Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
How Central Banks Lose Money On Interest
On this episode of Monetary Policy Explained, Lucas and Luna unpack the often-overlooked reality that central banks are net payers on their balance sheets. With the Federal Reserve holding trillions in excess reserves at elevated rates, the institution has become a significant fiscal cost to the US Treasury rather than a revenue generator. We break down why the Fed pays interest on reserves, how that liability swells when policy is tight, and what happens when those payments exceed the bank’s investment income from its bond portfolio. This structural shift challenges the traditional view of…
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