Scott Bessent Remarks on Fed's Balance Sheet Strategy
U.S. Treasury Secretary Scott Bessent indicated that the Federal Reserve is unlikely to expedite decisions on shrinking its balance sheet. Despite nominee Kevin Warsh's criticism, Bessent mentioned that the Fed might take up to a year to decide, especially as it may adopt a larger reserves regime policy.
Scott Bessent, the U.S. Treasury Secretary, suggested on Sunday that the Federal Reserve is not expected to rapidly reduce its balance sheet, even if Kevin Warsh, a critic of bond purchases, becomes Fed chief. Speaking on Fox News' 'Sunday Morning Futures,' Bessent noted that such decisions could take up to a year.
'That will be up to the Fed regarding how they manage the balance sheet,' said Bessent. He noted that adopting an ample reserves policy might mean a larger balance sheet and a more cautious timeline, taking possibly a year to decide a course of action.
Despite President Donald Trump's preference for lower mortgage rates, Bessent highlighted that reducing the Fed's balance sheet poses challenges to financial stability. Warsh argues that the large holdings distort the economy, yet the Fed has resumed technical Treasury bill purchases to maintain system liquidity.
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