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Brookings Institution research: The Federal Reserve can achieve balance sheet reduction through regulatory and payment system reforms

Brookings Institution research: The Federal Reserve can achieve balance sheet reduction through regulatory and payment system reforms

格隆汇格隆汇2026/03/26 01:17
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```htmlGelonghui March 26|A new study released by the Brookings Institution states that if the Federal Reserve truly wants to reduce the size of its balance sheet, it could achieve this goal through regulatory reforms, adjustments to the payment system, and more frequent market interventions by the central bank. The study outlines a complex path that will take some time to accomplish. Darrell Duffie, a professor of management and finance at Stanford Graduate School of Business who authored the study, wrote that the key to any reduction in the Federal Reserve’s balance sheet lies in lowering the very strong demand for reserves in the market. To curb this demand, liquidity rules could be relaxed, making financial institutions more willing to decrease their holdings of liquidity. The Federal Reserve’s Fedwire payment system could be adjusted to more closely match companies’ inflows and outflows, further lowering the necessity to maintain excessive cash. The Federal Reserve could also adjust the interest rate paid to financial institutions, applying a lower rate on reserves that exceed a certain threshold. Lastly, the Federal Reserve could more frequently adopt measures for injecting temporary liquidity, such as temporary open market operations, to replace the current highly automated liquidity management model.```
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