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Federal Reserve Posted Loss of $18.7 Billion in 2025

  • The Federal Reserve reported an operating loss of $18.7 billion in 2025, its third consecutive year of losses.
  • The Fed’s deferred asset, an IOU covering losses, grew to $243.5 billion in 2025 from $216 billion in 2024.
  • The losses are a side effect of the central bank’s aggressive interest rate hikes starting in 2022 to combat high inflation.

 
Iran War’s Impact on European Financial System ‘Contained’ for Now, ECB’s De Guindos Says

  • European Central Bank Vice President Luis de Guindos warned the Middle East conflict could cause systemic stress for Europe’s financial system.
  • The conflict, which began in late February, has largely closed the Strait of Hormuz and caused big swings in financial markets.
  • De Guindos stated European banks have robust capital and liquidity buffers, but called the conflict a supply shock with far-reaching repercussions.
BOE Must Be Patient in Considering Response to Middle East War, Says Breeden

  • The Bank of England should not rush its decision on the Middle East conflict’s impact, said Deputy Governor Sarah Breeden.
  • The Bank of England left its key rate unchanged last week, ready to act if energy prices cause persistent high inflation.
  • Breeden said policymakers must be patient, noting inflation could fall below target if economic growth is significantly impacted.
Middle East Conflict to Push U.S. Inflation Sharply Higher, Says OECD

  • The OECD warned that the global economy faces a large growth setback and higher inflation if energy prices remain high due to the Middle East conflict.
  • The OECD left its 2026 global growth forecast unchanged but lowered projections for the eurozone and U.K. while raising the U.S. forecast.
  • The research body raised its 2026 inflation forecast for G20 economies to 4% from 2.8%, expecting central banks to hold or modestly raise rates.
Norges Bank Expects to Lift Borrowing Costs This Year as Energy Prices Stoke Inflation

  • Norges Bank expects to raise its key policy rate later this year, citing higher energy prices and inflation from Middle East conflict.
  • Policymakers held the key policy rate at 4% for the third consecutive meeting, aligning with a Wall Street Journal poll.
  • New projections signal a policy rate increase to 4.25%-4.5% by year-end, according to Governor Ida Wolden Bache.
Philippine Central Bank Warns of Mideast War Inflation Risks, Holds Fire on Rate Hike

  • The Philippine central bank warned inflation will breach 4% this year but kept its policy rate at 4.25% to aid recovery.
  • The central bank projects inflation to average 5.1% in 2026 and 3.8% in 2027, topping 4.0% this year.
  • The Philippines declared an energy state of emergency due to the imminent danger of critically low supply.
German Consumer Confidence Sinks to Two-Year Low as War Raises Inflation Fears

  • German consumer sentiment fell to its weakest level since March 2024 due to the Middle East conflict and energy prices.
  • Consumers’ income expectations damped on inflation fears, and 60% of Germans expect long-term high energy prices.
  • Weaker consumer confidence aligns with worsening sentiment among German firms, whose business-climate index also dropped.
RBA Warns Global Oil Shock Could Drive Up Inflation Expectations

  • The Reserve Bank of Australia stated the Iran war’s global supply shock risks inflation in Australia.
  • Chris Kent, assistant governor at the RBA, said central banks must prevent initial price rises from extending inflationary pressures.
  • Australia entered the oil-price shock with high inflation; the RBA raised interest rates in February and March.
 

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