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An Analysis of the Interest Rate Risk of the Federal Reserve’s Balance Sheet, Part 2: Projections under Alternative Interest Rate Paths

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Abstract

As discussed in the first note of this two-note series, net income of the Federal Reserve (Fed) and its remittances to the U.S. Treasury along with the unrealized gain or loss position of the System Open Market Account (SOMA) portfolio are affected by fluctuations in interest rates. The need for the Fed to increase the policy rate expeditiously to address the inflationary pressures is projected to result in the Fed's net income turning negative temporarily.

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  • Alyssa G. Anderson & Philippa Marks & Dave Na & Bernd Schlusche & Zeynep Senyuz, 2022. "An Analysis of the Interest Rate Risk of the Federal Reserve’s Balance Sheet, Part 2: Projections under Alternative Interest Rate Paths," FEDS Notes 2022-07-15-3, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfn:2022-07-15-3
    DOI: 10.17016/2380-7172.3174
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    File URL: https://www.federalreserve.gov//econres/notes/feds-notes/an-analysis-of-the-interest-rate-risk-of-the-federal-reserves-balance-sheet-part-2-20220715.htm
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    Cited by:

    1. José Miguel Cardoso da Costa & Nuno Silva, 2023. "A novel decomposition of national central banks’ profits in the euro area: application to the case of Banco de Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    2. Gautam Nair & Federico Sturzenegger, 2024. "Great Dilution: The Global Impact of the US Inflation Shock on Sovereign Debt," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(3), pages 1238-1277, September.
    3. Monetary Affairs Department, 2023. "Central Bank Finances and Monetary Policy Conduct," Bank of Japan Working Paper Series 23-12-12, Bank of Japan.

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