Greece to move out of misery; won't disrupt mkts: JP Morgan

Also read: This would be scary enough to give Fed pauseBelow is the transcript of James Glassman's verbatim interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: How do you see this Greek crisis unravelling, will it unravel at all or do you think that at the nick of the time politicians on both sides will climb down?

A: I think they are moving closer to deal but it is going to sound difficult until they get to it and my guess is this isn’t the last time we are going to be hearing about this situation but I think it will be resolved. As you pointed out this is probably the main cloud of uncertainty that has been hanging over the market in the last several weeks or so.

Latha: Hypothetically they don't, how should we picture global markets in the event of Greece deciding to walk out?

A: I think initially it is not that big of a deal because it is very difficult for Greece if it doesn’t work out, but with the European Central Bank conducting asset purchases is helping all long-term interest down I doubt that we will see a repeat of the crisis of confidence in the European region that we saw several years ago. So it is difficult for the Greek people but we will see something coming out of this.

Latha: I take your point that this is going to be bigger Greek problem but for the global markets is there anything in the nature of a domino effect of payments or where will the mess fall if at all?

A: It is very complicated but I think for the global markets my guess is it wouldn’t be that disruptive because the market has been hearing about this problem for a very long time and it doesn’t have the same potential to unravel the European region. I think the rest of the region is fine and their economy seems to be doing a little bit better. So I think it is more right now confined to the Greece situation. The big problem would be if it sets the stage for a gradual unwinding of members leaving the European union, that would be a big problem but I don’t expect that to happen.

Sonia: So, the Greek issue will not be that disruptive for global markets, that is good to hear. Do you see a risk of sentiment in global equities lay out for the rest of the year? I mean, reasons could be plenty, but do you think that we could be headed for perhaps a price or even a time-wise correction in global equities?

A: I do not know about equities, but we are entering a period where we have to get used to the idea that the Federal Reserve is going to be slowly moving back its interest rate from zero to something more normal. It will be a slow gradual process and the process of removing very stimulative policy by itself should not be that big of a challenge for the equity market. That is certainly not the intention of the Federal Reserve, the intention is not to slow the recovery, but initially, the equity market may be very uncertain about all this until we actually see what the path is likely to look like.

Latha: What are you expecting to hear day after tomorrow from the Fed?

A: I do not think we will hear anything specific, say in the stage for tightening but the commentary coming from the Fed may be more optimistic about what is going on in the economy than some of the commentary that you have been hearing from the International Monetary Fund (IMF) or the world bank.

So, the stage is set by describing new optimism that the first quarter slowdown was an aberration and was affected by transitory factors. When we look at the labour market data, it is all quite good and it implies that the US economy is progressing toward recovery. That should make the Fed much more comfortable with preparing the market for the idea that they will have to start slowly raising interest rates.

Most of us do not think it is going to start till September, but because markets are fairly liquid, the Fed reserve will want to prepare the markets well in advance of this process starting.

And the Fed does explain to Congress their view next month of the state of the economy and they will want to give the Congress some idea of where they are going. We are getting closer to that moment. So, we should be hearing more and more about this. But first we have to see that they are pretty confident that economy is in pretty good shape which we may hear on Wednesday. Latha: Will they hint at all that the Fed hike is going to be in September? And if they were to confirm that in some fashion, how will markets react?

A: I do not think they need to do that yet because there is plenty of time between now and September and who knows? Anything can happen. They really just want to talk about their view of the economy and why they believe that it is on the right track. I doubt that we will get specific guidelines about when it is that they are thinking about moving.

Sonia: One final word on your assessment of the Indian economy because I know you track it as well. We have seen a firm improvement in our macros, whether it is inflation receding or even growth picking up, but versus other markets, how do you stack India?

A: I think this is going to be a good year for India. We are forecasting eight and a half percent growth for over the four quarters of the year. That will be faster growth than we expect to see from China. So, it is a very good news and my guess is we are going to see this is the beginning of a stretch of good growth for the next several years.