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WHEN: Today, Thursday, January 15th
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with CNBC's Steve Liesman and IMF Managing Director Christine Lagarde live from IMF Headquarters in Washington, D.C., during CNBC's "Fast Money Halftime Report" today. Following are links to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000346912, http://video.cnbc.com/gallery/?video=3000346914 and http://video.cnbc.com/gallery/?video=3000346915.
All references must be sourced to CNBC.
MELISSA LEE: MEANTIME, IMF MANAGING DIRECTOR CHRISTINE LAGARDE IS LIVE IN D.C. WITH OUR OWN STEVE LIESMAN FOR AN EXCLUSIVE INTERVIEW. STEVE TAKE IT AWAY.
STEVE LIESMAN: MELISSA, THANKS VERY MUCH. I'M HERE WITH THE IMF MANAGING DIRECTOR CHRISTINE LAGARDE, WHO COULD BE SAID TO BE VERY INTERESTING TIMES. THANK YOU FOR JOINING US, MADAM LAGARDE.
CHRISTINE LAGARDE: PLEASURE.
LIESMAN: I HAVE TO ASK ABOUT THE NEWS THIS MORNING. THE SWISS NATIONAL BANK LIFTING THE FLOOR GETTING RID OF THE FLOOR ON THE SWISS FRANC. IS THAT THE RIGHT WAY TO DO POLICY? A SURPRISE ACTION BY A CENTRAL BANK THAT ROCKS MARKETS GLOBALLY?
LAGARDE: WELL, CLEARLY WHAT IS NEEDED IS COOPERATION. COLLABORATION, COMMUNICATION, I'VE ADVOCATED THAT AND THE IMF IS VERY STRONGLY SUPPORTING FOR INSTANCE, THE POLICY OF JANET YELLEN WHO IS COMMUNICATING VERY CLEARLY. THIS WAS A BIT OF A SURPRISE. I WOULD HOPE THAT IT WAS COMMUNICATED WITH OTHER COLLEAGUES FROM CENTRAL BANKS. I'M NOT SURE IT WAS. AND I'M GOING TO RESERVE JUDGMENT ON THE PERTINENCE OF THAT MOVE BECAUSE WE HAVE NOT DISCUSSED IT WITH GOVERNOR JORDAN AND I WOULD CERTAINLY WANT TO UNDERSTAND EXACTLY WHERE HE'S COMING FROM. I THINK I UNDERSTAND WHY HE'S DOING IT, BUT TALKING ABOUT IT WOULD BE GOOD.
LIESMAN: IT BEGS THE QUESTION, WHEN YOU OPEN UP THE IMF'S WEB PAGE IT SAYS THAT ONE OF THE THINGS THAT YOU ARE RESPONSIBLE FOR IS GLOBAL EXCHANGE RATE STABILITY. WERE YOU CONTACTED ABOUT THIS? DID THE IMF KNOW THIS ACTION WAS GOING TO HAPPEN?
LAGARDE: GOVERNOR JORDAN DID NOT CONTACT ME, WHICH DOESN'T MEAN TO SAY HE HAS NOT CONTACTED SOMEBODY ELSE IN THE ORGANIZATION. I FIND IT A BIT SURPRISING THAT HE DID NOT CONTACT ME, BUT, YOU KNOW, WE'LL CHECK ON THAT. BY THE WAY THE IMF USED TO BE THE REFEREE OF ANY CURRENCY VARIATION. THAT HAS CHANGED OVER TIME. CLEARLY WITH THE FLOATING RATES THAT WE'RE SEEING IN MANY, MANY ADVANCED ECONOMIES AROUND THE WORLD. BUT STILL.
LIESMAN: UNDERSTOOD. THE QUESTION I THINK INVESTORS ARE ASKING THIS MORNING, DOES THIS PER SAGE A TIME OF GREATER GLOBAL EXCHANGE RATE AND MONETARY POLICY FLUCTUATIONS THROUGHOUT THE WORLD?
LAGARDE: YOU KNOW, AS THE SITUATION EVOLVES AND AS WE'RE SEEING THIS WHAT I CALL THE ASYNCHRONOUS MONETARY POLICIES WITH THE FEDS EXITING UNCONVENTIONAL MONETARY POLICY AND COMING BACK TO MORE TRADITIONAL INTEREST RATE VARIATIONS. AND AS THE ECB, THE BANK OF JAPAN, THE BANK OF ENGLAND ARE EITHER MAINTAINING OR ENTERING THE FRAY, WE WILL SEE MORE VOLATILITY. THERE IS NO QUESTION ABOUT THAT. VOLATILITY OF CAPITAL FLOWS, VOLATILITY OF EXCHANGE RATE CURRENCIES, AS WE ARE SEEING IT NOW.
LIESMAN: ARE YOU CONCERNED THAT CURRENCIES CAN BE USED AS A WEAPON, AS A PRIMARY MEANS FOR COUNTRIES TO LIFT THEMSELVES UP? THAT IT BECOMES A WAR OF CURRENCIES BETWEEN COUNTRIES HERE?
LAGARDE: YOU KNOW, THERE WAS TALK ABOUT A CURRENCY WAR BACK THREE YEARS AGO. WE ARE NOT HEARING THOSE WORDS ANYMORE, NOT THAT MUSIC. AND I WOULD CERTAINLY HOPE THAT WE DO NOT HAVE CURRENCY WARS AND THAT COUNTRIES AND THEIR CENTRAL BANKS IN PARTICULAR REFRAIN FROM COMPETITIVE DEVALUATION.
LIESMAN: I WOULD LIKE TO DRILL DOWN A LITTLE BIT ON YOUR EXPECTATIONS FOR MONETARY POLICY IN THE KEY AREAS OF THE WORLD. IS IT STILL YOUR EXPECTATION, GIVEN WHAT'S HAPPENING WITH INTEREST RATES IN THE UNITED STATES, WHAT'S HAPPENING WITH INFLATION AND THE DECLINE IN OIL PRICES, DOES THIS STILL SEEM LIKE THE RIGHT MOVE FOR THE FEDERAL RESERVE TO RAISE INTEREST RATES THIS YEAR?
LAGARDE: THAT WILL BE A JUDGMENT THAT THEY WILL MAKE. AND YOU KNOW,GIVEN THE COMPLEXITY OF THE INDICATORS THEY HAVE, ON BOTH THE EMPLOYMENT/UNEMPLOYMENT ACCOUNT AND ON THE INFLATION EXPECTATIONS, NOMINAL CORE EXPECTED, I THINK THAT THEY WILL DO A FINE JOB AT REALLY LOOKING INTO ALL OF THOSE AND MAKING THE RIGHT DECISION AT THE RIGHT TIME.
LIESMAN: IS THAT STILL YOUR EXPECTATION, THOUGH?
LIESMAN: PREVIOUSLY – THAT IT WOULD BE A YEAR OF RAISING RATES.
LIESMAN: LET'S TALK ABOUT EUROPE.
LAGARDE: YES. AND I'M SAYING THAT BECAUSE THE U.S. ECONOMY IS CLEARLY DOING WELL AND IS CURRENTLY A BIG ENGINE FOR GROWTH, YOU KNOW, WHETHER YOU LOOK AT GROWTH, WHETHER YOU LOOK AT EMPLOYMENT INDICATORS, WHETHER YOU LOOK AT THE HOUSING SECTOR, WHETHER YOU LOOK AT THE BANKING RESTRUCTURING THAT HAS TAKEN PLACE. A LOT OF VERY, VERY POSITIVE SIGNALS AND WE BELIEVE THAT 2015 WILL BE A GOOD YEAR FOR THE U.S. ECONOMY.
LIESMAN: I'M GUESSING THAT'S THE ONLY THING YOU – ONLY COUNTRY YOU CAN SAY IS GOING TO BE A GOOD YEAR FOR. THE WORLD ECONOMIC OUTLOOK IS COMING OUT NEXT WEEK. TELL US WHAT YOUR OUTLOOK IS FOR EUROPE?
LAGARDE: STILL, UNFORTUNATELY –
LIESMAN: LONG SIGH.
LAGARDE: WELL, I WILL MAKE AN EXCEPTION. CERTAINLY THE UK IS, YOU KNOW, CONFIRMING AND STRENGTHENING ITS RECOVERY. BUT IF WE LOOK AT THE EURO AREA IT IS STILL LOW, FRAGILE AND NEEDS TO BE MUCH STRONGER, COHESIVE, MORE BALANCED AND STRUCTURAL REFORMS ARE GOING TO BE ABSOLUTELY NEEDED. STRONGLY.
LIESMAN: THIS IS THE FIRST TIME WE'VE HAD A CHANCE TO TALK TO YOU SINCE JUST A COUPLE DAYS AGO, A EUROPEAN COURT JUDGE ADVOCATE SAID IT WAS OKAY FOR THE EUROPEANS TO BUY SOVEREIGN BONDS. WHAT IS YOUR REACTION TO THAT RULING?
LAGARDE: I'M A FORMER LAWYER, SO I'M WAITING FOR THE FINAL DECISION BY THE EUROPEAN CENTRAL – COURT, EUROPEAN COURT OF JUSTICE, BUT THE ADVOCATE GENERAL IS A STRONG INDICATION OF WHERE THE COURT IS LIKELY TO GO. AND I WOULD SUSPECT THAT IT GIVES GREAT COMFORT TO MARIO DRAGHI AND HIS COLLEAGUES WHEN THEY LOOK AT POTENTIAL ADDITIONAL MEASURES IN TERMS OF QUANTITATIVE EASING. IT SETS A BIT OF A FRAMEWORK.
LIESMAN: AND THOSE ARE MEASURES THAT I BELIEVE THE IMF HAS PUBLICLY SUPPORTED. THE IDEA OF ADDITIONAL SOVEREIGN BOND PURCHASES.
LAGARDE: YES, WE HAVE. YES, WE HAVE.
LIESMAN: LET'S STICK WITH EUROPE JUST FOR ONE MORE ISSUE HERE. IS THERE CONCERN – DO YOU HAVE CONCERN THAT GREECE COULD END UP LEAVING THE EUROPEAN UNION AS A RESULT OF ELECTIONS THAT ARE SCHEDULED THE END OF THIS MONTH?
LAGARDE: MY SENSE IS THAT ONCE THE ELECTIONS ARE DONE AND AS SOON AS A GOVERNMENT IS IN PLACE, WHETHER IT'S COALITION OR NOT, NEGOTIATIONS WILL BEGIN TO ADDRESS THE ECONOMIC SITUATION OF GREECE, NOT TO ADDRESS THE EXIT OF GREECE. AND THAT'S ALL THE SIGNALS THAT WE'RE RECEIVING.
LIESMAN: IS THAT AN AREA OF CONCERN FOR YOU? WHAT WOULD BE THE ECONOMIC IMPLICATIONS OF GREECE LEAVING THE EUROZONE?
LAGARDE: YOU KNOW, IT'S JUST NOT POSSIBLE UNDER THE CURRENT SCHEME AND UNDER THE CURRENT, YOU KNOW, ARTICLES OF THE TREATY OF THE EURO, IF YOU WILL, SO I DON'T SEE THAT HAPPENING.
LIESMAN: JUST A COUPLE MORE AREAS I WANT TO COVER. LOW OIL PRICES, WE HAVE THE 10-YEAR U.S. TREASURY TODAY BELOW 1.8%, AT LEAST IT WAS FOR A WHILE. IS THERE A MASSIVE DEFLATIONARY SIGNAL THAT'S COMING OUT OF MARKETS RIGHT NOW THAT IS CAUSE FOR CONCERN AT THE IMF?
LAGARDE: DEFLATION IS A CAUSE FOR CONCERN AND WE HAVE WARNED AGAIN THAT RISK OF VERY LOW AND SUSTAINABLY LOW INFLATION IN MANY OF THE ADVANCED ECONOMIES FOR AT LEAST A YEAR. WE ARE CLEARLY SEEING IT ACCENTUATED BY THE DECLINE OF THE PRICE OF OIL. AND THERE ARE, AS A RESULT, CURRENCY ADJUSTMENTS RESULTING FROM THAT. BUT YOU KNOW, IT'S ALSO A QUESTION OF OUTPUT. THE CAPACITIES OF SOME OF THE ADVANCED ECONOMIES ARE STILL, YOU KNOW, NOT USED TO FULL POTENTIAL AND FULL EFFECT, WHICH IS WHY WE HAVE THIS STICKINESS OF PRICES.
LIESMAN: BUT ON THAT, DO YOU STILL SEE LOW OIL PRICES AS A BENEFIT FOR THE GLOBAL ECONOMY?
LAGARDE: WE STILL SAY THAT IT IS A NET POSITIVE. BUT WHAT WE ARE SEEING AS WELL IS A GREAT VARIETY ACROSS THE MAP. WHETHER YOU ARE OIL PRODUCERS, OIL EXPORTERS, OIL IMPORTER, WHETHER YOUR CURRENCY IS PEGGED TO THE DOLLAR OR NOT, WHETHER YOU HAVE EDGED AGAINST THE CURRENCY RISK PUTS YOU IN A COMPLETELY DIFFERENT SITUATION. BUT ALL-IN-ALL WE ARE STILL SEEING ON A NET BASIS A POSITIVE OUTCOME FROM THE DECLINE OF OIL PRICES, YES.
LIESMAN: IF YOU DON'T MIND, MADAME LAGARDE, I'D LIKE TO PIVOT TO A PERSONAL ISSUE AS A FRENCH WOMAN, AS A WORLD LEADER, YOUR REACTION TO THE TRAGIC EVENTS IN PARIS THE LAST COUPLE OF WEEKS.
LAGARDE: WELL I WAS, LIKE ALL MY COMPATRIOTS, AND LIKE ALL PEOPLE OF GOODWILL, I WAS DEVASTATED AND HORRIFIED. AND I WAS VERY STRONGLY ENCOURAGED BY WHAT HAPPENED ON SUNDAY AND THIS SHOW OF STRONG SOLIDARITY ACROSS THE WORLD TO DEFEAT THESE EVIL FORCES.
LIESMAN: IS THERE MORE THAT CAN BE DONE ON A GLOBAL BASIS, DO YOU THINK TO REACT TO THESE ISSUES THAT ARE OUT THERE?
LAGARDE: I WOULD CERTAINLY MYSELF ADVOCATE FOR VERY, VERY STRONG AND SUSTAINED MULTILATERALISM. AND YOU KNOW, A COALITION OF ALL OF THOSE WHO SEE TOLERANCE, RESPECT AS KEY VALUES GOING FORWARD. AND IN THAT VEIN, I HOPE THE IMF CAN BE PROPERLY REFORMED TO REPRESENT THE WORLD AND I HOPE THE UNITED STATES WILL ACTUALLY SUPPORT THAT.
LIESMAN: YOU DID HAVE STRONG WORDS FOR THE UNITED STATES TODAY.
LIESMAN: ARE YOU AFRAID IT COULD BACKLASH HERE IN THE UNITED STATES WITH THE WORDS YOU HAD TO SAY IN YOUR SPEECH EARLIER EXCORIATING THE UNITED STATES FOR NOT APPROVING THOSE REFORMS?
LAGARDE: BUT YOU KNOW, I DESPERATELY WANT THE UNITED STATES TO HONOR ITS COMMITMENT AND TO RATIFY THE REFORM SO THAT THERE IS MORE FINANCIAL MEANS AVAILABLE TO RESCUE THE WORLD, TO SUPPORT UKRAINE, TO HELP OUT THOSE COUNTRIES THAT ARE FACING DIFFICULTIES. AND THE IMF MUST REPRESENT THE WORLD. THE U.S. WILL CONTINUE TO HAVE VETO RIGHTS, THE U.S. WILL CONTINUE TO BE AS STRONG AND THE MAIN SHAREHOLDER – THE FIRST ONE – BUT IT HAS TO RATIFY THAT REFORM AND I HOPE IT DOES. I REALLY DO.
LIESMAN: MADAME LAGARDE, THANK YOU SO MUCH FOR YOUR TIME TODAY.
LAGARDE: THANK YOU.
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