Home » US Central Bank Loses Billions From Rate Hikes, ‘Losses Pile up Into an IOU’ – Economics Bitcoin News

US Central Bank Loses Billions From Rate Hikes, ‘Losses Pile up Into an IOU’ – Economics Bitcoin News

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The U.S. Treasury and global bond markets in general experienced one of the worst declines in more than a decade while the Federal Reserve (Fed) raised benchmark bank rates with a series of rate hikes. did. The Fed’s actions have fueled criticism of the US central bank as some strategists believe the onslaught of rate hikes could exacerbate illiquidity in the world’s largest bond market. Additionally, a report released Tuesday explains that the Fed and foreign central banks around the world are “losing billions of dollars” by paying more interest.

The Federal Reserve Is Losing Billions of Dollars

The US Federal Reserve has raised the Federal Funds Rate (FFR) several times this year, with the central bank raising it by 75 basis points (bps) three times in a row.interest rate hikes brought politician and investment bank Barclays question The need for central banks to delay rate hikes. Even the United Nations Conference on Trade and Development (UNCTAD) agreed, urged the Federal Reserve Board Deceleration and increase in public spending.

Report: US Central Bank loses billions from rate hikes, 'losses pile up on IOU'
Chart by Bloomberg, source: US Federal Reserve

Despite the request, Fed members and observers working closely with the market doubt another 75bps rate hike. guaranteed to happen next month.Bloomberg Tuesday report Right now, the US Central Bank is “losing billions of dollars.” “Without revenue from the Fed, the Treasury will need to sell more debt to the public to fund government spending,” said Bloomberg contributor Jonelle Marte. Nevertheless, Seth Carpenter, Morgan Stanley’s chief global economist and former member of the U.S. Treasury Department, says more debt will need to be sold, but losses will be driven by short-term monetary decisions. It claims to have no significant impact.

Carpenter further emphasized:

Losses do not materially affect the ability to conduct monetary policy in the short term.

‘Other central banks are also dealing with losses from rising interest rates,’ says reporter

Bloomberg reporter Marte murmured “Rising interest rates mean that central banks are now paying more interest on reserves than they are recovering from their portfolios.” He added that they could be connected. In a thread on Marte’s Twitter, “I’ll spare you the accounting terms, but the short version is that the Federal Reserve (Fed) was sending revenues to the Treasury Department.” Now that we’re out, the losses are piling up in the IOU, which the Fed will pay later with future earnings.”

Bloomberg reporter Added:

Other central banks are also dealing with losses as interest rates rise around the world to combat inflation. Accounting losses threaten to fuel criticism of asset purchase programs put in place to save markets and economies.

A report pointing out that the Federal Reserve is losing billions of dollars and wreaking havoc on other central banks around the world follows many analysts claim The Fed is caught in a trap because raising the FFR too high could lead to a “blow-up of the Treasury.”Harris Kupperman, founder of hedge fund Praetorian Capital, said in a blog post published Oct. 18 that this could happen. Predict “Under these market conditions, a flash crash in the Treasury market is inevitable,” he said.

However, an expert Marte interviewed explained that the losses of the US central bank can be capitalized. Swiss Re chief economist Jerome Haegeli told a Bloomberg reporter that the central bank faces political criticism over its policy decisions, despite the fact that it could recapitalize at any moment.

“The problem with central bank losses is not the losses themselves, but the political backlash central banks are likely to face more and more, although they can recapitalize at any time,” Hegeli said in a statement to Marte. .

Tags for this story

75bps rate hike, Analyst, bond market, bond market flash crash, Central Bank, financial weapon, global derivatives, illiquidity, Jerome Hegeli, Jessica Walker, Jonelle Marte, market analyst, market strategist, Seth Carpenter, US central bankers, US Treasury market

What are your thoughts on the report that the US Federal Reserve and central banks around the world are losing billions of dollars? Let us know what you think about this in the comments section below.

Jamie Redman

Jamie Redman is a news lead for Bitcoin.com News and a financial technology journalist based in Florida. Redman has been an active member of the cryptocurrency community since 2011. He is passionate about Bitcoin, open source code and decentralized applications. Since September 2015, Redman has written over 6,000 articles for Bitcoin.com News about disruptive protocols currently emerging.

image credit: Shutterstock, Pixabay, Wiki Commons, Editorial photo credit: Bloomberg

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