Alternative and related questions:
Do you know what the current news headline is?
Which news story has recently grabbed your attention?
What would you do to improve the state of the country's finances?
The meaning behind the question:
This isn't exactly a trick question. It's just that they're not just asking if you're interested in current affairs; they're asking you to prove you're interested in current affairs – and you need to be prepared and ready for that.
Your answer:
For a start, your answer to the question has to be 'Yes' if you are to successfully convey to the interviewer that you are a well-informed and well-rounded individual. You should then go on to pre-empt the obvious follow-up question in which the interviewer will ask for a specific example of something which has taken your interest in the news recently. Not only that but you need to be prepared for the interviewer to want your opinion on the matter – so as to test your analytical skills. Just don't say anything controversial or likely to shock!
Example:
Yes, I am indeed interested in current affairs. I read The Independent, I keep an eye on the BBC News website and I normally listen to the news in the car on the way home. I watch very little television but, between my newspaper, the Internet and the radio, I really don't need to in order to keep abreast of what's going on in the world. Like many people, I've been particularly interested recently by the ongoing developments in the Arab world. It's going to be fascinating to see how that continues to unfold.