Fed's operating losses improved significantly in 2025, declining to $18.7 billion from $77.6 billion in 2024. The central bank's unrealized losses on Treasury securities and mortgage-backed securities fell to $844 billion, down from $1.06 trillion previously. These improvements reflect the effects of quantitative tightening and lower interest rates following years of ultra-low monetary policy. While the Fed cannot become insolvent due to its money-creation authority, these losses directly impact Treasury remittances and taxpayers. The Fed's $155.3 billion in interest income from its securities portfolio was offset by $167.4 billion in interest expenses, primarily payments to banks on reserve balances. As the Fed continues reducing its balance sheet, financial conditions gradually normalize after the pandemic-era monetary expansion.
