Bowman Says Fed Should Use Smallest Possible Balance Sheet (2)

Federal Reserve Vice Chair for Supervision Michelle Bowman said the US central bank should seek to achieve the smallest balance sheet possible and overhaul its regime for implementing monetary policy.

“Over the longer run, my preference is to maintain the smallest balance sheet possible with reserve balances at a level closer to scarce than ample,” Bowman said Friday in prepared remarks for a speech at the Forecasters Club of New York.

Fed Governor Michelle Bowman.

Photographer: Al Drago/Bloomberg

Bowman argued that returning to a regime where the Fed is actively managing the balance sheet would give it better indications of market stress and functioning issues.

“Allowing ...