Global central banks would do a better job of checking inflation by focusing on their core mandate, rather than trying to achieve multiple goals through monetary policy, according to former Indian central bank Governor Raghuram Rajan.
“They know how to bring down inflation once it exceeds a certain point,” Rajan said in an interview with Bloomberg Television’s Kathleen Hays. “If you told them that is your job and focus on that and leave all this other stuff aside, it would make their job a lot easier.”
He said issues such as climate change and employment are peripheral to the central bank mandate and could be better dealt with direct polices.
Monetary policy makers from the US to Australia have raised borrowing costs faster than expected to control inflation after getting its trajectory wrong. The hawkish outlook on rates has fueled fears of a recession.
“These are difficult times,” Rajan said at the Federal Reserve Bank of Kansas City’s annual gathering in Jackson Hole. “You can maybe criticize them a little bit for being a little late on reacting to inflation, but it’s hard to say that they have got it completely wrong.”
Central bank governors have gathered at the conference in Wyoming where investors will be listening closely for clues on the pace of future rate action. The much anticipated speech by Federal Reserve Chair Jerome Powell, ahead of Sept. 20-21 policy meeting, may restate the Fed’s resolve to keep hiking interest rates to fight high inflation.
“It’s okay to assume may be it pauses after that to see how the economy is progressing, but you need a very serious recession by April for the Fed to start cutting,” Rajan said.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
