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The US Fed reported a record loss last year

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The US Fed reported a record loss last year

The US Federal Reserve System (Fed), which acts as the central bank, reported a loss of $114.3 billion last year after a profit of $58.8 billion in 2022, writes Bloomberg.

This is the largest loss in history, which forced the US central bank to abandon transfers to the treasury. The reason for the loss was spending associated with high interest rates, which aim to bring inflation under control.

The Fed has repeatedly emphasized that the negative result does not limit its ability to conduct monetary policy.

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The Fed’s interest expense on bank reserve balances reached $176.8 billion last year, up $116.4 billion from 2022. And interest payments from its reverse repo operations rose to $104.3 billion last year from $41.9 billion dollars in the previous year.

Thus, total interest costs almost tripled to $281.1 billion in 2023. By contrast, income from bonds the Fed owns was $163.8 billion last year, little changed from 2022.

After covering its day-to-day operating costs, the Fed is required to send the money it earns to the Treasury, where that revenue will help offset federal deficits.

The Fed earns income from the securities in its portfolio and pays interest on reserves that banks keep with it. This gave him huge profits when interest rates were near zero, but that changed when the Fed started raising interest rates in March 2022.

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