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Fed's Logan (2026 voter) says balance sheet growth is not bad if it meets public's needs, the Fed should not the balance sheet issues distract from the mission, balance sheet policy should be driven by what is best for the economy

Fed's Logan emphasizes that balance sheet growth is acceptable if it aligns with public needs, indicating a willingness to prioritize economic stability over size constraints.

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Fed's Logan (2026 voter) says balance sheet growth is not bad if it meets public's needs, the Fed should not the balance sheet issues distract from the mission, balance sheet policy should be driven by what is best for the economy

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  • Reducing reserve demand is better than returning to scarce reserves system.
  • A smaller balance sheet could be from lower reserve demand or scarce reserves system.
  • Costs the Fed little to meet bank reserve demand.
  • Possible regulatory changes could reduce reserves demand.
  • Current ample reserves system 'efficient and effective’.
  • Many options with complex interactions for lowering the size of the balance sheet.
  • Broader access to Fed liquidity tools could also lower reserve demand.
  • Pushing banks to economise reserves that would increase financial system risk.
  • Some options to reduce reserve demand must come from areas other than the Fed.
Context

He suggests the current ample reserves system is beneficial, and any future adjustments to the balance sheet should not be distracting from the Fed's core mission. This stance hints at a potentially more flexible approach to monetary policy, impacting market expectations around future rate paths and liquidity.

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