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The Federal Reserve of the United States recently disclosed a staggering financial dip, revealing a $100 billion deficit for 2023 on September 14. Sources like Reuters anticipate this downturn to deepen in the coming months.
At the heart of this monetary mishap, the interest payouts on the Federal Reserve's obligations have exceeded its revenue from its assets and services to the banking industry. This revelation has led to growing concerns among investors, pondering its influence on interest rates and the surge in interest towards finite resources like Bitcoin (BTC).
Financial experts have suggested that this downturn for the Fed, which began the previous year, might see an uptick, potentially reaching twice its current state by 2024. For now, the central bank labels these financial setbacks as "deferred assets," indicating they won't be addressed immediately.
The Federal Reserve has a history marked by profitability. Nonetheless, a lack of profit doesn't deter its monetary policies or obstruct its set goals. The Federal Reserve's current state of financial decline can be partly attributed to notable interest rate increases, which rose from almost zero in March 2022 to today's 5.25%. The consensus, as highlighted by Reuters, is that even if these interest rates stabilize, the financial downturn will continue. This prolonged financial situation has its roots in 2020 and 2021 when the Federal Reserve took significant steps, purchasing bonds in large quantities, aiming to fend off a looming recession.
In its core operations, the Federal Reserve parallels regular banks by providing returns to its main depositors, which include major banks, wealth managers, and other financial entities.
A piece in Barron's delved into the repercussions of this $100 billion setback. It underscored that while the Federal Reserve's losses don't directly swell the federal budget deficits, the missing high profits, which were previously forwarded to the Treasury, offset the deficit, currently standing at $1.6 trillion for this fiscal year.
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