Answer to Question #61050 in Macroeconomics for Shaggy

Question

"One reason for raising interest rates was the prospect of a refinancing issue: a $12 billion issue matures April 1, and the government is expected to seek some new money, in excess of its refinancing needs."

Why doesn't the government get the central bank to wait until after the refinancing before increasing interest rates, so as to minimize its interest costs?

Answer 1

Refinancing means that additional cash flow will appear on the market pushing inflation up. Increase in interest rate by central bank aimed at balancing that inflation and adapting market to this issue.