Treasury plans to issue a bit more debt at each auction with the understanding a portion of the proceeds would be used to purchase old debt. In effect, the composition of Treasuries outstanding would be tilted towards the more liquid new issues. The program could one day be deployed to influence monetary conditions. For example, Treasury could effectively ease financial conditions by issuing short dated debt to purchase longer dated debt. There is no indication of this today, but treasuries and the central banks do not always have the same goal, and conflicts between the two are common in history.
- Date Posted:
- August 8, 2023
The dashed line presents our baseline forecast of year-over-year shelter inflation over the next 18 months based on the average of cumulative shelter inflation forecasts at the CBSA level. Blue shading shows the area in which 95% of the model’s out-of-sample forecast errors fall, indicating the range of confidence regarding the accuracy of our model estimates. The solid line plots actual year-over-year shelter inflation. Our baseline forecast suggests that year-over-year shelter inflation will continue to slow through late 2024 and may even turn negative by mid-2024. This would represent a sharp turnaround in shelter inflation, with important implications for the behavior of overall inflation. The deflationary component of this forecast would be the most severe contraction in shelter inflation since the Global Financial Crisis of 2007-09.