Treasury Bills Undermine Fed Independence Amid Inflation Fears

The U.S. Treasury's increasing reliance on short-term financing through Treasury bills is raising concerns about its impact on the Federal Reserve's independence and ability to control inflation.

According to Bloomberg macro strategist Simon White, the trend will structurally raise inflationary pressures and weaken the Fed's policy independence.

The proportion of Treasury bills in the U.S. outstanding debt balance has exceeded 22.7%, with a ratio of 24.1% excluding Federal Reserve holdings.

White believes that as the fiscal deficit continues to expand, this ratio is expected to rise further, making it increasingly difficult for the Fed to control inflation without tightening fiscal policy and exerting reverse pressure on monetary policy.