Fed's Schmid: The more the Fed's balance sheet can be shrunk the better

By Michael S. Derby

Sept 25 (Reuters) - Federal Reserve Bank of Kansas City President Jeffrey Schmid said Thursday he’d like to get the central bank’s balance sheet down as far as it can go.

“The more we can get our balance sheet out of the financial system environment” and allow banks to manage their liquidity needs with one another rather than with the central bank, the better it will be, Schmid said in response to an audience question at a gathering of the Mid-Sized Bank Coalition of America in Dallas. The Fed has been contracting its holdings since 2022, amid questions about how far this process can run.