Federal Reserve Board Governor Bowman supports holding only Treasury bonds and reforming the monetary policy mechanism

Federal Reserve Board Governor Bowman said the Fed should seek to achieve the smallest possible balance sheet size and comprehensively reform its monetary policy implementation mechanism. Bowman said: "In the long run, I tend to maintain the smallest possible balance sheet, so that the reserve balance is close to the scarce level rather than the abundant level." Bowman believes that returning to the Fed's mechanism of actively managing the balance sheet will better reflect market pressures and operational problems. Bowman said: "Allowing moderate fluctuations in the money market can enhance our understanding of the market clearing point." She also said that she supports the Fed's balance sheet holding only Treasury bonds, with a slightly shorter maturity, rather than completely consistent with the maturity structure of the overall market. She said this would give the Fed greater flexibility. Bowman added that the Fed should consider actively selling its mortgage-backed securities (MBS). (Jinshi)