Posted on 01/13/2024 7:20:17 AM PST by Red Badger
The Federal Reserve ran an operating loss of $114.3 billion last year, its largest ever, a consequence of its campaign to aggressively support the economy in 2020 and 2021, then jacking up interest rates to combat high inflation.
The losses added to already large federal deficits that have required bigger auctions of Treasury debt. The central bank’s losses could continue for as long as short-term interest rates remain near current levels. That has the potential to fuel new political attacks on the Fed, though there have been no signs of that so far.
The U.S. central bank announced preliminary, unaudited results of its 2023 financial statements on Friday.
The central bank paid more to financial institutions on interest-bearing deposits and securities than it earned from securities that it bought when interest rates were lower. That’s a result of it raising its benchmark short-term interest rate to a two-decade high, above 5%, last year.
The losses don’t affect the Fed’s day-to-day operations and won’t require the central bank to ask for an infusion from the Treasury Department. Unlike federal agencies, the Fed doesn’t have to go to Congress hat in hand to cover operating losses. Instead, the Fed created an IOU in 2022 that it calls a “deferred asset.”
The Fed has almost always turned a profit and is required by law to send its earnings, minus operating expenses, to the Treasury. Those gains turned to losses in 2022, meaning the federal deficit has been a bit larger than it would otherwise have been.
(Excerpt) Read more at wsj.com ...
Oops, my bad!
Sorry, I mistakenly thought you might have a brain. Go back to sucking your thumb.
OK enough with that thumb. Now switch to the other one.
There! What a good boy!
The only potential impact is a very minor increase in inflationary pressure.
$114bil extra money in an economy of $27 trillion.
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