Fed's Williams (Voter) says there is good understanding about ways to shift demand for reserves; Balance sheeet debate should not be about the nominal size of holdings

Balance Sheet

• Reforms to liquidity regulations should bear in  mind bank safety issues.
• Unclear how much smaller Fed balance sheet can get.
• Fed's goal with balance sheet is about interest rate control.
• Balance sheet policy will react to regulator changes.

Economy/Policy

• Inflation is far too high.
• Markets still expect oil prices to come down over the next 6-12 months, view is reasonable.
• Monetary Policy is focused on how energy prices impact inflation.
• AI investment is a driver of inflation.
• Tariffs impact on inflation close to its peak.
• Fed Minutes captures a "collective reaction function"
• Will get inflation back to 2%.
• Key to look at underlying inflation actors; not just a specific measure.
• Government technical changes could better reconcile PCE inflation and CPI differences.
• Policy to remain data dependent. Will have to see how monetary policy reacts to data.
• Labur market has been very stable.
• Risk is currently more on the inflation side.
• 0.2% monthly PCE in H2 will be consistent with the goal.
• Still uncertainty about longer term neutral rate.
• Timeline for Fed task forces is pretty aggressive.
• Ample reserves is the state of money markets, not a specific number.

AI:

• In the longer run, AI investment will be a positive supply shock.
• Base case sees broader use of AI that boosts productivity.

Task Forces:

• Fed task forces a timely chance for officials to think about policies.

Standing Repos:

• Standing repo operations should be seen as business as usual.
• Central clearing of standing repos likely to bring benefits.