finance
Federal Reserve Official Discusses Path to Smaller Balance Sheet
A Federal Reserve official said reducing banks' demand for reserves would offer a smoother route to shrinking the central bank's balance sheet than cutting the supply of reserves. The official also noted potential stability benefits from maintaining a large balance sheet.
May 28, 1:22 PM·1m read1 source
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A Federal Reserve official stated that lowering the banking system's demand for reserves would provide a smoother approach to reducing the central bank's balance sheet than directly shrinking the supply of reserves. The same official added that a large balance sheet carries some benefits for financial stability.
The comments address ongoing discussions about the size of the Federal Reserve's balance sheet following years of asset purchases. Reducing reserves held by banks forms one element of efforts to normalize monetary policy operations. No specific timeline or numerical targets were provided in the remarks.
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