MNI BRIEF: Fed Losses Make QE Harder To Explain -Mester

Losses for the Federal Reserve have no impact on monetary policy but make it harder to explain the benefits of balance sheet policy, Cleveland Fed President Loretta Mester said Tuesday. The Fed’s net interest income on its securities holdings has fallen below the interest it pays to banks and money funds as rates have risen for the first time in years.

"It doesn't impede the monetary policy that we're doing, but I do think it poses a communications problem," Mester told reporters on a call. "I wouldn't say that it gives me that it would give me pause to use the tool (QE) again, but I think it does pose some communications issue when you're trying to explain the costs and benefits of using that tool."

Ex-Fed staffer Bill Nelson argued on MNI's FedSpeak podcast in July that the Fed's losses pose a direct risk to taxpayers.