Federal Reserve Governor Michael Barr urged policymakers to avoid shrinking the Fed’s balance sheet by easing bank liquidity requirements. He warned such changes could weaken financial resilience, disrupt money market functioning, and raise the chance that banks would need emergency central bank support during stress. Barr pointed to the 2023 banking turmoil as evidence regulators should strengthen, not loosen, liquidity buffers. His remarks arrive as debate intensifies over a possible future Fed direction under Kevin Warsh, who favors a smaller balance sheet and argues it could create more space to cut rates.
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