Revenues that the Federal Reserve generated for the US Treasury declined in 2016 to $92 billion. However, the depreciation was expected in connection with preparing the ground for further increases in interest rates.
Net profit sank by about $7.6 billion
According to the data, which was published by Federal Reserve, the aggregate net profit fell by nearly $8 billion to $92.7 billion, mainly due to higher interest rates, which the institution had to pay commercial banks for maintaining the reserve at the central bank. Payments associated with the hike grew about $5.2 billion. Additionally, the Fed earned less about $2.5 billion due to changes in the composition of the securities in the System Open Market Account.
It is worth noting that the reported data are preliminary and subject to change in March – just when will be presented final report.
The end of the buyback program = end of profits?
Revenues Treasury generated by the Fed in recent years has clearly increased – all thanks to inflating the financial balance of the Federal Reserve in connection with a series of asset purchase programs designed to stimulate the economy.
FED is gaining interest on these bonds and income from other sources. With the dignity of the law, it uses the revenue to cover their operating costs, and the rest transfers to general treasury funds to support the government in paying off the federal debt.
In 2015, the central bank set a record of profitability at the level of $97.7 billion – for comparison, in 2008 the Treasury received from the bank only $32 billion. In subsequent years, the value will certainly decrease – The Federal Reserve wants to in fact raise short-term interest rates – the process will force, among others paying higher interest to central banks.
Last year’s operating expenses of the central bank amounted to $4 billion, of which $700 million is earmarked to finance the main Council, and less than $600 on office work to protect financial consumers.
