Currently, repayments of principal from agency debt and MBS are not being reinvested, allowing the holdings of those securities to run off as the repayments are received. By contrast, the proceeds from maturing Treasury securities are being reinvested in new issues of Treasury securities with similar maturities.
One way of doing so is to calculate the percentage change from quarter to quarter in the relevant price index, and then to annualise it. Calculated in this way, production price inflation shot up to 25,8 per cent in the first quarter of 2002, but receded during the course of the year to only 5,0 per cent in the fourth quarter.