Federal Reserve Chairman Ben S. Bernanke’s efforts to rescue the economy could result in more than a half trillion dollars of paper losses on the central bank’s books if interest rates rise abruptly from recent levels.
Federal Reserve Bank of Boston President Eric Rosengren said the Fed’s large-scale asset purchases help the nation’s fiscal outlook, which should be reflected in an analysis of remittances to the U.S. Treasury.
Frederic Mishkin, a professor at Columbia University and a former Federal Reserve governor, talks with Bloomberg's Tom Keene about monetary policy and how the Federal Reserve got it right during the financial crisis, preventing a likely depression. They speak on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
Federal Reserve Governor Jerome Powell said the central bank could revise its plan to eventually sell the securities acquired during its large-scale asset purchases, both to avoid causing financial instability and taking losses on its sales.
Ben S. Bernanke argued for 15 years that the Federal Reserve should announce a numerical inflation target. When he finally got his way in January, the victory allowed the central bank to elevate its other mandate: full employment.
The Federal Reserve is buying mortgage-backed securities and has stated it will keep interest rates low until unemployment falls. The Bank of Canada under Mark Carney likewise made an explicit promise about how long rates would be held down, and Carney is now bringing this practice to the Bank of England. The European Central Bank, led by Mario Draghi, has refined how it communicates its interest- rate intentions.
The longer the Federal Reserve continues its bond-buying stimulus, the higher the odds it will face a year without any money to give the U.S. Treasury after taxpayers received a record $88.4 billion profit in 2012.