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CNBC Exclusive: CNBC Transcript: Federal Reserve Bank of Chicago President Charles Evans Speaks with CNBC’s Steve Liesman on “Squawk Box” Today

WHEN: Today, Friday, November 6th

WHERE: CNBC's "Squawk Box"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Federal Reserve Bank of Chicago President Charles Evans on CNBC's "Squawk Box" (M-F, 6AM-9AM ET) today. Following are links to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000446496 and http://video.cnbc.com/gallery/?video=3000446497.

All references must be sourced to CNBC.

MICHELLE CARUSO-CABRERA: WELCOME BACK TO "SQUAWK BOX." THE FUTURES HAVE BEEN RICOCHETING UP AND DOWN IN THE WAKE OF A VERY STRONG MONTHLY PAYROLL NUMBER. DEEPLY NEGATIVE, THEN WE WENT POSITIVE. WE'RE BACK TO NEGATIVE AGAIN. DOW JONES INDUSTRIAL AVERAGE RIGHT NOW WOULD OPEN LOWER BY 30 POINTS, THE S&P BY 6, AND THE NASDAQ LOWER BY 10. LET'S GET MORE REACTION ON THE JOBS REPORT. STEVE LIESMAN IS IN CHICAGO WITH CHARLIE EVANS, STEVE?

STEVE LIESMAN: YEAH, MICHELLE, IF ONLY WE HAD A POLICYMAKER FROM THE FOMC WHO COULD TELL US WHAT TO THINK ABOUT THIS JOBS REPORT. OH, WAIT, WE DO. CHICAGO FED PRESIDENT CHARLES EVANS. THANKS FOR JOINING US, CHARLIE.

CHARLES EVANS: GOOD MORNING, STEVE, HOW ARE YOU?

LIESMAN: YOU WERE JOKING, DO WE REALLY HAVE TO DO THIS? NOW YOU THINK EVERYBODY KNOWS EXACTLY HOW TO PROCESS THIS JOBS NUMBER?

EVANS: OH, I DIDN'T SAY THAT. I JUST SAID IT WAS A GOOD NUMBER, DEFINITELY. 271, THAT'S A GOOD NUMBER. THREE MONTH AVERAGE, I THINK YOU SAID IT WAS 180. I HAVEN'T SEEN THE DATA VERY CAREFULLY, BUT, YEAH, NO, THAT IS VERY GOOD NEWS. IT SEEMS TO SUPPORT MY OUTLOOK FOR 2016 PRETTY WELL. I'M LOOKING FOR 2.5% GROWTH REAL GDP. YOU KNOW, LITTLE WORRIED ABOUT DOWNSIDE RISK WITH THE WEAK FOREIGN ECONOMY, FINANCIAL RESTRICTIONS A LITTLE HIGHER, THINGS LIKE THAT, BUT NUMBERS LIKE THIS HELP SUPPORT THAT OUTLOOK QUITE WELL.

LIESMAN: THERE WAS A STRONG WAGE GROWTH NUMBER. DOES THIS TELL YOU THAT, PERHAPS, YOU'RE BEGINNING A CYCLE HERE WHERE WAGES ARE GOING TO START TO GROW AND GROW MORE STRONGLY?

EVANS: WELL, YOU KNOW, STRONG WAGE GROWTH WOULD BE A VERY HELPFUL COMPONENT TO, YOU KNOW, MY OUTLOOK AND I THINK ALSO PUSHING INFLATION UP TO 2%, WHICH IS WHAT WE NEED. YOU KNOW, IT'S ONLY ONE NUMBER. I HAVEN'T SEEN THE COMPOSITION OF THIS AND THE OTHER MEASURES HAVE BEEN WEAKER. THEY'VE BEEN IN THE 2 TO 2.25 RANGE. BUT AS UNEMPLOYMENT RATE MOVES DOWN, AND MOVING DOWN TO 5 IS HELPFUL, I THINK THERE PROBABLY STILL IS A LITTLE BIT OF SLACK, BUT YEAH, I WOULD LIKE TO SEE WAGE GROWTH GO UP QUITE A LOT ACTUALLY.

LIESMAN: YOU SAY PROBABLY STILL A LITTLE BIT OF SLACK. IS THAT – THAT'S JUST A LITTLE BIT OF SLACK. DOES THAT –

EVANS: YEAH, I THINK THAT IS RIGHT.

LIESMAN: DOES THAT KIND OF SLACK JUSTIFY ZERO INTEREST RATES?

EVANS: OH, WELL, THAT'S A GOOD QUESTION, RIGHT? I THINK THAT, YOU KNOW, WHEN I SAID MY OUTLOOK WAS 2.5%, THAT IS PREMISED ON STILL FAIRLY ACCOMMODATIVE MONETARY POLICY IN MY OPINION. I WOULD SAY POLICY LOOKS FAIRLY ACCOMMODATIVE RIGHT NOW. I THINK WHAT WE'RE LIKELY TO GET INTO DISCUSSING BEFORE TOO LONG IS WHAT'S THE PATH OF THE RATE INCREASE IS GOING TO LOOK LIKE? YOU KNOW, I AGREE WITH CHAIR YELLEN WHEN IN THE PAST SHE SORT OF SAID THERE'S A LOT OF FOCUS ON ONE MOVE, THE FIRST MOVE. WE NEED TO THINK ABOUT THE ENTIRE PATH BECAUSE THAT'S WHAT'S GOING TO DICTATE HOW ACCOMMODATIVE OR RESTRICTIVE OUR POLICY IS. AND SO I THINK WE NEED TO HAVE COMMUNICATIONS WHICH INDICATE THAT THE PATH IS GOING TO BE GRADUAL.

LIESMAN: I THINK THIS GOES WITHOUT SAYING, BUT JUST CHECKING IF YOU ALSO AGREE WITH CHAIR YELLEN WHO SAID DECEMBER IS A LIVE POSSIBILITY FOR A RATE HIKE.

EVANS: WELL, ABSOLUTELY. I MEAN, WE'VE FOR MANY MEETINGS SAID THAT WE'RE GOING TO GO INTO EVERY MEETING AND KEEP AN OPEN MIND. I'VE GONE IN WITH AN OPEN MIND TO EVERY MEETING. AND SO, THEY'VE BEEN LIVE.

LIESMAN: THE QUESTION CAME UP AFTER THE WORDING IN THE LAST STATEMENT THE CHANGE – THAT TALKED ABOUT, FOCUSED ON THE NEXT MEETING. IS THE DEFAULT POSITION OF THE FEDERAL RESERVE TO HIKE IN DECEMBER? AND DOES THAT – AND WHAT DOES THAT MEAN?

EVANS: LOOK, WE'RE GOING TO GO INTO THE MEETING, WE'RE GOING TO TALK ABOUT THE STANCE OF MONETARY POLICY AND WE'RE GOING TO TALK MORE BROADLY THAN ANY ONE MEETING AND WE'VE INDICATED THAT CONDITIONS LOOK LIKE THEY COULD BE RIGHT FOR AN INCREASE. NOW, LOOK, I'VE SAID FOR, YOU KNOW, QUITE SOME TIME THAT, YOU KNOW, THE REAL SIDE OF THE ECONOMY IS LOOKING A LOT BETTER. WE'VE SEEN SUBSTANTIAL IMPROVEMENT IN THE LABOR MARKET SUPPORTED BY OUR POLICY ACTIONS. AND THE OTHER BRANCH OF THIS IS DO WE HAVE CONFIDENCE IN INFLATION THAT IT'S GOING TO GET UP TO 2%? AND I REALLY THINK THAT THAT'S WHERE MORE OF THE UNCERTAINTY LIES IN TERMS OF POLICY IMPLICATIONS. MY CONTINUED PREFERENCE FOR MORE DELAY OR A SHALLOWER PATH CONTINUES TO BE MY UNCERTAINTY OVER THE FACT THAT INFLATION IS GOING TO GET UP TO OUR 2% OBJECTIVE WITHIN A REASONABLE PERIOD OF TIME.

LIESMAN: AND THEN YOU LOOK THIS MORNING AT WHAT'S HAPPENING WITH THE DOLLAR, WHICH TENDS TO STRENGTHEN WHEN THERE IS TALK ABOUT THE FEDERAL RESERVE TIGHTENING, AND THAT TENDS TO WEAKEN THE INFLATION NUMBERS. IS THE FED CHASING ITS TAIL IN THIS REGARD? THAT EVERY TIME IT TALKS ABOUT A HIKE IT GETS A SPIKE IN THE DOLLAR THAT TENDS TO REDUCE THE INFLATION RATE AND SO IT CAN NEVER GET TO THE HIKE?

EVANS: NO, I DON'T THINK THAT'S WHAT'S GOING ON. I THINK THAT WE'RE KIND OF FORGETTING THAT WHEN POLICY BEGINS TO CHANGE DIRECTIONS AND TIGHTEN, YOU GET A NATURAL TRANSMISSION MECHANISM WHERE INTEREST RATES GO UP, WE PUT MORE PRESSURE ON CONSUMER BORROWING RATES THAT'S SUPPOSED TO DIFFUSE SOMEWHAT STRONGER DEMAND PRESSURES FOR AUTO LOANS, HOME BUYING AND THINGS LIKE THAT. BUSINESS INVESTMENT. NOW, NONE OF THOSE THINGS ARE QUITE – WELL, AUTO SALES ARE REALLY QUITE HIGH, BUT, YOU KNOW, WE'D LIKE TO HAVE STRONGER HOUSING INVESTMENT AND BUSINESS INVESTMENTS. SO WE WANT TO MAINTAIN THE ACCOMMODATIVE STANCE AS WE INCREASE THAT, BUT IT'S NATURAL FOR THE U.S. ECONOMY TO BE AS STRONG AS IT IS TO, YOU KNOW, SEE THOSE TYPES OF RESTRICTIVE PRESSURES. WE WANT TO MAKE SURE IT'S CALIBRATED TO BE CONSISTENT WITH THE STRONG OUTLOOK LIKE I HAVE.

LIESMAN: FROM THE OTHER SIDE, FROM THE DOVISH SIDE, IS THERE A DANGER THAT IF YOU START TO HIKE BEFORE THERE'S SORT OF OBVIOUS MOVEMENT TOWARDS 2% THAT YOU UNDERMINE THE CREDIBILITY OF YOUR OWN TARGET?

EVANS: WELL, I THINK IT'S VERY IMPORTANT THAT WE ALL GO OUT AND TALK ABOUT THE IMPORTANCE OF OUR INFLATION OBJECTIVE. I THINK IT'S IMPORTANT TO MENTION THAT IT'S AN OBJECTIVE THAT IS 2%, WE ARE SUPPOSED TO AVERAGE 2%, IT'S SUPPOSED TO BE SYMMETRIC, WE SHOULDN'T BE BOTHERED IF WE END UP OVERSHOOTING SOME WHAT, AS LONG AS IT'S WELL CONTROLLED – 2, 2.25, 2.5 – I MEAN THAT IS CONSISTENT WITH THE AVERAGE 2% INFLATION RATE GOING FORWARD. YOU KNOW, THE UPS AVERAGE OUT THE MINUSES, BUT WE'VE HAD SIX YEARS AND MORE OF BELOW 2%. WE'VE AVERAGED 1.5%, AND I'M GETTING TOO MANY QUESTIONS, FRANKLY, FROM SMART PEOPLE WHO, AFTER I GIVE THIS TYPE OF COMMENTARY, WE NEED TO GET INFLATION UP. AND THEY GO, HM, I HEAR YOU, BUT WHAT'S REALLY WRONG WITH 1.5%? I THINK WHAT'S WRONG IS WHEN WE SAY WE ARE SUPPOSED TO BE DELIVERING 2%, ALL OF THE FINANCIAL CONDITIONS ARE PREMISED ON THAT. AND WHEN WE DON'T DELIVER 2%, IT IS MORE RESTRICTIVE FOR ANYBODY WHO IS BORROWING. THAT DAMPENS DEMAND AND THAT REENFORCES THE FACT THAT IT COULD BE A CEILING. I DON'T THINK IT'S A CEILING, BUT IF IT WERE A CEILING, WE'D HAVE LESS CAPACITY, LOWER RATES IN MOMENTS WHEN WE REALLY NEEDED TO IF THINGS WERE TO WEAKEN. WE NEED TO PRESERVE OUR ABILITY TO RESPOND TO THE ECONOMY AND INFLATION, WHETHER IT'S TOO WEAK, WHETHER IT'S TOO STRONG.

LIESMAN: SO CHARLIE, HOW WOULD YOU CHARACTERIZE YOURSELF RIGHT NOW, AND THIS IS THE LAST QUESTION HERE, IN TERMS OF A PERSON WHO COULD ACCEPT A RATE HIKE IN DECEMBER WITH A SORT OF, SOME KIND OF PLEDGE OR PROMISE OR FORECAST OF A GRADUAL TIGHTENING THEREAFTER?

EVANS: WELL, LIKE I SAID, I GO IN TO THESE MEETINGS WITH AN OPEN MIND. SO I CAN'T SAY SPECIFICALLY. I WOULD SAY THAT TODAY'S NUMBER WAS A VERY GOOD ONE. I HAVEN'T STUDIED IT VERY CAREFULLY. WE HAVE ANOTHER NUMBER THAT'S GOING TO COME OUT. IT LARGELY SUPPORTS THE OUTLOOK THAT I HAVE, AND THAT'S REALLY THE TEST FOR, YOU KNOW, IS THE ECONOMY PRIME TO TAKE ON BOARD TIGHTER POLICY? BUT I DO THINK THAT THE PATH IS GOING TO BE A VERY IMPORTANT COMPONENT OF UNDERSTANDING, YOU KNOW, WHERE WE'RE GOING AND THE RISK MANAGEMENT.

LIESMAN: CHARLIE, THANKS FOR JOINING US THIS MORNING.

EVANS: THANKS, STEVE.

LIESMAN: CHARLIE EVANS, CHICAGO FED PRESIDENT. BACK TO YOU GUYS.

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