More than a decade after the global financial crisis, the exit from an ultra-loose monetary policy — such as near-zero interest rates and helicopter money — in the US is still a work in progress. The US Federal Reserve’s balance sheet has expanded from under $1 trillion before 2008 to $4.5 trillion in the aftermath of the financial meltdown. The Covid outbreak has further pushed the unwinding as the Fed’s balance sheet is expected to jump to 50 per cent of the country’s GDP from the current 34 per cent. The eventual exit would mean liquidity tightening and higher interest rates in the US, which would have implications for emerging markets, including India, by way of dollar outflows from stock market and currency depreciation.
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