How U.S. Treasury Is Fighting The Fed | Nouriel Roubini & Stephen Miran on Treasury’s $800 Billion of “Stealth QE” via “Activist Treasury Issuance” (ATI)
Forward Guidance
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N.Roubini: “Too many short-terms US T-Bills going out the door = US Treasury doing Backdoor QE, overriding Fed tight policy”
The paper discusses Activist Treasury Issuance (ATI) where the Treasury has been issuing more short-term bills and fewer long-term bonds, acting as a form of backdoor quantitative easing. This unconventional fiscal policy by the Treasury has effectively countered the Fed's efforts to tighten monetary policy. The ATI is estimated to have an equivalent impact as the Fed cutting policy rates by 100 basis points, leading to growth remaining above potential and inflation staying sticky rather than moving towards the 2% target. This interference by the Treasury is aimed at maintaining easier financial conditions to stimulate growth during the current phase of the business cycle.
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