Fed Governor Barr warns against shrinking balance sheet via liquidity cuts
Fed Governor Michael Barr argued that lowering liquidity rules to shrink the Fed’s balance sheet is misguided and would increase financial stability risks.
The current policy framework has served markets well, and many proposals to achieve a smaller balance sheet would undermine bank resilience and threaten financial stability.
The Fed is working to align its balance sheet duration with the broader Treasury market, focusing on effective rate control and policy implementation.