Low inflation is a major concern for the global economy: Rajan, ex-RBI chief.
Raghuram Rajan, an ex-governor of India’s central banks, stated that the global economy could return to low inflation and that central bankers who pursue restrictive monetary policies should be aware.
Rajan, who is now a professor of finance in the University of Chicago Booth School of Business, stated that central banks need to ask themselves whether their policies were flexible enough when inflation moved from low to high. He said Friday at a conference hosted by the Bank of Thailand (BoIS) that “we should be ready to potentially return to a low inflation rate.”
Rajan stated, “We must examine what constrains us.” “We must assess whether we didn’t recognize the inflation building, or if we were waiting for our instruments and wanted to preserve them for future generations.
It is therefore important that central banks pursue policies that allow for inflation dynamics to change over time. He also said that headwinds such as de-globalization and slow growth in China can have a negative impact on growth.
Rajan stated that in these volatile times, emerging market central banks have done an amazing job anticipating the need for interest rate increases and it has “served them very well.”