Fed Sets New Record: Biggest Loss Yet!

The Fed set a new record, recording its largest loss yet since its accrued earnings account became negative in September of 2022. In the most recent week, the Fed lost $3.275 billion. This edges out its earlier record of a $2.456 billion loss for the week ending January 4^th, 2023.

As of February 8^th, 2023, the total accrued loss that the Fed must earn back before remitting additional funds to the treasury is $30.234 billion.  The Fed’s loss over the most recent week was its largest since its accrued earnings account became negative last September. For the week ending February 8^th 2023, the Fed lost $3.275 billion. This edges out the prior record of $2.456 billion for the week ending January 4^th, 2023.

Losses at the Federal Reserve Causes and Consequences

In short, the Fed is losing money because their borrowing costs are higher than the interest they receive on their holdings.

Until one or more of the following occurs, the Fed is likely to continue losing money:

• A sufficient portion of the Federal Reserve’s current holdings mature and they are able to purchase higher yielding assets.
• Banks and/or money market funds reduce the amount they have deposited or invested in Reverse Repo agreements at the Fed.
• The Federal Reserve reverses course on interest rates and starts lowering rates again.

Unless one of the above changes, losses at the Federal Reserve will continue in the short and medium term.

Fed Losses: the Fed is Losing Money, more completely explains the Federal Reserve’s holdings and why they are losing money. For more about the significance of the Fed’s losses and economic impacts, see: How Much Can the Fed Tighten? To keep up with developments moving forward, you can follow the Fed losses dashboard.

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