Federal Reserve Reports $77.5 Billion Net Loss for 2024 Amid High Interest Rate Strategy
The Federal Reserve disclosed on Friday that its net operational loss for 2024 totaled $77.5 billion, marking a decline from the $114.6 billion loss recorded in 2023. This is the central bank’s first official audited figure for the year, as it broke from its recent tradition of releasing a preliminary estimate earlier in the calendar year.
The reported loss reflects the ongoing financial impact of the Fed’s aggressive monetary tightening aimed at combating the highest inflation levels in decades. While the central bank is designed to be self-financing — generating income from securities holdings and financial services — its interest expenses have recently overwhelmed earnings.
Following a long stretch of remitting sizable profits to the U.S. Treasury, the Fed saw its financial position shift dramatically starting in 2022. In response to surging inflation, the Fed raised its benchmark interest rate range from near zero to 5.25%-5.50% by July 2023. Though inflation has eased and rates have since been lowered by a full percentage point, the central bank remains in a holding pattern with no immediate policy changes in sight.
A large portion of the Fed’s rising costs stem from the interest it pays to banks, money market funds, and other financial institutions that hold excess reserves at the central bank. Officials continue to stress that while these paper losses are significant, they do not impede the Fed’s capacity to execute monetary policy or maintain operational stability.