Fed's Waller asserts ample reserves, opposes balance sheet slowdown

Federal Reserve Governor Christopher Waller expressed his dissent against the decision to slow the pace of the central bank's balance sheet runoff, asserting that the banking system still has abundant reserves exceeding $3 trillion. He emphasized that there is no evidence indicating the system is nearing an 'ample' level of reserves, which would justify a slowdown in the asset reduction process. Waller believes that reducing the balance sheet is essential for normalizing monetary policy and that the Fed should continue its current asset drawdown until reserve levels decrease further. He highlighted the importance of developing contingency plans to address any short-term strains that may arise during this process. Waller's stance reflects broader concerns among some policymakers about maintaining adequate liquidity in the banking system while navigating the balance sheet normalization. His comments were made following a recent Federal Open Market Committee meeting where the decision to reduce the monthly cap on asset runoff was made amid concerns about potential market disruptions.