Fed’s Waller Sees Balance Sheet Drifting Toward $5.8 Trillion

Federal Reserve Chair Jerome Powell said on 24 June that the central bank is “on the right track” in reducing its asset holdings and still has “some shrinking left to do,” adding that the current pace of balance-sheet runoff could continue for “a good while.” Governor Christopher Waller on 10 July gave further detail, estimating that the portfolio might ultimately settle near $5.8 trillion, compared with roughly $6.7 trillion today. He suggested the Fed could aim for about $2.7 trillion in bank reserves, down from roughly $3.3 trillion, and noted that forces outside the Fed’s control are temporarily propping up the total size. Waller also argued the central bank holds “too many” long-maturity securities and should gradually tilt its reinvestments toward Treasury bills once the runoff is further advanced. Both officials indicated that while additional tightening is ahead, the amount of further balance-sheet shrinkage may be smaller than earlier expected.