Fed's Evans says have to be nervous about yield curve, but U.S. economy solid
HONG KONG - Chicago Federal Reserve Bank President Charles Evans said on Monday it was understandable for markets to be nervous when the yield curve flattened, though he was still confident about the U.S. economic growth outlook.
After an unexpected rise in the Ifo Institute’s March business climate index in Germany, spreads between U.S. three-month and 10-year Treasury yields turned positive.“We have to take into account that there’s been a secular decline in long-term interest rates,” Evans said in comments at the Credit Suisse Asian Investment Conference in Hong Kong, days after the Fed signaled an end to its tightening and abandoned plans for further rate hikes in 2019..
“Your first reaction is gonna ‘wow, this is less than what we had’ and I think this is missing the message.” “In contrast with times past, there’s a tendency now for the yield curve to be very flat,” Yellen, who led the Fed between 2014 and 2018, said.On the monetary policy outlook, Evans told the conference it was a good time for the U.S. central bank to pause and adopt a cautious stance, adding he did not expect any interest rate hikes until the second half of next year.
“I see things impeding inflation a bit, and I want to see inflation get up. So my own path is not to expect a funds rate increase until next year, probably, the second half,” Evans said. He added that with downside risks looming and uncertainties rife, it is prudent for the Fed to wait for more economic data.
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