The Treasury’s strong commitment to this product, reflected in the range of maturities that have and will be sold and the volume of securities sold, should do much to foster this market, as will the growing realization by market participants that indexed debt will represent an increasing share of the nation’s debt obligations.
The risks to the inflation outlook are primarily on the upside. In the near term, existing pipeline pressures could lead to stronger than expected rises in retail prices for energy and food. Over the medium term, risks stem primarily from domestic factors such as a persistent rise in inflation expectations above our target or higher than anticipated wage rises.