Fire to the Fuel

Fire to the Fuel

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  • The Federal Reserve is predicted to suffer losses of tens of billions of dollars over the coming years as a result of its vigorous campaign to control inflation. According to an accounting metric, referred to as deferred asset to account for negative revenue, estimates losses to be close to $6.3B.
  • Losses have grown as a result of the interest the central bank pays banks and money-market funds to keep their funds on deposit at the Fed now outpaces the income it receives. This is from the $8.3T in Treasury and mortgage-backed securities it has accumulated over the course of the past 14 years of stimulus programs that involved the purchase of bonds.

Why it matters

The Fed is expected to increase interest rates this week by further three-quarters of a percentage point, which would be the fourth consecutive large increase with another rate increase expected in December.

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