Federal Reserve's Waller Advocates for Continued Balance Sheet Reduction

According to Odaily, Federal Reserve Governor Christopher Waller has expressed support for the continued reduction of the central bank's balance sheet. He emphasized the importance of adjusting the asset structure to increase the proportion of short-term assets, though he noted that excessive reductions might not be necessary. In a speech prepared for a Dallas Federal Reserve event, Waller stated, "I believe we are likely to continue allowing securities that mature and are prepaid to naturally exit the balance sheet, thereby reducing reserve balances." His remarks focused on the balance sheet, advocating for a reduction, but to a lesser extent than some Federal Reserve observers and economists have suggested. Waller highlighted that bank reserves are currently at a "plentiful" level, exceeding the Federal Reserve's "ample" standard. He suggested that the ideal reserve size should be around $2.7 trillion. Including the Federal Reserve's holdings of currency in circulation and the Treasury's general account balance, the total balance sheet size would reach $5.8 trillion, compared to the current size of $6.7 trillion.