Stress testing the Fed

Jens Christensen, Jose Lopez and Glenn Rudebusch

FRBSF Economic Letter, 2014

Abstract: The Federal Reserve has purchased a large amount of longer-term bonds since December 2008. While these purchases have helped support a strengthening economy, the Fed?s resulting financial position may incur significant declines in bond values and net income when interest rates rise. However, analyzing a range of possible future interest rate scenarios?and their associated probabilities?shows that potential losses associated with these declines are very likely to be manageable.

Date: 2014
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