[Rury]

The interest income the Fed earns now, is from assets which were created in the past at lower interest rates, where what it's paying out to banks is in current higher interest rates. While this may seem like it could essentially result in QE, the Fed covers the difference via what's considered a deferred asset, which is something that goes away when the income balance changes in the future. It's kind of like paying a future expense now. So, the effect is temporary.

[xhrpost]

Thanks. I've heard of the deferred asset, kind of an IOU to itself. But that only changes, like you said, when the income balance changes. Similarly, we could say that QE is just deferred until the purchased assets are sold again in the future?

[Rury]

I'm not entirely sure, but I think that depends. It's like the Fed is making up the difference in income, by handing out promises which will be paid in the future when the Fed has a positive net income again, so to speak. If the Fed decides in the future to pay for such with newly printed money, then I think you could consider it deferred QE, but if in the future it merely uses the income from its assets to pay for them, then in effect it's not really QE at all. Or vice versa, if the Fed is paying out new money to cover such today, it is reversed in the future (and it therefore acts like temporary QE and deferred QT). Either way, in aggregate, it should balance out, and would only result in QE if it results in new money added to the monetary base.