The central banks of the euro zone and the USA will incur losses in the hundreds of billions in the coming years. “We expect that the burden on the Eurosystem will be around 60 to 80 billion euros in 2023 and will then decrease in the following years, so that within three to four years around 100 to 120 billion euros should come together,” said Ulrich Kater, chief economist of Dekabank to WELT AM SONNTAG. “For the Fed, the numbers are in the same order of magnitude, around $150 billion,” Kater continued.
Other economists are also anticipating losses of this magnitude. The reason for this is the turnaround in interest rates that took place this year. “The return on central bank investments brings in less than they cost their deposits,” said Kater. The currency watchdogs now have to pay the banks normal interest rates again for their deposits at the central bank.
At the same time, however, they have bought up a huge portfolio of bonds in recent years that pay little or no interest, and in the eurozone sometimes even have negative interest rates. The more interest rates rise in the coming months, the greater the losses will be.
The ECB has at least taken precautions for this. Since it was clear that a change in monetary policy would result in losses, it built up reserves of around 120 billion euros, which can now be offset against the deficit in the balance sheet. In the US, the Fed is expected to offset losses against gains in later years.
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