Ex Fed's Warsh: smaller Fed balance sheet would allow lower policy rate

May 9 (Reuters) - Kevin Warsh, a former Federal Reserve Governor who is an apparent frontrunner to be U.S. President Donald Trump's pick to be the next Fed chair, on Friday suggested a possible pathway to a lower policy rate, an outcome that Trump has repeatedly, albeit in vain, pressed the current Fed Chair Jerome Powell to deliver.

A large and often growing Fed balance sheet can work at cross-purposes with the Fed's main policy lever of setting short-term borrowing rates, Warsh told a monetary policy panel at Stanford University's Hoover Institution, but "if the printing press could be quiet, we could have lower policy rates."

Warsh also said there is no "cruel choice" between the Fed's two objections of stable prices and full employment, an apparent reference to the idea long prevalent in central bank thinking that the cost of bringing down inflation is harm to the job market.