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Federal Reserve carrying $330 billion in unrealized losses on its assets
By Howard Schneider
Friday, May 27, 2022
WASHINGTON -- The U.S. Federal Reserve is carrying $330 billion in unrealized losses on its holdings of U.S. Treasury and mortgage-backed securities as of the end of March, according to newly released financial statements showing the impact of rising interest rates on the market value of the Fed's balance sheet.
The central bank's holdings of nearly $9 trillion in assets still allowed the Fed to remit $32.2 billion to the U.S. Treasury in the first quarter of 2022, according to the documents.
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But the losses on the Fed's investments, an $8.5 trillion portfolio that surged higher through asset purchases designed to keep financial markets stable through the pandemic, pose a potentially tough political problem for the central bank.
Bill Nelson, chief economist at the Bank Policy Institute, said that adjusting for the appreciation in its assets the Fed had seen through the end of last year, the unrealized losses were an even larger $458 billion.
Criticized for continuing to buy assets even as the economy was well on the way to healing from the pandemic, it is now trying to reverse course and shrink its holdings, particularly of mortgage backed securities. ...
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