When the mighty US Federal Reserve started to unwind its bloated $4tn balance sheet last year, some investors braced themselves for a shock. But it did not immediately transpire — or at least not in a way that American cable television shows (or a president) might notice. On the contrary, US markets seemed so impervious to the unwinding that many investors have almost forgotten that it is happening. Instead, the main, obsessive focus for debate around the Fed right now is whether it will raise policy rates three or four times this year. But if Urjit Patel, the governor of India’s central bank, is correct, this obsession with US interest rates misses the point. Writing in the Financial Times earlier this week, Patel argued that the Fed’s balance sheet unwinding is quietly contributing to the current turmoil in emerging markets. He warned this could soon get much worse. This is not because Patel thinks that the Fed was wrong to embark on the unwinding. Instead, he worries that Preside...

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