RBI governor vocal on competitive monetary easing
(21 May 2015 – India) Unconventional monetary policies and competitive monetary easing are creating risks in the financial industry, according to Reserve Bank of India (RBI) governor Raghuram Rajan.
In a speech in New York on 19 May, Rajan said it was not an industrial country problem, nor an emerging market problem, but a problem of collective action.
Rajan, is a former International Monetary Fund chief economist, and has been one of the most vocal critics of unprecedented monetary stimulus policies deployed by developed economies.
“The tactics being deployed by some countries to boost growth also create risks in the financial industry, once the era of unconventional monetary policies ends,” Rajan said.
Central banks in the United States, Europe and Japan have tried to spur growth by holding interest rates near zero for years, and through massive asset purchases aimed at holding down longer-term borrowing costs.
“I fear that in a world with weak aggregate demand, we may be engaged in a risky competition for a greater share of it,” Rajan told the Economic Club of New York.
At the meeting he was asked about the health of India’s banking sector to which Rajan said the nation’s banks were “willing to lend,” but “going forward they will need more capital.”
Subscribe