world-economy

Fed's Barr Warns Against Balance Sheet Reduction Amid Financial Stability Concerns

Federal Reserve Governor Michael Barr rejected proposals to shrink the central bank's balance sheet, calling it the wrong objective and a potential threat to financial stability. Speaking May 14 at a Money Marketeers of New York University event, Barr cautioned that such moves could undermine economic resilience. His remarks underscore mounting concerns among Fed officials about maintaining liquidity in the financial system. Separately, Federal Reserve Bank of New York President John Williams indicated the central bank's current interest rate stance remains well-calibrated to address competing pressures on inflation and employment. Barr also flagged emerging risks in private credit markets, warning that stress in that sector could trigger broader credit market disruptions through psychological contagion effects.