Warsh may find shrinking Fed’s balance sheet difficult, BofA says in World Economy News 10/02/2026 Kevin Warsh, President Donald Trump’s nominee to be the next Federal Reserve Chair, would likely find it difficult to shrink the U.S. central bank’s large bond holdings without a tightening of financial conditions, according to analysts at BofA Securities. Warsh has been a frequent critic of bond purchases by the Fed, arguing that such holdings end up distorting the overall state of finances in the economy. Instead, he has argued for a reduction in the Fed’s balance sheet. Following a major campaign to expand its balance sheet to help support the economy during the global financial crisis and COVID-19 pandemic, the Fed has let it fall from as high as $9 trillion in 2022 to $6.6 trillion late last year. However, the Fed once again began to grow out its balance sheet in December, as part of a bid to ensure that there was enough liquidity within the financial system to keep interest rates floating around officials’ target range. It is now unclear if Warsh will push to end this process. Writing in a note, the BofA analysts including Mark Cabana and Katie Craig argued that while Warsh has often taken a critical stance against the Fed’s balance sheet policies, they “suspect he would find it easier to be” a critic versus a “change agent.” They added that, to shrink the balance sheet’s size, Warsh would need to also lower its liabilities, possibly through changes in bank liquidity guidance and regulations. But “[i]f Warsh pushes too hard on Fed sheet reduction, it could risk funding vol[atility], broader [market volatility], [and] tighter fin[ancial] conditions,” they wrote. “We suspect Warsh to favor easy fin[ancial] conditions over smaller Fed sheet, given difficulty of reducing Fed liabilities.” The analysts flagged that President Trump, in particular, would likely care more about financial conditions than the Fed’s reserves, adding that Warsh is “likely to side with Trump.” Warsh, for his part, has said that shrinking the balance sheet would be hard to do, especially because it is used to manage the Fed’s target range. Source: Investing.com 2026-02-10 hellenicshippingnews... window.___gcfg = {lang: 'en-US'}; (function(w, d, s) { function go(){ var js, fjs = d.getElementsByTagName(s)[0], load = function(url, id) { if (d.getElementById(id)) {return;} js = d.createElement(s); js.src = url; js.id = id; fjs.parentNode.insertBefore(js, fjs); }; load('//connect.facebook.net/en/all.js#xfbml=1', 'fbjssdk'); load('https://apis.google.com/js/plusone.js', 'gplus1js'); load('//platform.twitter.com/widgets.js', 'tweetjs'); } if (w.addEventListener) { w.addEventListener("load", go, false); } else if (w.attachEvent) { w.attachEvent("onload",go); } }(window, document, 'script')); tweet Share