Fed controls the interest rates by increasing and decreasing the money supply but does it not incurr a loss...

in the process. For example if Fed wants to increase the rate to 5% and to do that it starts selling T-bills starting at the market rate of 4.75% until the rate touches 5%. So, in a way Fed raised money at higher than the market rates. Who will pay for the difference? Does the Fed have enough investment opportunities where it could earm more than 5%? and if not who bears this loss every time Fed enters the money market with an intent to influence the interest rates.Fed controls the interest rates by increasing and decreasing the money supply but does it not incurr a loss...
The Fed does lose money in that specific case, however its overall operations cover the cost. In addition, the Fed is a peculiar not for profit organization. It has a statutory limit on its profitability. Any excess profit is returned to the Treasury. In addition to its lending activity the Fed charges fees for services just like other banks.Fed controls the interest rates by increasing and decreasing the money supply but does it not incurr a loss...
The first answer you got on this question is really good. If you are so focused on money supply, I am guessing you are too focused on reading texts from the 70s and early/mid 80s. Money supply is not really considered to be a worthy indicator or tool anymore...however, it WAS considered very important in the later 70s and early/mid 80s. EVERYONE waited to hear how M1, M2, M3 were doing. In more modern economic theory, money supply has kind of fallen by the wayside.
The central banking authority uses it as a weapon to control credit. That is the money in circulation and the excess money with banks for lending is reduced than the banks will have to restrict their lending. Federal bank is not a commercial bank but it is the controlling bank- controlling the economy of the country and inflation has to be controlled at any cost.
The Fed's influence on interest rates is largely limited to their increases and decreases in the Fed Funds rate--the rate that banks charge one another for loans. If they raise this rate, banks will lend less money, slowing the economy.





This is completely separate from the Fed issuing bonds at prevailing market rates to meet the bloated goverment budget and repay maturing bonds.