Federal Reserve Reports Historic Loss of $114.3 Billion in 2023

The Federal Reserve recorded its largest operational loss in its 110-year history in 2023 and was therefore unable to return anything to the Treasury, as it should do when it achieves profits.

The estimated preliminary calculations for the year 2023 indicate a loss of $114.3 billion for this institution, which carries out the tasks of the central bank.

This loss is linked on one hand to the increase in interest rates used by the Federal Reserve to curb high inflation. This forced it to pay more money in exchange for bank reserves, as well as the treasury bonds and mortgage-backed stocks it holds.

As a result, the Federal Reserve paid $281.1 billion in interest in 2023, an increase of $178.7 billion from the previous year.

One of the Federal Reserve’s sources of income, namely the interest it earns from the bonds and stocks it holds, declined last year.

With the deterioration of its performance, it only received $163.8 billion in profits in 2023, which is $6.2 billion less than the previous year.

In normal times, the Federal Reserve pays its profits to the Treasury every week after deducting its expenses for operating its headquarters in Washington and the profits it pays to its 12 subsidiary banks in the states, which make up the Federal Reserve system.

However, when profits are not sufficient to cover these costs, the Federal Reserve becomes indebted to the Ministry of Economy and Finance, and it is accounted for as deferred assets. The Federal Reserve will not resume paying money to the Treasury until it makes a profit that allows it to cover this amount.