Fed's Schmid (2028 voter) says main focus of Fed balance sheet debate is about size of reserves; concerned about duration of Fed balance sheet
Importance
Level 1
- Fed mortgage holdings have lowered yields there.
- It will take years for the Fed to run off mortgage bond holdings.
- Never returning to Fed balance sheet size seen before financial crisis.
- Appreciates that Warsh, if confirmed as Fed chair, would come with experience.
- Politics do not enter Fed policy debates, independence leads to better decisions; last year's dissents were not done lightly
- T-bill reserve management buying is relatively modest.
- We are in a pretty good place for the job market.
- We have work to do on inflation side of Fed mandate.
- Fed response to market trouble would depend on cause.
- Fed is attentive to, but not preoccupied by, market conditions.
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