Fed Governor Waller supports balance sheet reduction and asset structure adjustment
Odaily News Fed Governor Waller said the balance sheet should continue to shrink, including by adjusting the asset structure to increase the proportion of short-term assets, but there may not be a need for excessive reductions. I think it is very likely that we will continue to allow maturing and prepaid securities to naturally exit the balance sheet for some time to come, thereby reducing reserve balances, Waller said in remarks prepared for a Dallas Fed event on Thursday. In a speech focused entirely on the balance sheet, Waller advocated for a smaller balance sheet than some Fed watchers and economists have suggested. He suggested that bank reserves are still at an ample level (higher than the adequate standard set by the Fed) and that the ideal size should be maintained at about $2.7 trillion. If the Feds currency in circulation and the balance of the Treasurys general account are added, the total balance sheet size will reach $5.8 trillion, compared with the current size of $6.7 trillion.
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