The United States central bank, The Federal Reserve (The Fed), has reported a potential loss of up to US$ 1 trillion stemming from its management of securities holdings.

According to a report from Reuters, citing the Federal Reserve Bank of New York, the Fed experienced an unrealized loss of US$ 1 trillion related to its securities portfolio from the previous year.

The New York Fed report noted that as of 2024, unrealized losses from the Fed's large holdings of cash and securities in the System Open Market Account (SOMA) amounted to US$ 1.06 trillion.

"This unrealized loss is slightly higher than the US$ 948.4 billion loss recorded in 2023," Reuters reported on Monday (June 9, 2025).

The unrealized losses in 2024 were primarily driven by "higher market interest rates across the yield curve," though partially offset by a reduction in the Fed’s bond holdings.

The Fed explained that these unrealized losses represent the difference between the book value of the securities it owns and their current market prices.

However, these paper losses do not impact the Fed’s monetary policy operations and are not a cause for concern, since the Fed typically holds its bonds to maturity.

"The report further stated that the unrealized losses on the Fed’s holdings are expected to persist over the next several years," Reuters added.

It is important to note that the Fed’s balance sheet has undergone significant expansion in recent years, more than doubling to a peak of US$ 9 trillion in 2022.

This financial growth was the result of large-scale purchases of Treasury bonds and mortgage-backed securities intended to stabilize financial markets and provide economic stimulus during the pandemic. Since then, the Fed’s balance sheet has contracted, now standing at approximately US$ 6.7 trillion.