First on CNBC: CNBC Transcript: CNBC's Steve Liesman Sits Down with James Bullard, St. Louis Federal Reserve Bank President, Today
WHEN: TODAY, FRIDAY, JANUARY 4TH
WHERE: CNBC'S "POWER LUNCH"
Following is the unofficial transcript of a FIRST ON CNBC interview with St. Louis Federal Reserve Bank President James Bullard, today on CNBC's "Power Lunch." Following is a link to the video of the interview on CNBC.com: http://video.cnbc.com/gallery/?play=1&video=3000139261. All references must be sourced to CNBC.
LIESMAN: THANKS FOR JOINING ME TODAY JIM BULLARD.
BULLARD: THANKS FOR HAVING ME IT IS A GREAT PLACE TO HAVE THIS.
LIESMAN: SO IT IS THE DAY AFTER WE GOT THE FED MINUTES. THE DAY OF THE JOBS REPORT A LOT OF NEWS TO TALK ABOUT. LET ME ASK YOU ABOUT YOUR TAKE ON THE JOB'S REPORT THIS MORNING.
BULLARD: I THINK IT IS STEADY AS SHE GOES. WE HAVE A REASONABLY GOOD JOBS NUMBER TODAY AND CAME IN LINE WITH EXPECTATIONS. I THINK IS VERY CONSISTENT WITH AN ECONOMY GROWING AT ABOUT 2%, MAYBE A LITTLE BETTER. AND HOPEFULLY WE WILL SEE SOME IMPROVEMENT ON THESE NUMBERS IN 2013.
LIESMAN: THERE'S TWO TESTS FOR FED POLICY. QUANTITATIVE EASING TEST LOOKS LIKE IT IS SUBSTANTIAL IMPROVEMENT IN THE LABOR MARKET. THE TEST FOR THE RAISING THE INTEREST RATE IS 6.5% EMPLOYMENT RATE OR THEREABOUTS. IS THERE, IN YOUR OPINION, SUBSTANTIAL IMPROVEMENT IN THE LABOR MARKET, FROM THIS REPORT?
BULLARD: WELL, I DON'T THINK THERE'S BEEN ENOUGH IMPROVEMENT FROM SEPTEMBER. SO WE TOOK THAT DECISION IN SEPTEMBER. AND WE HAVE ONLY ADD FEW MONTHS HERE. ONE THING I WILL SAY, IS I THINK THAT THE QUANTITATIVE EASING WE ARE DOING NOW STARTING RIGHT ABOUT NOW, IS MORE THAN WHAT WE ARE DOING WITH OPERATION TWIST. SO I THINK IT IS A BIT EASIER POLICY.
LIESMAN: WHY IS THAT?
BULLARD: BECAUSE I THINK OUTRIGHT PURCHASES ARE MORE EFFECTIVE THAN THE TWIST PROGRAM, SO I THINK IT IS A LITTLE BIT EASIER POLICY IN THAT SENSE.
LIESMAN: WE LEARNED YESTERDAY THERE ARE TWO CAMPS AT FEDERAL RESERVE. ONE THINKS THEY OUGHT TO DO QE THROUGH MID-2013. ANOTHER ONE ALL THE WAY THROUGH 2013. WHAT CAMP ARE YOU IN?
BULLARD: YOU KNOW, WHY ARE WE TALKING ABOUT DATES WE'VE TRIED TO GET THE IDEA IS TO HAVE STATE CONTINGENT POLICY. THIS DEPENDS ON THE ECONOMY. SO WHY ARE WE TALKING ABOUT OH, WE WILL DO IT UNTIL SUCH AND SUCH DATE OR SOME OTHER DATE. IT SHOULD BE, IF THE ECONOMY PERFORMS WELL IN 2013, THE COMMITTEE WILL BE IN A POSITION TO THINK ABOUT GOING ON PAUSE WITH ITS BALANCE SHEET POLICY. IF IT DOESN'T DO VERY WELL THEN THE BALANCE SHEET POLICY WILL PROBABLY CONTINUE INTO 2014. THAT'S THE BEAUTY OF DOING IT THIS WAY INSTEAD OF DOING IT BY FIXED DATE AND I THINK THAT THAT'S A BIG ADVANTAGE OVER THIS POLICY OVER THE PREVIOUS POLICY THAT WE HAVE. SO I THINK THAT THE DEBATE – I THINK THE DATE THING IS OUT OF LINE.
LIESMAN: BUT JIM IT IS A GOOD THOUGHT BUT STILL PEOPLE THINK IN TERMS OF, WHEN IS THIS OR THAT --
BULLARD: PLUG IN YOUR FORECAST THEN TELL ME WHAT YOU THINK THE COMMITTEE'S JUDGMENT WILL BE WHEN THERE WILL BE SUBSTANTIAL IMPROVEMENT IN LABOR MARKETS. MYSELF, I THINK THAT UNEMPLOYMENT WILL CONTINUE TO TICK DOWN THROUGH 2013. IF YOU LOOK AT THE LAST THREE YEARS, YOU KNOW, ABOUT .7 PER YEAR ON THE UNEMPLOYMENT RATE. IF WE GOT THAT THIS WEAR, WE WOULD BE AT 7.1% BY THE END OF THE YEAR OR SOMETHING LIKE THAT. YOU KNOW, THAT WOULD BE PROBABLY SUBSTANTIAL IMPROVEMENT AND COMMITTEE COULD THINK ABOUT REMOVING ACCOMMODATION ON THE BALANCE SHEET SIDE OF THE POLICY AT THAT POINT. BUT NOT EVERYBODY ON THE COMMITTEE THINKS THAT. A LOT OF PEOPLE ARE PREDICTING, OH, UNEMPLOYMENT WILL HANG UP THERE SO THEN WE HAVE TO MAKE A DIFFERENT JUDGMENT. WHAT I LIKE ABOUT THE POLICY IS YOU HAVE THIS AUTOMATIC STABILIZER FEATURE, WHICH VICE CHAIR YELLEN HAS EMPHASIZED, WHICH AS DATA COMES IN AND CHANGES AND EXPECTATIONS CHANGE ABOUT THE OUTLOOK FOR THE ECONOMY, EXPECTATIONS ALSO CHANGE ABOUT WHAT THE FED'S GOING TO DO AND THIS IS A WAY TO GET A MORE STABILIZED OUTCOME FOR THE U.S. ECONOMY.
LIESMAN: LET ME HIGHLIGHT WHAT YOU WERE SAYING. A 7/10 IMPROVEMENT IN YOUR BOOK WOULD CONSTITUTE SUBSTANTIAL IMPROVEMENT, SOMETHING THAT SHOULD PROMPT THE FED TO EITHER HALT ITS QUANTITATIVE EASING POLICY?
BULLARD: IF YOU HAVE CLOSE DOWN TO 7% THEN YOU ARE WITHIN A HALF A POINT OF YOUR 6.5% ON INTEREST RATES SIDE. AND I THINK CLEARLY THE INTENTION IS TO PULL BACK BALANCE SHEET POLICIES SOMETIME BEFORE YOU WOULD START THINKING ABOUT RAISING THE RATE.
LIESMAN: LET ME ASK YOU ABOUT THE FISCAL CLIFF DEAL THAT WASHINGTON CAME UP WITH OVER NEW YEARS WHICH I'M SURE YOU WERE FOLLOWING CLOSELY. IS THIS SOMETHING THAT CHANGES YOUR OUTLOOK ON THE ECONOMY?
BULLARD: NO, I THINK THAT ALSO CAME IN ABOUT AS EXPECTED. MANY PEOPLE PREDICTED. WE TALKED ABOUT IT DURING THE FALL THAT WE THOUGHT THERE WOULD BE A DEAL ULTIMATELY. THERE WAS A DEAL ULTIMATELY. WE ALSO SAID IT WOULD PROBABLY BE A BEAR BONES THINGS AND THAT IS WHAT HAPPENED. WE SAID THERE IS MORE WRANGLING IN THE FUTURE AND THAT'S ALSO WHAT HAPPENED. THIS, SO FAR, PLAYED ACCORDING TO SCRIPT, I THINK IF YOU FOLLOW POLITICS IN THE U.S.
LIESMAN: WHAT IS YOUR EXPECTATION. HOW MUCH CONCERN DO HAVE YOU ABOUT A FIGHT OVER THE DEBT CEILING?
BULLARD: I THINK THE DEBT CEILING IS A DANGEROUS THING TO FIGHT OVER. IT DID NOT GO WELL IN 2011. I HOPE WE GET A BETTER AND SMOOTHER RESOLUTION THIS TIME THAN WE DID THAT TIME.
LIESMAN: DO YOU THINK THAT -- DO YOU WANT CONGRESS AND WASHINGTON RIGHT NOW TO BE CUTTING SPENDING? IS THAT SOMETHING THAT CONCERNS YOU RIGHT NOW?
BULLARD: WELL, I'M NO MONETARY POLICY GUY, SO IT IS NOT UP TO ME TO RECOMMEND ON THIS. BUT I DO THINK THAT IF YOU COULD SET -- YOU KNOW, GET RID OF THE LONGER MEDIUM TERM AND LONGER RUN UNCERTAINTY ABOUT THE U.S. FISCAL OUTLOOK, I THINK IT WOULD BE A TREMENDOUS HELP FOR THE U.S. ECONOMY. YOU ONLY HAVE SO MANY DOLLARS TO SPEND. DECIDE WHERE YOU WANT TO SPEND THEM. DECIDE HOW YOU WANT TO RAISE THE MONEY. AND GO FORWARD FROM THERE.
LIESMAN: EASY FOR TO YOU SAY, YOU HAVE A LOT OF DOLLARS TO SPEND. YOU GET TO PRINT THEM.
BULLARD: INDEED WE DO.
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