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Inflation Is Mucking Up the Numbers for Fed Balance-Sheet Runoff

  • Accruals on inflation-protected Treasuries count toward total
  • Including them, holdings fell less than allotted $90 billion
A worker makes a delivery to a store in Ocean City, New Jersey.

A worker makes a delivery to a store in Ocean City, New Jersey.

Photographer: Al Drago/Bloomberg

Three months after the Federal Reserve stopped reinvesting all of the maturing Treasury securities in its portfolio -- allowing $30 billion a month to run off -- its holdings of the debt ought to be lower by $90 billion.

Soaring inflation is slowing that decline. That’s because the Fed’s Treasury holdings include inflation-protected securities, and the total value incorporates adjustments to their principal determined by changes in the consumer price index -- which have been hefty over the past year.