The Federal Reserve has started to turn around its unprecedented losses from implementing monetary policy during the pandemic. Recent data shows a slow shift towards profitability, with the Fed’s deferred asset decreasing slightly since November 5. It may take years to fully cover losses and return cash to the Treasury.

Former top Fed staffer Bill Nelson predicts the Fed’s combined profits for the current quarter to exceed $2 billion, signaling a positive financial performance. The Fed funds its operations through income from bond holdings and services, returning excess profits to the Treasury. The pandemic disrupted this cycle, causing losses since 2022.

The Fed’s challenge arose from surging inflation and increased bond holdings, leading to loss-making in 2022. Rate cuts have helped stabilize the situation, reducing payouts to banks and improving financial performance. More rate cuts are expected as officials focus on the job market’s health and overall economic stability.

Analysts like Derek Tang and Matthew Luzzetti believe the Fed’s losses have stopped and may turn into profits, as market yields rise above interest on reserve balances. While Fed officials claim profits don’t impact monetary policy, some elected officials criticize the interest-paying system as a subsidy to the financial sector.

Read more at Yahoo Finance: Fed data suggests central bank has stopped losing money