The ongoing economic instability across the globe compelled the central government of America to take necessary step, to bring inflation under control.
The Federal Reserve System is currently dealing with a challenge to reduce inflation from four-decade highs, which has lifted the federal funds rate range from effectively zero in March to between 3% and 3.25% in October 2022, with rates expected to rise to between 4% and 5% next year.
The central bank of America raised interest rates several times in 2022, with the aim to stabilize market demand and eventually balance rising prices. However, as interest rates rise, the Federal Reserve System is paying more than it receives in interest income, resulting in growing losses.
The Federal Reserve System is Anticipated to lose around $10 billion in the Next Few Years
With the economic downturn, the central bank of America started to lose money sooner than anticipated. Although there is a lot of uncertainty regarding the size and duration of this loss in the future, it is currently estimated to be around $10 billion. The deferred asset account is projected to grow in the range of $100-200 billion and it is likely to take 3-4 years to recover from the losses. Furthermore, as losses mount, the Federal Reserve System may face political backlash over measures taken by the bank as inflationary measures.
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