Fed’s Barr Says Shrinking Balance Sheet Is ‘Wrong Objective’ (1)

Federal Reserve Governor Michael Barr on Thursday pushed back against proposals to shrink the central bank’s balance sheet, describing them as wrong and a threat to financial stability.

The remarks by Barr are a direct rebuttal to calls from the incoming Fed chair, Kevin Warsh, who has repeatedly warned that the central bank needs to reduce its balance sheet to minimize its intervention in financial markets.

Barr said the central bank’s balance sheet operations lie at the core of promoting a sound banking system. He warned that some proposals that have been floated would increase the Fed’s footprint in ...