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Higher Rates Raise Risk of Future Fed Losses
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wsj.comThe Federal Reserve’s plans to raise interest rates aggressively to combat high inflation could have an overlooked and uncomfortable side effect for the central bank: capital losses.
The potential for losses hinges on obscure monetary plumbing. The Fed’s $9 trillion portfolio, sometimes called a balance sheet, is full of mostly interest-bearing assets—Treasury and mortgage-backed securities—with an average yield of 2.3%. On the other side of the ledger—the liability side of the Fed’s balance sheet—are bank deposits held at the Fed known as reserves, which are also interest bearing, as well as currency in circulation.
Read more on wsj.comAbout this in other media
Fed's Mester says inflation hasn't peaked and multiple half-point rate hikes are needed cnbc.com /2 years ago
Stock futures are slightly higher ahead of May's jobs report cnbc.com /2 years ago
Fed’s Logan Says Digital Money Could Affect Central Bank Operations wsj.com /2 years ago
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