Former Federal Reserve Chairman Ben Bernanke says the central bank could reduce its $4.5 trillion balance sheet by as much as half.
"I think they're aiming for something in the vicinity of $2.3 to $2.8 trillion, something like that," he said Monday on CNBC's "Squawk Box."
Bernanke did not expect the Fed would return its balance sheet to precrisis levels of less than $1 trillion.
During the financial crisis, the monetary-policy setting Federal Open Market Committee bought a massive amount of assets and cut short-term interest rates to near zero in an effort to stimulate the economy.
The central bank began moving back toward more normal policy in the last three years by halting new asset purchases and hiking rates three times. The Fed is expected to raise rates at least two more times this year, and March meeting minutes showed policymakers intend to cut the size of the balance sheet in 2017.
"They're going to want to maintain more bank reserves than before the crisis because they want run to monetary policy with a large amount of reserves," Bernanke said.
Total assets of the Federal Reserve
Source: Federal Reserve
In January, Bernanke said in a Brookings Institution blog post that the Fed should not reduce its balance sheet until "short-term interest rates are comfortably away from their effective lower bound" to prevent potential financial markets disruption.
The Fed holds a two-day meeting on Tuesday and Wednesday but is not expected to raise interest rates until at least June.
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— CNBC's Jeff Cox contributed to this report.