Fed's losses to rise to record $114.3 billion in 2023

According to audited financial reports released on March 26, expenses exceeding revenues caused the US Federal Reserve (Fed) to lose $114.3 billion in 2023, an unprecedented loss, forcing the Fed to stop transferring profits to the US Treasury while interest rates remain high.

The Fed's interest expenses will nearly triple to $281.1 billion in 2023. Meanwhile, interest income from its asset portfolio will total $163.8 billion, up from nearly $170 billion in 2022.

After deducting its daily operating expenses, the Fed is forced to transfer the proceeds to the Treasury to cover the federal budget deficit.

As expenses outpaced revenues starting in late 2022, the Fed issued certificates of debt, or “deferred assets,” to the Treasury. The value of these “deferred assets” increased by $116.7 billion to a record $133.3 billion in 2023.

The Fed earns revenue from the securities in its portfolio and pays interest on the reserves that banks keep at the Fed. This generates a lot of revenue and contributes a lot to the Treasury when interest rates are near 0%. However, the situation changed when the Fed started raising interest rates in March 2022.

Interest payments on excess reserves banks hold at the Fed will hit a record $176.8 billion in 2023, nearly triple the amount in 2022.

Most of the Fed's regional banks have begun to stop transferring profits to the Treasury Department in September 2022.

According to VNA

Source