Economics
Fed to Lose Money Next Year as It Raises Rates, Dudley Says
- Fed will be paying more to banks than it earns on securities
- Loss to dissuade Fed from mortgage-backed bond sales, he says
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The Federal Reserve looks on course to lose money next year as it raises short-term interest rates to try to rein in inflation, according to former New York Fed President William Dudley.
That’s because the interest rate the Fed will be paying out to banks for the reserves they hold at the central bank will be greater than the rate it earns on its huge holdings of Treasury and mortgage-backed securities.