Economy

Fed will pay smaller dividend to the US Treasury for 2017

Fed will pay smaller dividend to the US Treasury for 2017

U.S. Federal Reserve said on Wednesday that its remittances to U.S. Treasury Department are expected to continue to decline in 2017 due to increases in interest payments to commercial banks.

The US Federal Reserve payments are down for a second consecutive year, although they remain three times higher than before 2008, when the central bank began the large-scale bonds purchasing.

Based on the preliminary figures, the Fed said it earned $80.7 billion in net income in 2017, a drop of $11.7 billion from 2016. That decline reflected an increase of $13.8 billion in interest payments the Fed made to banks which was partially offset by an increase of $2.5 billion in the interest income the Fed earned on its holdings of Treasury bonds and mortgage-backed securities.

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The comments from Dudley - in which he maintained a "strong case" for the Fed to keep gradually raising interest rates - suggest that while the central bank has little reason to curb the fiscal stimulus, its policymakers will not hesitate to criticize its timing and assumptions. Dividend payments to Federal Reserve member banks totaled $784 million. In addition, the Reserve Banks were assessed $724 million for the costs related to producing, issuing, and retiring currency, $740 million for Board expenditures, and $573 million to fund the operations of the Consumer Financial Protection Bureau.

After the global financial crisis, the Fed adopted a series of bond-buying programs in order to stimulate the economy. One side effect of the Fed's larger balance sheet is that interest on assets it holds have gone up as well, from $31.7 billion in 2008 to a high of nearly $100 billion in 2015.


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