WHEN: Today, Thursday, April 16th
WHERE: CNBC's "Squawk on the Street"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Federal Reserve Vice Chairman Stanley Fischer on CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET) today. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000371668.
All references must be sourced to CNBC.
SARA EISEN: I AM HERE WITH STANLEY FISCHER, THE VICE CHAIRMAN OF THE FEDERAL RESERVE. IT IS NICE TO SEE YOU AGAIN.
STANLEY FISCHER: NICE TO SEE YOU. THANK YOU.
EISEN: SO HERE AT THE IMF WORLD BANK MEETINGS, THE ECONOMY IS DESCRIBED AS UNEVEN AND MODERATE. THE GLOBAL RECOVERY. IS THAT HOW YOU SEE IT?
FISCHER: YEAH. IT'S VERY UNEVEN AND IT'S GROWING. BUT IT'S NOT GROWING SPECTACULARLY.
EISEN: UNITED STATES IS THE BRIGHT SPOT OR AT LEAST WAS THE BRIGHT SPOT. BUT CURRENT ECONOMIC DATA ISN'T SHOWING ALL OF THAT OPTIMISM. IS IT JUST TEMPORARY? DO YOU EXPECT A REBOUND HERE WHEN THE WEATHER IMPROVES?
FISCHER: WELL THERE IS DEFINITELY A REBOUND UNDERWAY ALREADY. WE'LL SEE AT WHAT SPEED IT PROCEEDS. BUT THE FIRST QUARTER WAS POOR. THAT SEEMS TO BE A NEW SEASONAL PATENT. IT'S BEEN THAT WAY FOR ABOUT FOUR OF THE LAST FIVE YEARS.
EISEN: BECAUSE THE WINTERS HAVE BEEN SO COLD.
FISCHER: YEAH.
EISEN: SO DOES THAT AFFECT THE TRAJECTORY OF WHAT THE FED IS GOING TO DO OR NOT DO THIS YEAR?
FISCHER: WELL, IT DEPENDS HOW QUICKLY WE COME OUT. I MEAN, IF YOU LOOK AT LAST YEAR, WE HAD NEGATIVE GROWTH IN THE FIRST QUARTER. AND THEN SPECTACULAR GROWTH WHICH MADE UP FOR THAT. AND WE DON'T KNOW WHAT'S GOING TO HAPPEN IN THE SECOND QUARTER HERE YET.
EISEN: BUT THE EXPECTATION?
FISCHER: WELL, CERTAINLY A RECOVERY. WHETHER IT WILL BE SPECTACULAR OR JUST MODERATE IS HARD TO SAY NOW.
EISEN: IT DOES SEEM LIKE FROM WHAT WE HEARD FROM VARIOUS FED PRESIDENTS AND FED OFFICIALS, THAT THEY ARE ITCHING TO RAISE INTEREST RATES. IS THAT TRUE? YOU HAVE THIS SENSE THAT IT IS TIME?
FISCHER: WELL, I MEAN, MOST PEOPLE THINK IT WILL HAPPEN THIS YEAR, BUT YOU DON'T WANT TO GET A LOT MORE DEFINITE THAN THAT. IT DEPENDS ON HOW THE ECONOMY DEVELOPS.
EISEN: ARE YOU FEARFUL OF NOT RAISING INTEREST RATES SOONER THAN LATER?
FISCHER: I DON'T THINK FEARFUL IS THE RIGHT WORD. WE'LL TRY AND DO IT AT THE BEST POSSIBLE TIME AND WE WOULD LIKE TO SEE THE ECONOMY BEGINNING TO GROW AGAIN. AND GROW AT A DECENT RATE. WE WOULD LIKE TO SEE UNEMPLOYMENT CONTINUING TO COME DOWN, AND SOME SIGNS THAT INFLATION IS GETTING CLOSE TO THE 2% TARGET, IS HEADING TOWARDS THE 2% TARGET.
EISEN: DO YOU THINK THAT THE INFLATION WILL HIT THE 2% TARGET BY THE TIME IT IS TIME TO RAISE INTEREST RATES?
FISCHER: NO. THE REQUIREMENT IS THAT WE'LL BE MOVING IN THAT DIRECTION. WE'LL HAVE REASONABLE BASIS FOR BELIEVING WE ARE MOVING IN THAT DIRECTION.
EISEN: OPTIMISTIC ABOUT THE WAGE GROWTH THAT WE ARE STARTING TO SEE? IT'S LITTLE. IT'S NOT ENOUGH.
FISCHER: YEAH, YOU KNOW, THERE ARE MORE SIGNS EVERY DAY. LOTS OF PAPERS COME THROUGH MY COMPUTER EXPLAINING THAT THIS IS THE TURNING POINT RIGHT NOW. BUT THEY HAVE BEEN COMING FOR AWHILE.
EISEN: WHEN IT COMES TO WAGES.
FISCHER: YEAH.
EISEN: LET ME PUT IT THIS WAY. ARE YOU FEARFUL OF RAISING INTEREST RATES?
FISCHER: WELL, YOU ALWAYS HAVE TO TAKE ACCOUNT OF THE FACT YOU MAY BE MAKING A MISTAKE ON ONE SIDE OR THE OTHER. SO WE HAVE TO ASK WHAT WILL GO WRONG. I SAY THAT IF WE GET THIS IN PROPORTION, WE ARE GOING TO BE CHANGING MONETARY POLICY FROM THE MOST EXTREMELY EXPANSIONARY WE'VE BEEN ABLE TO DO IN ALL OF HISTORY TO AN EXTREMELY EXPANSIONARY MONETARY POLICY. THE INTEREST RATE IS SCHEDULED TO GO UP IF IT GOES UP BY .25%. SO WE WON'T BE BETWEEN 0 AND .25%, WE WILL BE BETWEEN .25% AND 0.50%. IF WE HAD NOT GONE TO ZERO, THAT WOULD BE THE LOWEST IT'S EVER BEEN.
EISEN: WHAT IS A 10-YEAR YIELD BELOW 2% SIGNAL TO YOU?
FISCHER: IT SIGNALS IN PART THE FACT THAT THE MARKETS ARE WAITING TO SEE WHAT WE DO. AND I THINK WHEN THEY GET CONVINCED THAT WE ARE GOING TO BE MOVING, BEGIN MOVING THE INTEREST RATE GRADUALLY TO WHERE IT WILL BE IN THE LONG RUN, WE'LL PROBABLY SEE A REACTION.
EISEN: DON'T YOU THINK THE CURRENCY MARKET IS CONVINCED THOUGH?
FISCHER: THE CURRENCY MARKET IS CONVINCED, BUT THERE ARE TWO SIDES TO THE CURRENCY MARKET. THE DOMESTIC SIDE OF THAT MARKET SEEMS NOT YET CONVINCED PERHAPS OF WHEN WE ARE GOING TO MOVE. WE DON'T KNOW. SO WE LOOK AT WHAT THEY THINK.
EISEN: BUT YOU HAVE TO BE TAKING THE DOLLAR STRENGTH INTO ACCOUNT RIGHT NOW WHEN IT COMES TO THAT DECISION.
FISCHER: WE'VE GOT TWO GOALS. ONE IS UNEMPLOYMENT, MAXIMUM EMPLOYMENT, WHICH IS LOW UNEMPLOYMENT, AND THE OTHER IS INFLATION AT 2%. IF THE REST OF THE WORLD IS WEAKER AND THE DOLLAR IS STRENGTHENING, THEN WE'LL SEE SOME IMPACT ON GROWTH. SO BECAUSE OF ITS IMPACT ON THE DOMESTIC ECONOMY, YEAH, WE TAKE IT INTO ACCOUNT. BUT WE DON'T SIT AROUND SAYING THE ECONOMY IS WEAK BECAUSE OF THAT.
EISEN: BUT ISN'T THE ECONOMY WEAKENING BECAUSE OF THE U.S. DOLLAR?
FISCHER: THE DOLLAR IS ONE OF MANY FACTORS AFFECTING THE WAY THE ECONOMY'S BEHAVING.
EISEN: WHAT ABOUT THIS IDEA THAT MONETARY POLICY IS VERY UNCOORDINATED RIGHT NOW. THE FEDERAL RESERVE IS PREPARING AN INTEREST RATE INCREASE AT THE SAME TIME THAT EVERYONE ELSE ALMOST IS GOING THE OPPOSITE DIRECTION. AS A CENTRAL BANKER, THAT HAS TO CONCERN YOU.
FISCHER: THERE ARE LOTS OF DISCUSSIONS ABOUT WHETHER IT'S BETTER FOR EVERYBODY TO BE COORDINATED, AND IF EVERYBODY WAS ALWAYS COORDINATED AND GROWING NICELY, THEN COORDINATION WOULD BE GREAT. IF WE ARE GROWING AND THE REST OF THE WORLD IS IN TROUBLE, I DON'T THINK WE WANT TO COORDINATE DOWN. SO WE'LL BE HAPPY IF THEY COORDINATE BY INCREASING THEIR GROWTH RATES.
EISEN: BUT YOU COULD HOLD OFF.
FISCHER: WELL, WE COULD HOLD OFF, BUT THAT WOULD SAY WE ARE TAKING A DIMMER VIEW OF OUR GROWTH AND INFLATION THAN WE ACTUALLY ARE.
EIESN: IT'S BEEN A VERY EXCITING DAY ON THE FLOOR OF THE STOCK EXCHANGE. WE JUST WATCHED PARTY CITY OPEN UP, IPOs, THERE IS A BUOYANCY IN THE MARKETS RIGHT NOW. DO YOU SEE IT AS A DISCONNECT, PERHAPS, OF WHAT IS GOING ON IN THE EQUITY MARKET TO THE FUNDAMENTALS OF THE ECONOMY?
FISCHER: WELL, THERE WERE LOTS OF COMPLAINTS WHEN THE MARKETS WERE VERY STEADY AND THERE WASN'T MUCH VOLATILITY AND THE VIX WAS LOW AND ALL THAT. WE ARE ARTIFICIALLY KEEPING THE MARKETS STEADY. NOW THERE IS A LOT MORE VOLATILITY. AND COMPLAINTS ABOUT TOO VOLATILE.
EISEN: ARE THE MARKETS TOO RELIANT ON THE SUPER EASY MONETARY POLICY FROM THE FEDERAL RESERVE?
FISCHER: WELL, WE EXPECT THAT THE MARKETS LOOK AHEAD SOMEWHAT. SO I THINK – I HOPE THAT THEY ARE TAKING INTO ACCOUNT THAT THE FED AT SOME POINT IS LIKELY TO RAISE THE INTEREST RATE, AND THEY CAN'T DEPEND ON CURRENT SITUATIONS CONTINUING FOREVER OR EVEN PROBABLY BEYOND THE END OF THIS YEAR.
EISEN: ONE THING THAT HAS BEEN PROPELLING EQUITIES IN PART IS THE SHARE BUYBACKS IN A RECORD AMOUNT. MORE THAN A TRILLION LAST YEAR, ANOTHER 200 BILLION PLUS ANNOUNCED THIS YEAR. IS THAT HURTING OUR ECONOMY THAT INSTEAD OF INVESTING IN THEIR LONG-TERM BUSINESSES, BUSINESSES ARE BUYING THEIR OWN STOCK?
FISCHER: OBVIOUSLY, WE WOULD LIKE TO SEE MORE INVESTMENT. WHETHER IT'S THOSE COMPANIES WHICH ARE GENERATING CASH THAT SHOULD BE DOING THE INVESTMENTS IS ANOTHER ISSUE. SO WE HOPE EACH COMPANY IS FIGURING OUT HOW TO MANAGE ITSELF BEST WITH REGARD TO INVESTMENTS AND DISTRIBUTION OF REVENUES.
EISEN: BUT YOU NEED TO SEE MORE.
FISCHER: WE WOULD LIKE TO SEE MORE INVESTMENT, YES.
EISEN: WANT TO ASK YOU ABOUT EUROPE BECAUSE THAT WAS A LAGGARD. COMING TO THIS IMF WORLD BANK MEETING, ALL OF A SUDDEN, THE OUTLOOK HAS BRIGHTENED FOR EUROPE. DO YOU SEE THAT IMPROVEMENT IN THE ECONOMY THERE?
FISCHER: YES. AND FIRST OF ALL, LIKE US, THEY HAVE THE IMPACT OF THE LOWER PRICE OF ENERGY AND GASOLINE.
EISEN: AND THEY HAVE A CHEAP EURO.
FISCHER: AND NOW THEY HAVE DONE WHAT EVERYBODY TOLD THEM TO DO FOR A VERY LONG TIME. THEY ARE DOING QE AND IT'S FAR MORE SUCCESSFUL AT THIS POINT THAN THE GENERAL VIEW HAD BEEN BEFORE THEY STARTED. SO YEAH, THEY'VE GOT SOME WIND IN THEIR SAILS.
EISEN: AND HERE WE ARE TALKING ABOUT GREECE AGAIN. IS THAT A THREAT TO THEIR NASCENT ECONOMIC RECOVERY?
FISCHER: WELL, THEY'VE DONE A LOT SINCE THE PROBLEM FIRST BEGAN TO, I CAN'T SAY INOCULATE. YOU CAN'T BE TOTALLY INOCULATED. BUT THEY'VE DONE A LOT AND THEY HAVE A VERY GOOD PROBABILITY OF BEING ABLE TO DEAL WITH THIS. IT WOULD BE A BAD THING FROM THE VIEW POINT OF THE FUTURE OF EUROPE AND SO FORTH IF THAT WERE TO HAPPEN. IT WOULD ALSO BE A PROBLEM FOR GREECE. IT'S GOING TO BE VERY DIFFICULT TO DEAL WITH IF IT HAPPENS. BUT IT LOOKS LESS PROBLEMATIC THAN IT DID FIVE YEARS AGO.
EISEN: YET, YOU ARE NOT SEEING CONTAGION IN THE MARKETPLACE.
FISCHER: YEAH, THE TROUBLE WITH ALL THESE PHENOMENA THAT YOU DON'T SEE IS THEY CAN WAKE UP ONE MORNING. SO, YOU HAVE TO TAKE ACCOUNT OF THE RISKS. AND YOU CAN'T RULE IT OUT. AND ON THE OTHER HAND, SO FAR, SO GOOD.
EISEN: WE MENTIONED THAT THEY WERE GETTING A BOOST FROM THE WEAK EURO, WHICH CONTINUES TO WEAKEN. AT WHAT POINT DO YOU SAY ENOUGH IS ENOUGH? WE ARE ALREADY RIGHT NEAR PARITY. IT'S BEEN A TREMENDOUS FALL.
FISCHER: WELL, THERE IS AN INTERNATIONAL AGREEMENT. IF CURRENCIES MOVE AS A RESULT OF MEASURES THAT ARE CLEARLY UNDERTAKEN TO STRENGTHEN THE DOMESTIC ECONOMY, THAT'S ACCEPTABLE. IF CURRENCIES MOVE BECAUSE SOMEBODY'S MANIPULATING THE FOREIGN EXCHANGE MARKET –
EISEN: BUT THEY'RE NOT.
FISCHER: BUT THEY'RE NOT. THIS IS A SIDE EFFECT. IT WILL HAVE SOME IMPACT ON US. IT IS HAVING SOME IMPACT ON US. BUT IF YOU ASK WHETHER WE WOULD RATHER HAVE A EUROPE THAT IS GROWING AT A REASONABLE RATE AND SLIGHTLY MORE TROUBLE WITH THE EXCHANGE RATE, OR EXCHANGE RATE IS WONDERFUL AND EUROPE IS IN THE DUMPS, WE WOULD TAKE A GROWING EUROPE ANY TIME.
EISEN: AND FINALLY, YOU HAVE BEEN AT THE FED ALMOST A YEAR AGO NOW. HARD TO BELIEVE. YOU JOINED AT A PRETTY CRITICAL AND INTERESTING TIME. WHAT HAS BEEN MOST SURPRISING TO YOU?
FISCHER: WELL, I HAD TO GET USED TO A NEW CENTRAL BANK AND ONE WHICH IS FAR MORE IMPORTANT IN THE GLOBAL ECONOMY THAN THE ONE I'VE BEEN IN BEFORE. THE SURPRISES HAVE BEEN MOSTLY POSITIVE. THAT IS QUALITY OF THE STAFF IS PHENOMENALLY GOOD. THE DISCUSSIONS IN THE WARD ARE VERY, VERY SUBSTANTIVE. AND IT'S A COMPLICATED PLACE. AND I THINK I'M BEGINNING TO UNDERSTAND IT.
EISEN: ALRIGHT. THANK YOU VERY MUCH, STANLEY FISCHER, FOR TAKING THE TIME AND SPEAKING WITH US HERE ON CNBC. STANLEY FISCHER OF COURSE IS THE VICE CHAIRMAN OF THE FEDERAL RESERVE. FORMER GOVERNOR OF THE BANK OF ISRAEL.
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