Fed's policy committee to weigh balance sheet issues early next year, Warsh says
TLT•Kevin Warsh said the Fed's policy-setting committee will likely consider recommendations from a balance sheet task force early in the first quarter of 2027. The Fed's holdings have fallen from a peak of about $9 trillion to around $6.8 trillion, but further reductions could risk money market volatility.
1. Committee to consider proposals
Fed Chairman Kevin Warsh said policymakers will likely receive recommendations from a task force studying the central bank's balance sheet early in the first quarter of 2027. The timing could change, and Warsh said any changes would follow serious consideration of the proposals.
2. Further reductions pose challenges
The Fed's holdings rose from under $1 trillion before the 2008 financial crisis to a peak of about $9 trillion in summer 2022. They are now around $6.8 trillion after passive runoff, but the central bank has found it cannot shrink them much further without risking money market volatility. Further reductions could require changes to the Fed's short-term interest-rate toolkit and regulatory changes allowing financial institutions to hold less emergency cash.
