Report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee

April 30, 2024Letter to the SecretaryDear Madam Secretary,Since the TBAC last met in late January, resilient domestic economic activity and stronger-than expected core inflation readings have led Treasury yields to rise by about 80 basis points. Aside from economic data and Fed policy, geopolitical developments also drove movements in asset prices over the period.Six-month annualized core PCE inflation had slowed to 1.9% at the end of last year. But core PCE inflation in Q1 was stronger than expected at 3.7% annualized. Slower goods price inflation accounts for most of the disinflation in the last year with service sector inflation (both housing and non-housing related) proving “stickier.”Since January, Fed officials have guided in their post-meeting statement that policy rates will not be reduced until the Committee “has gained greater confidence that inflation is moving sustainably toward 2 percent.” Chair Powell cautioned on April 16ththat the recently stronger inflation data mean “it’s likely to take longer than