The global economy is currently going through an uncertain path as myriad elements with the potential to induce volatility continue to be active. The myriad conflicts plaguing the world could bring about chaos not only on the humanitarian front but also on the economic end.
Focus On Inflation
As the world navigates through these tricky terrains, renowned economist and former RBI governor, currently a member of the revered Chicago Booth School, shared his thoughts on the evolving situation in the global economy.
Rajan underscored and laid emphasis on the conduct of the US Fed and said the incessant promise of aggressive rate cuts to sway the market may have consequences that may not be desirable. |
While speaking to CNBC TV-18, Rajan touched upon the role of Central Banks in this time of uncertainty. According to Rajan, citing the cases of the US Fed, the Bank of Japan and other central banks around the globe, central banks should focus on their mandate for inflation. And he also implied that the central banks should not focus on trying to assuage the markets.
He underscored and laid emphasis on the conduct of the US Fed and said the incessant promise of aggressive rate cuts to sway the market may have consequences that may not be desirable.
According to him, the last thing that the Fed would want, as it looks for a soft landing, is to have it take off with aggressive spending.
Japanese Economy In Focus
Rajan also touched on the functioning of the Japanese economy and the Bank of Japan. According to Rajan, the BoJ's attempts to further increase interest rates could hamper consumption in the Japanese economy.
It is to be noted that the country had record-low interest rates for many years, until that practice was recently reversed. It also needs to be understood, that despite the low interest rates, the country's growth and consumption remained stagnant.
It is to be noted that the Japanese economy has been stagnant for nearly three decades, with low consumption despite monumentally low interest rates.
Rajan also focused on the Chinese economy and the recent numbers suggesting a further slowdown, owing to a drop in consumption. |
Rajan also focused on the Chinese economy and the recent numbers suggesting a further slowdown, owing to a drop in consumption. Rajan primarily underscored the declining real estate sector, which has been the Achilles heel of the dragon for some years now. rajan
Given the uncertainties, Raghuram Rajan highlighted the phenomenon of Masterful Uncertainty. This, as predicting the progress of the economy is 'anyone's guess'.
All these factors, in turn, could affect the Indian paradigm, as major economies and the equity markets in those economies often end up affecting emerging economies like India throughout the globe.
And the RBI and the Indian economy, according to him, are therefore susceptible.
