MNI BRIEF: Warsh-Smaller Fed Balance Sheet Would Help Economy

A smaller Federal Reserve balance sheet would benefit the economy by creating greater clarity about the central bank's main policy instrument and allowing officials to heed closer to traditional policy rules, former Fed Governor Kevin Warsh, a leading candidate to replace Fed Chair Powell at the central bank's helm, said Friday. 

"There are many benefits of a smaller balance sheet," Warsh said, including "better economic outcomes."

"We have two policy instruments, imperfect substitutes for each other, working sometimes at cross purposes, sometimes working together. But if the printing press could be quiet, you can have low policy rates," he told a Hoover Institution conference. (See MNI POLICY: Warsh Could Reshape Fed On Rates, Communications)