Investing.com -- Dallas Federal Reserve President Lorie Logan on Thursday outlined potential paths for the U.S. central bank to reduce the size of its balance sheet while maintaining the current system's benefits for financial stability.

"When it comes to the balance sheet, as with all of the Fed's work, the focus needs to be on how we can best serve the public and support a strong economy and financial system," Logan said in prepared remarks at a Dallas Fed event.

Logan emphasized that the current ample reserves system "is efficient and effective" and warned that "pressing banks to economize on reserves would only increase risk in the system."

The Fed's balance sheet currently stands at around $6.6 trillion, down from a peak of approximately $9 trillion in 2022. Bank reserves are around $3 trillion. The central bank more than doubled its holdings during the COVID-19 pandemic before allowing bonds to mature without replacement starting in 2022.

Logan said regulatory changes could help reduce reserve demand, pointing to ongoing Fed work that could make reserves management "more efficient," particularly during times of stress. She also noted that broadening access to Fed liquidity facilities, including discount window lending, could reduce financial firms' need to maintain large cash stockpiles.

"Shifting the demand curve inward through steps like these holds substantial promise for reducing reserves while maintaining the benefits of the ample reserves framework," Logan said.

She added that "balance sheet growth isn't bad if it serves the public, but neither should we waste balance sheet space and let it be a distraction from our mission."