Federal Reserve Governor Waller Supports Balance Sheet Reduction and Adjustment of Asset Structure

Federal Reserve Governor Waller said that the balance sheet should continue to be reduced, including adjusting the asset structure to increase the proportion of short-term assets, but it may not be necessary to cut excessively. "I think we are likely to 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 prepared remarks for a Dallas Fed event on Thursday. In his speech focusing on the balance sheet, Waller advocated for a smaller reduction than some Fed watchers and economists have suggested. He suggested that bank reserves are still at a "sufficient" level (above the "adequate" standard set by the Fed), and the ideal size should be maintained at approximately $2.7 trillion. If the Fed's holdings of currency in circulation and the Treasury Department's general account balance are added, the total balance sheet size would reach $5.8 trillion, compared to the current size of $6.7 trillion. [Odaily Planet Daily]