Trouble in Monetary Paradise? Fed, Central Banks Losing Billions Every Year

Federal Reserve’s mounting losses mean less money to plug the U.S. government budget deficit.

Federal Reserve Chairman Jerome Powell is introduced at the Jacques Polak Research Conference at the International Monetary Fund in Washington on Nov. 9, 2023. Mark Schiefelbein/AP Photo

The Federal Reserve and its monetary policymaking counterparts worldwide have recorded enormous losses as they raised interest rates to combat inflation. Despite the sizable hemorrhaging showing up on the books, central bank chiefs have said that they do not believe that it will alter how they conduct monetary policy.

The U.S. central bank is funded from the interest earned on its securities holdings, purchased from its open market operations to influence interest rates in the debt market.