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Central banks like the Bank of England and the Fed must cover their costs. I was wondering how they do this? I can think of two possible mechanisms:

  1. Government allocates money from its tax revenue to the central bank, which then uses this money to cover costs.

  2. The central bank creates an amount of money necessary to cover its costs.

This question is specifically about central banks as they alone have the authority to create new money.

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  • $\begingroup$ You can easily find the Bank of England's annual accounts - it does not use either method $\endgroup$ – Henry Nov 19 '19 at 0:26
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    $\begingroup$ Possible duplicate of How does a bank create new money when it pays its own staff? $\endgroup$ – Kenny LJ Nov 19 '19 at 1:07
  • $\begingroup$ @KennyLJ This is about central bank though... so the answer might be different? $\endgroup$ – Art Nov 19 '19 at 1:58
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    $\begingroup$ Yes, they are. And in the US at least, if profits did not exceed costs, they’d be funded by the Treasury. $\endgroup$ – dismalscience Nov 19 '19 at 17:33
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    $\begingroup$ Indeed the Fed does, at least during a contingency. During the US government shut-down of 2018-2019, the Fed did not shut down and its staff continued to be paid, using coupon payments from its QE portfolio. $\endgroup$ – Michael Nov 20 '19 at 3:39

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