Federal Reserve’s Net Income Loss Nearly Doubles Year-Over-Year

Increased expenses related to managing the U.S. central bank’s short-term interest rate target pushed the Federal Reserve’s net income loss to $114.3 billion in 2023 — nearly double the $58.8 billion net negative income loss in 2022. Over recent years the Fed, which “earns income from services it provides to the financial system and from interest income on securities it owns,” has earned significant profits. However, since the spring of 2022 when the Fed began to aggressively boost the federal funds rate to cool inflation pressures, it upended central bank finances. When the Fed is dealing with operating losses, it can create money which is recorded as a deferred asset to fund its operations so as to not impede its ability to operate or conduct monetary policy. Once the Fed returns to profitability it will use excess earnings to reduce the deferred asset, which increased by $116.7 billion in 2023 to a “cumulative deferred asset at year-end of $133.3 billion,” and when extinguished, will return to handing over any profits after covering operational expenses to the Treasury as required by law.

Source:    https://www.reuters.com/markets/us/fed-says-official-net-negative-income-was-1143-billion-2023-2024-03-26/

Source:    https://www.federalreserve.gov/newsevents/pressreleases/other20240326a.htm