In this episode of MacroMatrix, host Ethan sits down with senior financial analyst Tracy to unpack why the U.S. Federal Reserve is experiencing unprecedented operating losses. They dive deep into the mechanics behind interest on reserve balances (IOR), the consequences of aggressive rate hikes, and the growing gap between the Fed's interest income and expenses. Tracy explains how the Fed's large balance sheet, quantitative tightening, and unrealized losses on securities are impacting its financial position. The discussion also explores how IOR affects bank profitability, lending behavior, and short-term interest rate control. Finally, they examine potential policy alternatives and lessons from other central banks. A must-listen for anyone looking to understand the Fed’s evolving financial challenges and their broader implications for markets and the economy.