When: Today, Monday, Oct. 1, 2012
Where: CNBC’s “Squawk Box”
Following are excerpts from the unofficial transcript of a CNBC EXCLUSIVE interview with Federal Reserve Bank of Chicago President Charles Evans today on CNBC’s “Squawk Box.”
Following are links to videos of the interview: http://video.cnbc.com/gallery/?video=3000118604 and http://video.cnbc.com/gallery/?video=3000119465.
All references must be sourced to CNBC.
Evans on Shoring Up Labor Market Conditions
EVANS: WHAT WE'RE CURRENTLY EMBARKING UPON WITH INCREASING OUR LONG DURATION ASSETS ON OUR BALANCE SHEET TO THE TUNE OF $85 BILLION PER MONTH WE'RE LOOKING FOR SUBSTANTIAL IMPROVEMENT IN LABOR MARKET CONDITIONS. FOR ME, THAT SEEMS LIKE WE OUGHT TO BE SEEING 200,000 INCREASE IN PAYROLL EMPLOYMENT PER MONTH, MAYBE A LITTLE HIGHER THAN THAT FOR ABOUT SIX MONTHS REALLY. WE OUGHT TO SEE GROWTH THAT IS ABOVE TREND, WHICH SUPPORTS THAT CONTINUING SUBSTANTIAL IMPROVEMENT IN LABOR MARKET CONDITIONS.
Evans on Growth Forecast
EVANS: MY FORECAST HAS UNEMPLOYMENT COMING DOWN TO THE 7% RANGE BY THE END OF 2014, WHICH IS ANOTHER REASON WHY WE SHOULD BE ACCOMMODATIVE.
LIESMAN: WHEN DO WE GET THAT ABOVE TREND GROWTH?
EVANS: WELL, DURING THAT PERIOD TO GET THE UNEMPLOYMENT RATE TO CONTINUE TO MOVE DOWN WE WOULD BE SEEING ABOVE TREND GROWTH. SO WE WOULD BE SEEING GROWTH NEXT YEAR, 2 1/2- 2 3/4, BUT AFTER THAT ABOVE 3 PERCENT.
Evans on Credit
EVANS: I THINK TO THE EXTENT THAT YOU GET MORE PEOPLE REFINANCING AND HAVING THE OPPORTUNITY, TO THE EXTENT THAT SMALL BUSINESS PEOPLE FIND THE ENVIRONMENT EVEN MORE ATTRACTIVE FOR THEM TO BE ABLE TO BORROW. REMEMBER BANKS ARE LOOKING FOR GOOD QUALITY CREDITOR-- CREDITS IN ORDER TO MAKE THESE LOANS TO THE EXTENT THAT WE START TO IMPROVE THINGS, THEY'LL BE ABLE TO DO THAT AND THINGS WILL REALLY START TO BURST FORWARD I BELIEVE.
Evans on Inflation
EVANS: 2% IS OUR LONG RUN OBJECTIVE FOR INFLATION. I DON'T THINK WE'VE DONE A GOOD ENOUGH JOB OF DESCRIBING OUR ATTITUDES ABOUT INFLATION ABOVE 2% OR BELOW 2%. WE WANT TO AVERAGE 2% BUT AT THE MOMENT WE ARE UNDERRUNNING THAT. I DON'T SEE THE INFLATIONARY PRESSURES.
Evans on Asset Purchases
EVANS: I FRANKLY THINK IT'S GOING TO TAKE ALMOST A YEAR IN ORDER TO SEE THE TYPE OF IMPROVEMENT IN LABOR MARKETS THAT I'M EXPECTING, JUST GETTING THROUGH THE FIRST HALF OF NEXT YEAR WITH THE HEADWINDS THAT WE'RE FACING, I THINK THAT IT'S PROBABLY LATER IN 2013 THAT WE WOULD GET THERE, SO IN MY OPINION, WE'D CONTINUE WITH THOSE ASSET PURCHASES UNTIL WE SEE PAYROLL EMPLOYMENT MORE LIKE 200-250,000.
LIESMAN: SO YOU'RE SAYING CONTINUE AT 85 BILLION INTO ALL OF 2013 WOULD BE YOUR RECOMMENDATION?
EVANS: THIS IS MY RECOMMENDATION.
Evans on $85 Billion
EVANS: IF YOU GO FROM A PERIOD WHERE YOU'VE GOT $85 BILLION BEING ADDED TO LONG DURATION ASSETS TO ONE WHERE IT’S ONLY 40 BILLION, WELL THAT'S A STEP DOWN IN WHAT YOU'RE DELIVERING. IS THAT CONSISTENT WITH SUBSTANTIAL IMPROVEMENT IN LABOR MARKETS?
LIESMAN: AND WOULD IT BE ALL MORTGAGES OR WOULD IT BE MORTGAGES AND TREASURIES YOU EXPECT?
EVANS: WELL AS WE CONTINUE THROUGH THESE PURCHASES WE'LL LOOK AT THE STATE OF FINANCIAL MARKETS, THEIR ABILITY TO ABSORB IT. WE'VE LOOKED AT IT, IT SHOULDN'T BE A PROBLEM.
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