More Rate Rises Justified if Economy Meets Expectations — Fed's Dudley

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. According to a preliminary estimate for 2017, the Fed plans to contribute 80.2 billion USD to the federal budget, or 11.7 billion USD (12.3%) less than in 2016. The payments dipped slightly from previous years, falling from $92 billion in 2016 and $97.7 billion in 2015, but still more than double the sums contributed in the mid to late 2000s. Dividend payments to Federal Reserve member banks totaled $784 million.

After the report, traders of short-term rate futures boosted bets the Fed will raise rates this year, and the yield on the two-year U.S. Treasury rose.

The regional Fed banks had net operating expenses of $4.1 billion in 2017, and the Fed system also paid $724 million to produce and retire currency, $740 million to fund the Federal Reserve Board of Governors and $573 million for the operations of the Consumer Financial Protection Bureau. 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 almost $100 billion in 2015.

  • Monte Muniz