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

• 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.

Fed's Schmid emphasizes that the focus of the balance sheet debate centers on the size of reserves, reflecting a long-term commitment to a lower balance sheet size than pre-crisis levels. His comments signal that while the Fed is keeping an eye on market dynamics, it remains concentrated on inflation targets and labor market conditions, suggesting a cautious, data-driven approach to policy without heavy political influence.