]

NEWTON: Ukrainian authorities say they were blindsided by "substantial new restrictions" on the military grade version of Starlink, called Starshield.

Now, the service leverages Elon Musk's SpaceX satellite technology. And this, of course, is notable because over the weekend, Elon Musk chided

Volodymyr Zelenskyy for recent attacks on Russian energy infrastructure, saying the Ukrainian president had "gone too far."

Two U.S. officials tell CNN the decision to limit Ukrainian access to Starshield was not a high level U.S. policy decision. I am not sure what to

make of that. However, in just the last hour, Elon Musk noting on X that any limits on speed or usage are decided by the U.S. military and

ultimately, the President of the United States.

Mr. Zelenskyy meantime spoke to broadcaster, Piers Morgan during a visit to the U.K. earlier. The Ukrainian President said he feels betrayed by the

actions of the U.S. President.

(BEGIN VIDEO CLIP)

PIERS MORGAN, "UNCENSORED" HOST: Do you feel betrayed by what has been happening?

VOLODYMYR ZELENSKYY, UKRAINIAN PRESIDENT: Really, yes. Really, between us. But it is a little bit more complicated than just my emotions or my

feelings.

Yes, it depends, not on me. I mean, our country has to survive and we count on our real partners, strategic partners, United States.

(END VIDEO CLIP)

NEWTON: CNN's Jim Sciutto joins us now.

I mean, it is interesting, right? He said "between us," but he basically told the whole world that he feels betrayed by President Trump.

You had reporting that we covered here with you the fact that two European officials had told you that, in fact, they had threatened to cut off

intelligence, and now, you're learning more about what is going on with this whole Starshield Starlink situation.

JIM SCIUTTO CNN ANCHOR AND CHIEF NATIONAL SECURITY CORRESPONDENT: So there is a lot going on at once in the last 72 hours. Over the weekend, we

reported that the U.S. had warned Ukraine that if it does not stop striking Russian energy infrastructure, that it might restrict U.S. Intelligence

sharing with Ukraine, which is crucial for Ukraine, among other things, to intercept incoming Russian ballistic missiles or even to end weapons

purchases -- European weapons purchases -- U.S. weapons, they buy them and then send them to Ukraine, they might do that.

[16:15:00]

No official public decision to do so, but since then, two things have happened. One, overnight, Starlink speeds get restricted and this matters

because those drones have to fly at certain speeds, Ukrainian drones to intercept incoming Russian drones, and the speeds were restricted below the

level that was necessary to intercept those incoming drones. That is one thing that happened.

The other thing that happened was on Monday and Tuesday, Ukraine was not getting the same warnings of incoming Russian ballistic missiles that it is

used to getting, and it believes that that's because the U.S. stopped sharing that critical intelligence.

Now, the U.S. told Ukraine it was a weather problem with that intelligence gathering, but European and Ukrainian officials tell me they just simply

don't believe that, especially given the timing, following those threats over the weekend.

Now, as it relates to Starlink, specifically, just over the last hour, I've been told by Ukrainian officials that the signal is improving, but not up

to the level it was before and I am told this, this is a direct quote from a Ukrainian official that this speed is not enough to effectively intercept

Russian jet powered drones.

So the restrictions have been raised, but not to the level they were before, so it is still impacting the ability to stop what you're seeing

there on the screen, right? Which is those drones and missiles striking targets, often civilian targets inside Ukraine and that's why you hear from

the Ukrainian president. They are saying we can't rely on the U.S. as a partner to the degree we used to.

NEWTON: You know, you've had the President saying that Zelenskyy should stop hitting energy infrastructure in Russia. You've had the Vice

President, apparently several weeks ago, doing the same thing, and yet, Jim, you know, as we report, there seems to be little regard for U.S.

businesses in Ukraine that are getting hit by, you know, Russian munitions.

I mean, when President Zelenskyy talks about betrayal, certainly it is not a word or an expression he would take lightly at this point in time.

SCIUTTO: Yes. Listen, the President's motivation here seems to be singular. It is to bring down diesel prices before the midterms, because he knows it

is impacting costs in this country, affordability, and that is hurting him in the polls.

From Ukraine's perspective, they are striking Russian energy because Russia sells that energy to buy missiles and drones that are killing Ukrainians

right now. I mean, from their perspective, they are defending their country from an ongoing Russian invasion, which is a fact and they are trying to

save lives and the few -- the less ability -- the lesser ability they have to do that, people die, and Ukrainian officials, the President included,

have said that in recent days, a number of Ukrainians have died because their defenses have been hurt.

So President Trump focused on diesel prices in the U.S., Ukraine focused on saving lives in their country after four and a half years of war and from

their perspective, those two things just aren't equivalent. Right?

So, you know, that's certainly how they looked at this diesel deal that while Trump may think it serves his interests to put more supply on the

market, lower those prices for American consumers, from Ukraine's perspective, that means Russia could sell more diesel and therefore buy

more weapons and continue to kill Ukrainians.

I mean, it is quite a simple -- it is simple math, and they're not wrong, right? It is just that they -- the two leaders have different priorities.

NEWTON: Yes, simple math, conflated by a very complicated geopolitics, because another reason that diesel fuel went up today, in fact, was because

of the conflict with Iran and the Saudis.

SCIUTTO: Exactly! And that's the other piece, right? Yes. You watch the diesel prices, when did they spike? They spiked after the Iran War. Yes.

NEWTON: So over to Europe, Zelenskyy will be speaking with European leaders on Thursday and we will see what more comes of this. Jim Sciutto, always

grateful for your reporting. Appreciate it.

SCIUTTO: Thank you.

NEWTON: Now the President of the European Central Bank says the answer to rising bond yields lies in fiscal discipline. Christine Lagarde spoke to

Richard Quest at the CNN Global Perspectives Event in Bangkok. She says it is up to individual countries to lower the yields on their government debt.

Lagarde also noted that Europe's economic growth is not as sluggish as many believe. Listen.

(BEGIN VIDEOTAPE)

LAGARDE: The bond yield factor is not just specific to Europe, not specific to France, it is across the world, number one.

There are particular circumstances that lead to some countries being more affected; France being a case in point, and for that one, the primary and

first solution lies at home in France, and it has to do with fiscal policies.

This is not only the case for France, it is the case for many advanced economies, but it is certainly the case for France.

QUEST: You've got higher or at least monetary policy rising. You've got arguably slowing economies. And at the same time, the IMF saying yesterday

in the WEO that fiscal policy needs to come back into line, all of which slows growth further. It doesn't -- it is a perfect storm.

[16:20:10]

LAGARDE: You know, I disagree with one point that you made. You said, you know, slow growth.

The numbers have been revised upward for many countries, and certainly, it is the case in Europe. When you look at Germany, for instance, the amount

of support and the amount of impetus in infrastructure in military has really risen significantly over the last few months, will continue to rise

into 2027, and as a result of that, growth has been revised upward.

So granted, it is not a brilliant number, but to have 1.1 percent growth in Europe in 2026 is not a bad outcome.

QUEST: The risk is on the downside. If you're going to raise --

LAGARDE: Yes, you're right.

QUEST: If you're going to raise -- I am not saying you are -- but if monetary policy is to raise, and fiscal policy is constrained, growth will

fall.

LAGARDE: Well, we will see how it goes, and as you know, our monetary policy is data dependent and is determined on a meeting by meeting basis.

So, we will be looking very carefully at all the data that come in. We will be focused on the two percent medium term, which by the way, is still in

the cards at the moment, okay? So when I look at my 2028 projection, we are at 2.1 HICP.

So we will be extremely attentive, yes.

QUEST: Is this situation that we are facing now -- it is obviously not as bad as COVID or anything like that, and it is not as bad as the GFC, but

are you preparing for a major debt crisis in Europe?

LAGARDE: Look, I am focused on my objective. What has been assigned to me by the European Treaty, which is price stability, and I think the best

contribution that we can make at the moment is to procure price stability so that those who are looking at investing heavily in infrastructure,

military equipment, artificial intelligence, and the data centers that go with it, as well as, you know, renewable energy, which is going to be an

absolute necessity if we want to be serious about data centers so that they know exactly what is the environment and what is the price environment in

particular.

QUEST: You have -- the ECB under your watch has had two reviews of monetary policy.

LAGARDE: Yes.

QUEST: 2021 and 2025.

LAGARDE: Yes.

QUEST: The Fed is doing its review at the moment.

LAGARDE: Yes.

QUEST: Kevin Warsh is not in favor of Q.E. He doesn't like forward guidance much. I am exaggerating obviously, but he is going in a different path to

the one that you set in your policy of 2021 and 2025.

LAGARDE: Well, you're right to mention 2021 and 2025, because 2025 really took into account the developments, whereas 2021 was this moment in time

which we have all forgotten where we were at, the lower bound. Interest rates was negative, if you remember, so 2025 was a completely different

ball game.

And I am not that different from Kevin's approach to forward guidance, for instance. I think that in current circumstances, forward guidance is not

helpful at all.

We are not in the same environment and for the moment, our predominant and main tool is definitely interest rates.

(END VIDEOTAPE)

NEWTON: Interesting comments about forward guidance.

Now, the head of the largest bank in Southeast Asia says the recent spike in global bond yields has been a wake-up call.

Borrowing costs in both the U.S. and Europe have hit multi-year highs over the last few weeks. Tan Su Shan told Richard Quest at that Global

Perspectives Event that higher yields could drive up costs for Asian consumers.

(BEGIN VIDEOTAPE)

TAN SU SHAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR, DBS GROUP: So the bond market has spoken, and I also believe that it is the enormous sort of

influence that the U.S. has globally. So whilst you're saying the U.S. and E.U. might feel far away from Asia, and we certainly work in different time

zones, the fact is the genius of the U.S. is its incredible innovation and influence in the world's capital markets, in the world's markets. Right?

But to your point, the bond market has spoken. The bond market has awakened everyone to what should be the real price of debt.

QUEST: And the interesting part is that those of us who are of a certain age remember that --

SHAN: You, not me!

QUEST: Absolutely, me not you, remember that phrase bond vigilantes.

SHAN: Bond vigilantes, yes.

QUEST: Which was used to determine in the days of junk debt and the days of Michael Milken and Drexel Burnham.

SHAN: Yes. Yes.

QUEST: The bonds gave their views.

SHAN: Yes.

QUEST: Now, it is not maybe as powerful, but they are certainly telling them -- what are they saying they don't like at the moment when they're

pricing this debt?

[16:25:01]

SHAN: I think they are saying, look, the enormous spend of two big buckets, the first bucket being the hyperscalers asking for $1 trillion a year

between now and 2030. The other bucket being the fiscal spend of governments.

The bond is market, saying, you know, you've got to price this right. Right?

And what is my risk? Because do I continue to have this massive concentration of wealth and assets just moving in one direction when, I

don't know.

Number one is I don't know what the potential ROI could be for the hyperscaler spend. And the other is, I don't know when I am going to get

paid back if I am going to get paid back.

QUEST: Are we talking about a pricing of risk or an inability to raise debt ultimately.

SHAN: I think it is a mix of both. Richard, I think the market is finding now that there isn't this infinite supply of deposits in dollars. Right?

But there is also a pricing mismatch, honestly, because even as bond yields are higher in the U.S. and E.U. today, actually the number two bond market

in the world is China, and China yields are much lower than the U.S.

QUEST: Are we facing a currency and a carry trade issue, do you think?

SHAN: Well, you've had the carry trade in currencies like the yen.

QUEST: Completely.

SHAN: Yes.

QUEST: Do we now start to see that elsewhere? And if it starts to unwind against certain countries, do we find certain companies and countries in

Asia in trouble?

SHAN: Well, I think if U.S. bond yields continue to grind higher, that will be an issue, especially if, you know, people need to borrow in dollars.

QUEST: Do you get the feeling that the tangled web of knitting wool in the financial markets at the moment? You know, it is all one big massive --

everything is getting intertwined is now starting to unravel and things are starting -- how bad do you view the current scenario?

SHAN: So, you know, Richard, the good news is people are talking about it. You know, when people start saying, oh my God, it is Armageddon, it is

going to crash. The whole private credit sectors terrible, then it has come out to the surface. So that's the good news.

So hopefully we don't get another GFC. Hopefully, we don't get another Asian crisis because people are digesting the bad news and they're

repricing for risk. That's the good news.

And also, people are now asking the long term questions right. All this spend on data centers, all this spend on A.I., is it really going to lead

to the kind of ROI that the market is pricing for? Right? That's a big question.

In the meantime, the next two years, we will still have supply side shortages in the semiconductor construct. Plus, we've got two wars going on

that has exacerbated energy pricing. Theres blockages in logistics and infrastructure.

So there are issues.

(END VIDEOTAPE)

QUEST: Thanks to Richard there.

Coming up, a former OpenAI worker is suspected of spying on the company. He was arrested after a recording device was found in the company's office. We

will have more on that right after the break.

(COMMERCIAL BREAK)

[16:31:30]

NEWTON: A former OpenAI worker has been arrested for allegedly planting a recording device in a company conference room. U.S. officials say the

suspect is a Saudi national who worked as an engineer for OpenAI. He's since been fired.

Hadas Gold has more for us here in New York.

Hadas, obviously, this shows us just exactly how high the stakes are as this A.I. development continues.

HADAS GOLD, CNN A.I. CORRESPONDENT: Yes it does. I mean, we still don't know whether this was a case of corporate espionage or if there was some

sort of, you know, international espionage. You know, a foreign country trying to get secrets involved in this. But what we do know is that the

suspect is a 35-year-old named as Abdulrahman Alfozan. As you noted, he's a Saudi national, worked as an engineer for OpenAI's product team for about a

year, and he was arrested last week.

What OpenAI and the Department of Justice says happened is in late September they believe that Alfozan inserted some sort of device into the

USB port of a TV screen in a conference room that's used exclusively by OpenAI executives. OpenAI says that this device was rather sophisticated,

that it monitored audio. It had advanced encryption and had a mechanism for transferring data in a way that was designed to evade monitoring.

They say that he also covered this device in some sort of toilet paper of some kind, but, again, snuck into the USB port of this TV screen in this

conference room. They say that it was there for about two days before OpenAI security team that conducts regular sweeps, looking for exactly

these types of things. They discovered this device. They worked with the FBI. They actually put in a hidden camera, and they actually caught

Alfozan, you know, peeking behind the TV screen. He was later arrested and of course he has now been dismissed from his position at OpenAI.

OpenAI has said that they have no indication that Alfozan managed to inappropriately access sensitive things like model weights or source code

or customer data. Now, as for Alfozan, he's been working in Silicon Valley for some time, used to be a senior engineer at Meta. He went to Berkeley.

He went to MIT. He is also, though, interestingly, a venture partner at a venture capital firm that's based out of Saudi Arabia called RAED.

We've reached out to both RAED and the Saudi embassy for comment, but we have not heard back from them. The Department of Justice, for their part,

they say that they are treating this as an issue of national security. But, again, we still don't know whether it's corporate espionage or something

else. But as it stands right now, Alfozan is in federal custody and he will face a judge next week -- Paula.

NEWTON: An intriguing that technically, as you just pointed out, he was with a venture capital firm in Saudi.

Hadas Gold, thanks for your reporting. I appreciate it.

Now Britain will be one of the big winners from the A.I. economic boom. That's the assessment from the IMF, which just upgraded its economic

outlook for the U.K. For Bank of England Governor Andrew Bailey, A.I. is a double edged sword. Last month, he published a report for the G-20 warning

A.I. cyberattacks could pose severe risks to the global financial system.

At the IMF World Bank meetings in Bangkok, Richard Quest asked Bailey whether the A.I. risks outweigh its benefits.

(BEGIN VIDEOTAPE)

ANDREW BAILEY, GOVERNOR, BANK OF ENGLAND: Well, I think it's both, as you say. I come back to the point about needing stronger growth in the world

economy. You know, I always tend to look at it because I, you know, I'm an economic historian by background. And the longer, the longer run of

history, I think, you know, big technological breakthroughs have, you know, fostered growth in the world economy over a long time. And I think it's

most likely that A.I. and robotics is the next one.

[16:35:04]

RICHARD QUEST, CNN INTERNATIONAL ANCHOR: But there's two aspects to it. There's the short term, which is where you say not all can win. And there's

the longer term, which is, is this going to make managing economies much more difficult?

BAILEY: Well, I think it -- look, I think it has all the potential to raise productivity growth. And that's very good. It's very good for living

standards, by the way. But we are going to have to deal with some obviously big issues on the way. We've got big issues in terms of safety and security

that we have to -- you know, have to deal with, which we're very much part of because of the financial stability aspect. And of course, then there are

bigger issues -- going to be bigger issues in terms of how it affects labor markets.

QUEST: Do you fear it could jeopardize the traditional central banks' role as lender of last resort in terms of making it? This could become so big,

it could become so systemic, it could become so difficult to manage that that could imperil central bankers' ability.

BAILEY: Well, I think you need to get back to what I think is the big underlying issue here, which is two things. One, I think, you know, public

trust in A.I. is ultimately rooted in the degree of what I call human control, right? And how that is affected. Now, that is not for central

banks to do. But I am very supportive of the work the U.K. government is doing. I've worked very closely with the U.K. government on this because we

have a common interest.

And I think that is the crucial question here. You know, we want the benefits of A.I., but we want it under our control. How do we get it?

QUEST: Is that an impossible task to do?

BAILEY: No, I don't think it is. I mean, there is this sort of safety versus speed tradeoff. But I think ultimately public trust depends upon it.

And let me make a big financial stability point here. Necessarily the industry is investing very heavily. You know, we're seeing this happen. And

that's necessary because of the capital accumulation that's needed. What goes with that financial position and the growing financial dependence is

public trust.

If the public don't trust the thing, then we're going to have a problem because it's not going to be able to succeed in that sense, in the way that

it needs to do then to support its financial commitments.

QUEST: Where are we on that public trust as you see it?

BAILEY: I think we're at a very important moment, and I think this is why, you know, I strongly support what the U.K. government is doing on testing

standards, on working with the industry. And, you know, I'm encouraged by some of the noises in other parts of the world at the moment that I think

we're heading in the direction, because we've got to have the framework that allows the public to say, yes, we can trust this.

(END VIDEOTAPE)

NEWTON: OK. Headline inflation in the U.S. came in higher than expected last month, with prices rising at an annual rate of 3.7 percent. The

increase was once again driven by a big jump in gas prices, which of course is tied to the U.S. war with Iran. Now, housing costs also rose at the

fastest monthly rate in five months at 0.4 percent.

It is the latest sign of affordability pressures in the United States, and, of course, is adding to concerns about keeping people having enough money

during retirement.

Jean Chatzky is the author of "The Forever Paycheck: The New Retirement Strategy to Spend Less," pardon me, spend more, not less, "Worry Less and

Never Run Out of Money." She's also the founder and CEO of Her Money.

And I broke the golden rule there. It's about spend more, not spend less. And so I do want to get to that concept of retirement. What is it and how

do you define a forever paycheck, which we should all have in retirement?

JEAN CHATZKY, AUTHOR, "THE FOREVER PAYCHECK": A forever paycheck -- and thank you, by the way, for having me. A forever paycheck is simply a

paycheck that arrives for the rest of your life no matter how long that turns out to be. So here in the United States, Social Security makes up a

base of a forever paycheck for most people. But it's not enough to cover those things you need as well as those things you want.

And so the point of this book is to suggest that people take some of the money in their retirement account, not all, and use it to either build or

buy themselves a forever paycheck.

NEWTON: And in terms of doing that, you have some specific takeaway here -- takeaways here. And you say, look, you need to be deliberative. And you say

that you have to, in fact, budget, you have to start early at 50. You say budget is a verb, not a noun. Delay claiming a government or company

pension, which many people do have one, even if they don't live here in the United States. And key here, do not panic and cash out if markets fail.

How do we begin to execute on that? Because so much of what you're saying is good advice, but difficult to do.

CHATZKY: It really comes down to being planful, as you said, and 50 is a great time to start with what I like to call a pre-retirement checkup.

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Take a look at how much your cost of living is right then. Your cost of living in retirement is not all that different from your cost of living

before retirement. See how much Social Security is going to replace, and then look at how much of your assets you need to convert into income to

cover the rest. That asset-income comparison is really important because what we're learning about retirees, and this is true across the globe, not

just in the United States, is that we treat assets and income very differently.

We're willing to spend our Social Security, our pension payments, the money that comes in on the regular. But when it comes to that big fat balance in

the 401(k) or the other retirement plan, we're hoarding those assets. We don't want to see the balance heading in the other direction, because after

30 or 40 years of saving that money, it is really hard to start letting go. So just making the shift to convert some money to income and then invest

the rest to keep up with those inflation numbers and manage the volatility of the markets is proving to be a successful way to live in retirement.

NEWTON: Yes. And you make it clear that it is difficult in retirement to spend money, that there is friction about flipping the switch from saving

to spending. And I guess this is what you want all of us to understand.

CHATZKY: It's so emotional. It becomes -- the balances in those retirement accounts become precious cargo. They're that bottle of wine that somebody

gave you as a gift that you can't open because it's too good, and it turns to vinegar times 10. And so we've got to give ourselves some tools to

manage those emotional difficulties and converting some of the money into income whether you do it with investments like a bond ladder or whether you

do it with insurance, like annuities, is one way to go.

NEWTON: We don't have a lot of time left, but top of mind for so many around the world now is inflation. What is your best measure of how to

really make an inflation-proof retirement fund or forever paycheck? What's your best advice on that?

CHATZKY: So the first thing you have to do is max Social Security. Get the most that you can from Social Security. We learned that this year Social

Security is going up by 3.6 percent for recipients. Social Security tracks actual inflation. If you max out what you're getting, it will help. The

other thing we all need, and we need it for life, is money in stocks because stocks historically have grown to keep up with inflation. So you

have your paycheck, but then you also keep money invested in stocks for the duration.

NEWTON: Gotcha. Jean Chatzky, the book is "The Forever Paycheck." I want to thank you for being with us.

And I want to thank all of you. That's QUEST MEANS BUSINESS. I'm Paula Newton. Up next, "MARKETPLACE ASIA."

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