A bid for safe assets after the attacks in Brussels supported modest gains in Treasuries along with curve Tuesday morning, but the gains reversed to modest losses in the front end and belly of the curve in the afternoon following the European close, in part triggered by less dovish comments from Chicago Fed Governor Evans than investors have come to anticipate from him. In recent years Evans has been toward the far dovish end of the range of Fed views generally, and he didn’t suddenly turn hawkish by any means, but he did call the FOMC’s SEP median of two rate hikes this year “really a pretty good setting” and “not at all unreasonable” as far as he’s concerned, as he sees the fundamentals for the economy as “really quite good”. He is still concerned about inflation, though, and is prepared to “pursue somewhat more aggressive accommodation for a period of time to make sure that we have momentum to get up to 2%.” He’s concerned that “long-run inflation expectations are taking us to something that’s not exactly 2. It’s a little lower than 2, 1 3/4 might be 1 5/8. There’s something that’s not necessarily going to be consistent with 2%. I’d like to see that move up 2%,” and if getting to sustained 2% inflation “requires going over a little bit to make sure you get to 2, I’m perfectly fine with that. It’s a symmetric inflation objective.”
