Key Points
The Federal Reserve ran an operating loss of $114.3 billion last year, its largest ever, a consequence of its campaign to aggressively support the economy in 2020 and 2021, then jacking up interest rates to combat high inflation..
The losses added to already large federal deficits that have required bigger auctions of Treasury debt..
The central banks losses could continue for as long as short-term interest rates remain near current levels..
The market value of those securities dropped after the central bank began raising rates aggressively in 2022 to combat inflation, but the Fed doesnt book losses on them because they are held to maturity..
Beginning in September 2022, the overnight rates the Fed pays to banks on their deposits held at the Fed, called reserves, and on other securities transactions it conducts to manage interest rates, exceeded the income it collects on its $7.1 trillion in security holdings..
