Federal Reserve Suffers $1,060,000,000,000 in Unrealized Losses As Central Bank’s Rate Hikes Pressure Bonds

The Federal Reserve is now facing a whopping $1.06 trillion in unrealized losses on its balance sheet.

The New York Federal Reserve Bank, which handles the Fed’s bond transactions, just disclosed the losses, linking them to the central bank’s tight monetary stance.

The Fed’s bonds are losing value as the bank maintains higher-for-longer interest rates in a push to fight inflation.

The agency says it will ensure the losses won’t hit its bottom line or cash transfers to the Treasury.

“The unrealized gain or loss position of the SOMA portfolio has no effect on net income or Federal Reserve remittances to the Treasury unless assets are sold and gains or losses are realized.

Unrealized gains and losses have no effect on the conduct of monetary policy.”

The New York Fed also notes the unrealized losses, which are recorded through the end of 2024, were offset slightly as the central bank let bonds mature without reinvesting.

The Fed’s bond portfolio began witnessing significant unrealized losses over the previous two years, clocking $1.08 trillion in 2022 and $948.4 billion in 2023.

The account witnessed unrealized gains of $354 billion in 2020 and $127.9 billion in 2021.