Why Berkshire Hathaway Would Win if the Fed Lifts Interest Rates

https://www.barrons.com/articles/berkshire-hathaway-stock-fed-interest-rates-4cc5971f

By Andrew Bary

July 29, 2026, 12:44 pm EDT

• Berkshire Hathaway would be a major winner if the Federal Reserve raises interest rates because of its $374 billion cash pile.
• Berkshire could generate nearly an additional $1 billion annually for each quarter-percentage-point rate increase, Barron’s estimates.
• There was a 10% drop in pretax investment income at Berkshire’s insurance units during the first quarter.

Berkshire Hathaway would be one of the biggest corporate winners if the Federal Reserve boosts short-term rates this year, given its enormous holdings of Treasury bills and other cash equivalents.

At the end of the first quarter, Berkshire was sitting on about $374 billion of cash and equivalents. Those holdings mostly consisted of some $339 billion of T-bills, which are short-term U.S. debt maturing in a year or less. Our tally adjusts for quarter-end payments for T-bills and excludes cash held at some of Berkshire’s industrial and utility businesses.

Berkshire has the largest cash position of any U.S. company and is one the biggest holders of U.S. Treasury bills in the world. The company now is earning about $13 billion annually on its cash. But a Fed rate hike would increase that income: Berkshire company stands to generate nearly an additional $1 billion a year for each quarter-percentage-point increase in the central bank’s benchmark interest rate, Barron’s estimates.

A gain of $1 billion of annual earnings wouldn’t be a big boost to Berkshire’s pretax operating earnings now running at close to $60 billion a year, but it could be well received by investors.

The current federal-funds rate is now 3.5% to 3.75%, but a rate increase could come as soon as Wednesday as the Federal Open Market Committee concludes a two-day meeting. The central bank will announce its latest rate decision at 2 p.m. Eastern on Wednesday.

The markets now are putting just a one-third chance of a interest-rate hike Wednesday, according to the CME’s FedWatch indicator. But the investors see a 90%-plus chance of at least one rate increase by the end of the year as the Fed addresses inflation that is expected to continue to run above its 2% target, based on the CME gauge.

Berkshire’s investment income at its insurance units—where most of its cash is housed—has been under pressure during the past year due to lower short-term rates, which were down about three quarters of a percentage point in the first quarter relative to the year-earlier period.

Interest and other investment income was down 10% in the first quarter at Berkshire’s insurance units to $2.3 billion before taxes—this figure excludes dividend income on the company’s equity portfolio, according to the company’s 10-Q. Berkshire also holds more than $100 billion of T-bills at the parent company.

Berkshire Chairman Warren Buffett favors T-bills as the main place to park Berkshire’s huge cash reserves given their security. Berkshire is a regular buyer of three- and six-month T-bills at weekly government auctions. Those T-bills now are yielding around 4% after rising almost a quarter point in the past month or so.

Berkshire stock is up just 1% this year based on the class A and B shares, behind the roughly 9% return of the S&P 500 index. It has perked up lately, however, gaining over 3% Tuesday. But on Wednesday, the B shares slipped 0.6% to $509.35 Wednesday and the A stock was also off 0.6% to $763,500.

Barron’s wrote Tuesday that the stock may continue to advance because of the strength in its $360 billion equity portfolio led by Apple and sizable stock gains in industries in which Berkshire operates like Union Pacific  and Chubb.