Federal Reserve Nears End of Historic Losses, Analysts Say

According to BlockBeats, Morgan Stanley analysts reported that the Federal Reserve is close to ending its historic streak of losses and may soon resume returning cash to the U.S. Treasury. This development is linked to the Fed's financial operations and its payments to maintain control over short-term interest rates. The aggressive rate hikes that began three years ago led to significant losses for the Fed, but with the recent decline in short-term rates, Morgan Stanley suggests the Fed is nearing a critical point for profitability. Morgan Stanley estimates that the Fed's breakeven interest rate is approximately 4.8%. The combination of a shrinking balance sheet and lower policy rates is helping the Fed move away from losses. Analysts indicate that the continued reduction in bond holdings and the potential for further rate cuts "suggests the Fed will return to profitability." The Federal Reserve released its 2024 financial status last Friday, revealing a total net loss of $77.5 billion for 2024, following a record deficit of $114.6 billion in 2023. The last time the Fed reported a profit was in 2022.