US Fed should slow its plans to shrink balance sheet, says Urjit Patel

The US Fed started slowing down on asset purchases starting October 2017

The US Federal Reserve should slow down its plans to shrink its balance sheet. Or else, the deluge of US treasury issuance to fund tax cuts will dry up the dollar liquidity globally, said Reserve Bank of India (RBI) governor Urjit Patel in an article in the Financial Times.

“Given the rapid rise in the size of the US deficit, the Fed must respond by slowing plans to shrink its balance sheet. If it does not, treasuries will absorb a large share of dollar liquidity. This will lead to a crisis in the rest of the dollar bond markets. The