Jeff Lacker on Shrinking the Fed’s Balance Sheet

About this episode

Jeff Lacker discusses the implications of shrinking the Fed's balance sheet and the challenges faced by policymakers.

The Fed’s balance sheet has swelled from $900 billion in 2008 to just under $7 trillion in April 2026. Policymakers bought up securities to support the economy during the global financial crisis and pandemic, but critics allege the enormous balance sheet boosts inflation and distorts financial markets. If Kevin Warsh tries to reduce the Fed’s holdings as Chair, he must contend with the existing regulatory environment and the Fed’s ample reserves regime. In this episode, we talk with Jeff Lacker, the former President of the Richmond Fed from 2004-2017, about the theory behind central bank asset purchases, the costs and benefits of QE, and how a Kevin Warsh-led Fed could shrink the balance sheet.

People in this episode

Host: Will Compernolle

Guest: Jeff Lacker

Topics covered

• Federal Reserve
• balance sheet
• quantitative easing
• inflation
• financial markets

Keywords

• Fed balance sheet
• quantitative easing
• inflation
• Kevin Warsh
• financial crisis

Mentioned in this episode

Organizations: Richmond Fed

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