×

First on CNBC: CNBC Excerpts: Dallas Fed President Robert Kaplan Speaks with CNBC’s Steve Liesman on “Squawk Box” Today

WHEN: Today, Tuesday, May 30th

WHERE: CNBC's "Squawk Box"

Following are excerpts from the unofficial transcript of a FIRST ON CNBC interview with Federal Reserve Bank of Dallas President Robert Kaplan and CNBC's Steve Liesman on "Squawk Box" (M-F, 6AM-9AM ET) today, Tuesday, May 30th. Following are links to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000622784 and http://video.cnbc.com/gallery/?video=3000622783

All references must be sourced to CNBC.

KAPLAN ON RATE HIKES

MY OWN BASE CASE IS TWO MORE RATE HIKES FOR THE REMAINDER OF 2017. WE'VE ALREADY DONE A THIRD RATE HIKE IN MARCH. I THINK THAT ANY REMOVALS OF ACCOMMODATION SHOULD BE DONE GRADUALLY AND PATIENTLY. IN ADDITION, I THINK IN THE NEAR FUTURE WE OUGHT TO BE ANNOUNCING PLANS AND OUR SPECIFIC PLANS FOR HOW TO LET THE BALANCE SHEET BEGIN TO RUN DOWN, AND I THINK WE SHOULD BEGIN THE PROCESS AS EARLY AS SOMETIME LATER THIS YEAR.

KAPLAN ON INFLATION

I'M CONCERNED ABOUT THE RECENT WEAKNESS THE LAST COUPLE OF MONTHS IN INFLATION, BUT MY OWN OVERALL VIEW IS, GDP GROWTH IS GOING TO BOUNCE BACK I BELIEVE THE REMAINDER OF THIS YEAR. IT'S BEEN DISAPPOINTING FOR THE FIRST QUARTER. I GUESS THE REVISED NUMBER IS 1.2%. AND THE REASON I THINK THAT IS WE'VE GOT A RELATIVELY STRONG CONSUMER. HOUSEHOLD BALANCE SHEETS ARE IN GOOD SHAPE AND WE NOW HAVE BETTER BUSINESS SPENDING. SO, I STILL BELIEVE WE CAN GROW AT 2% THIS YEAR. IF THAT OCCURS, I BELIEVE THAT WHILE THAT'S SLUGGISH BY HISTORICAL STANDARDS, THAT'S SUFFICIENT GROWTH TO CONTINUE TO TAKE SLACK OUT OF THE LABOR MARKET. AND REGARDING THE INFLATION NUMBERS, EVEN THOUGH THE RECENT NUMBERS HAVE BEEN WEAK, SOME OF IT IS A LITTLE BIT IDIOSYNCRATIC, TELECOMMUNICATION PRICING, BUT I THINK IF YOU'RE GETTING TO A TIGHTER AND TIGHTER LABOR MARKET, MY OWN JUDGMENT IS, WITH A LAG EFFECT, INFLATION PRESSURES ARE BUILDING.

KAPLAN ON HIS FORECAST

I'M GIVING YOU MY FORECAST BASED ON POLICIES I SEE TODAY. HERE'S THE ISSUE, THOUGH, FOR GETTING GREATER GROWTH. TWO THINGS DRIVE GDP. GROWTH IN THE LABOR FORCE, GROWTH IN PRODUCTIVITY. SO THE PROBLEM IS LABOR FORCE GROWTH IS VERY SLUGGISH. AND MY OWN JUDGMENT, OUR ECONOMISTS AT THE DALLAS FED THINK IT'S GOING TO CONTINUE TO BE SLUGGISH FOR THE NEXT TEN YEARS BECAUSE POPULATION IS AGING AND LABOR FORCE GROWTH THEREFORE IS SLOWING.

KAPLAN ON GDP

SOME OF THE DISCUSSIONS ABOUT HEALTH CARE REFORM COULD AFFECT SIGNIFICANT PERCENTAGE OF CONSUMERS AND THE PROPENSITY TO SPEND VERSUS SAVE. IMMIGRATION REFORM, IF WE WANT TO GROW THE WORKFORCE, IT COULD ACTUALLY BE HURTFUL TO THAT. IT MAY ALSO AFFECT SPENDING HABITS OF IMMIGRANTS IN THIS COUNTRY. SO I THINK THE NET EFFECT THAT BOTH OF THESE POLICIES IS STILL UNCERTAIN. AND ON TERMS OF TAX REFORM, IF IT'S TAX REFORM, I THINK THAT COULD BE HELPFUL. IF IT'S A TAX CUT FINANCED BY INCREASE IN THE DEFICIT, MY CONCERN IS THAT MAY GIVE A SHORT-TERM BUMP TO GDP GROWTH, BUT NOT A SUSTAINABLE BUMP TO GDP.

KAPLAN ON THE BOND MARKET

I THINK THE BOND MARKET IS SAYING IS THE OUTLOOK FOR ECONOMIC GROWTH IS SLUGGISH. NOT INCONSISTENT WITH 2%, BUT IT'S NOT SAYING THAT THERE'S A LOT OF UPSIDE FROM THAT. AND I THINK THE OTHER THING YOU'RE SEEING IS BECAUSE OF SOME GEOPOLITICAL ISSUES THAT WE'VE HAD.

About CNBC:

With CNBC in the U.S., CNBC in Asia Pacific, CNBC in Europe, Middle East and Africa, and CNBC World, CNBC is the recognized world leader in business news and provides real-time financial market coverage and business information to more than 385 million homes worldwide, including more than 94 million households in the United States and Canada. CNBC also provides daily business updates to 400 million households across China. The network's 15 live hours a day of business programming in North America (weekdays from 4:00 a.m. - 7:00 p.m. ET) is produced at CNBC's global headquarters in Englewood Cliffs, N.J., and includes reports from CNBC News bureaus worldwide. CNBC at night features a mix of new reality programming, CNBC's highly successful series produced exclusively for CNBC and a number of distinctive in-house documentaries.

CNBC also has a vast portfolio of digital products which deliver real-time financial market news and information across a variety of platforms including: CNBC.com; CNBC PRO, the premium, integrated desktop/mobile service that provides live access to CNBC programming, exclusive video content and global market data and analysis; a suite of CNBC mobile products including the CNBC Apps for iOS, Android and Windows devices; and additional products such as the CNBC App for the Apple Watch and Apple TV.

Members of the media can receive more information about CNBC and its programming on the NBCUniversal Media Village Web site at http://www.nbcumv.com/programming/cnbc.

For more information about NBCUniversal, please visit http://www.NBCUniversal.com.