Federal Reserve’s balance sheet now has unrealized losses of $1,06 trillion.
New York Federal Reserve Bank which is in charge of the Fed bond trades, has just revealed the losses and linked them to the tightening monetary policy by the Fed.
As the Fed maintains interest rates higher for longer in an effort to combat inflation, its bonds lose value.
It says that it won’t let the losses affect its cash flow or transfers to Treasury.
The unrealized gains and losses of the SOMA Portfolio have no impact on the net income, or Federal Reserve payments to Treasury, unless the assets are sold.
“Unrealized gains or losses do not affect the conduct of monetary policies.”
New York Fed notes that the losses unrealized, recorded until the end 2024 were slightly offset as the central banks let the bonds mature, without reinvesting.
In 2022, the Fed’s bond holdings will have experienced significant losses. They are expected to reach $1.08 trillion and $948.4 milliards in 2023.
Unrealized gains on the account were $354 billion dollars in 2020, and $127.9 milliards in 2021.
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This article Federal Reserve Suffers 1,060,000,000,000 Unrealized Losses as Central Bank Rate Hikes Press Bonds first appeared on The ICD.
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