"Guideposts for a New Central Banker" and important comments on Fed's balance sheet and QT/Retail comments and some on CRE

I forgot to mention yesterday the very important comments we heard from the new (6 months in) KC Fed president Jeff Schmid who replaced Esther George, someone I was a fan of. It was the first speech he gave titled "Guideposts for a New Central Banker" so we finally got a sense of his thinking though he does not vote this year. He commented on both rates and importantly on the Fed's balance sheet, where the latter I believe is a big deal this year in terms of how much more it shrinks in size. 

He's in the 'lets take our time' camp with rate cuts. "With inflation running above target, labor markets tight, and demand showing considerable momentum, my own view is that there is no need to preemptively adjust the stance of policy...I believe that the best course of action is to be patient, continue to watch how the economy responds to the policy tightening that has occurred, and wait for convincing evidence that the inflation fight has been won."

On the balance sheet, he is clearly on the side of wanting to get it smaller. Under a section of his speech titled "Minimizing the Federal Reserve's Financial Footprint", which I say amen to, he said this specifically applies to the Fed's balance sheet. He does talk about the huge increase that the Fed took on during times of crisis such as the GFC and Covid but then said "However, maintaining a persistently large presence in markets in normal times comes with costs and increases the possibility of unintended consequences. These concerns have been highlighted by the KC Fed in the past and are concerns I also share. To be specific, I offer three examples:"

1)"First, maintaining a large portfolio of long-term Treasury and mortgage debt can create distortions in the price of assets and the allocation of credit. These distortions risk misallocations that can ultimately sow the seeds of future imbalances in the economy."