Fed’s Balance Sheet Is Point of Tension as Trump Weighs Chair

A key question is emerging as investors await President Donald Trump’s nominee as the next Federal Reserve chair — how the candidate will manage the central bank’s $6.6 trillion balance sheet.

Much of the focus has been on whether Trump’s choice will slash borrowing costs deeply, as the president has pressured current Fed Chair Jerome Powell to do for months. But the other big issue is whether the central bank should keep buying Treasury bills to maintain its balance sheet at present levels, or attempt once again to remove more liquidity from financial markets.

The choice has direct ...