Fed's Barr says wrong to lower liquidity rules to shrink Fed holdings

Federal Reserve Governor Michael Barr said lowering liquidity requirements to shrink the Fed's balance sheet would be a bad idea, warning it could weaken financial-system safety. The comments are negative for prospects of regulatory easing and reinforce a cautious stance on bank liquidity standards. Market impact is likely limited but relevant for banks and rate-sensitive financials.

Analysis

Federal Reserve Governor Michael Barr said lowering liquidity requirements to shrink the Fed's balance sheet would be a bad idea, warning it could weaken financial-system safety. The comments are negative for prospects of regulatory easing and reinforce a cautious stance on bank liquidity standards. Market impact is likely limited but relevant for banks and rate-sensitive financials.