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CNBC Exclusive: CNBC Excerpts: Federal Reserve Bank of San Francisco President John Williams Speaks with CNBC's Steve Liesman Today

WHEN: Today, Monday, May 11th

WHERE: CNBC's "Squawk on the Street"

Following are excerpts from the unofficial transcript of a CNBC EXCLUSIVE interview with John Williams, Federal Reserve Bank of San Francisco President, on CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET) today. Following are links to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000378479 and http://video.cnbc.com/gallery/?video=3000378493.

All references must be sourced to CNBC.

WILLIAMS ON YEAR'S MOMENTUM

I think what we're seeing is pretty steady job gains, improving labor market, unemployment coming down, other broader measures of unemployment also coming down; so I see it as a positive sign and a sign that we have a good momentum going through this year.

WILLIAMS ON GDP

Q1 weakness in GDP was I think a big anomaly. There's a lot of issues you've talked about those yourself. You know we've seen this pattern over years that Q1 GDP growth has been a lot weaker than the rest of the year. So we do look at a lot of other indicators. I do expect growth to bounce back in the second quarter in the fact that we've seen good employment numbers and other indicators.

WILLIAMS ON UNEMPLOYMENT

Given the data we've seen, given my forecast, I expect unemployment to be down to 5% or even lower than that by the end of the year.

WILLIAMS ON INFLATION

We're trying to get 2% inflation. We haven't seen that in a number of years. There are a number of factors holding inflation down right now including the stronger dollar and the fact that the economy is still not quite at full strength. So it's really to my mind having that confidence that we are in a position that we'll see inflation move back to our 2% target in the next couple of years.

WILLIAMS ON MARKET VALUES

Well I think they are, you know, high. Of course financial economist can debate this, but I think the message I took away from this is one of the reasons there high is that long-term yields are very low. We know that both in the United States and globally. That's a factor that does push up equity prices and other asset prices. So I really see this as being more a reflection of where globally long-term rates are and returns are and that pushes stock market up and other financial markets up.

WILLIAMS ON FORECAST

A year from now, yes, we will have unemployment below 5%. Broader measures of unemployment or underemployment will be down to more normal levels like we've seen in other good economic times. Inflation will be heading back to 2% and yes rates will be moving up.

WILLIAMS ON RATE HIKES

The decisions about whether the FOMC will or will not do will depend on the committee, the discussions and the decisions behind those meetings. So I'm not going to speculate on when that's going to be. My personal preference is that we don't have the most telegraphed policy decisions in history like we did in 2004. I do believe that the data dependence is what we should be doing. We should be coming together every six weeks discussing what the outlook looks like and what the right appropriate policy decisions at that meeting are and then adjusting policy going forward.

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