Faltering US, global economy behind Fed delay: RBI Guv Rajan
19 Sept 2015 7:31 AM IST
“If we look around the world today, it doesn’t present a pretty picture. Industrial countries are still struggling, with a few exceptions, to grow and the uncertainty about growth in the US as well the world is probably what impelled the Fed to stay on hold yesterday,” Rajan said here.
The Governor was making his opening remarks before delivering the CK Prahalad memorial lecture here this morning.
In what could be termed as the most-awaited Fed meeting since the 2008 global credit crisis, the world’s most powerful central bank again postponed its intended decision to increase the rates from 0.00-.025 per cent till the end of the year, giving a big relief to India and other developing countries.
“To support continued progress toward maximum employment and price stability, the Fed committee on Friday reaffirmed its view that the current 0 to 1/4 <g data-gr-id="29">per cent</g> target range for the federal funds rate remains appropriate,” Federal Reserve chair Janet Yellen said after a two-day meeting in Washington.
In New Delhi, Economic Affairs Secretary Shaktikanta Das said the US Fed decision gives more room to emerging markets for policy adjustment. “The Fed has given a clear signal that any increase would be calibrated,” Das said in first official response to the Fed decision.
The market anticipates that Rajan will cut rates at the September 29 meeting. It can be noted that the world’s <g data-gr-id="25">second largest</g> economy China has been in perils since beginning of the year, which pulled down global commodity prices to near record lows.
The Fed said it anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back to its 2 <g data-gr-id="26">per cent</g> objective over the medium-term.
Still worried on inflation, pins fall on low base
As the clamour for a rate cut by RBI grew with the US Fed leaving ultra-low rates intact, Governor Raghuram Rajan on Friday kept all guessing about his next monetary policy move saying the ‘key task’ is to keep inflation low. He further said the “excessively low” level of retail inflation at 3.6% last month was due to “base effects”, excluding which it should be around mid-5%. “The key task is to keep inflation low, not just today but well into the future,” he said while addressing industrialists and bankers at an event here. Rajan has been under pressure to cut the rates further, with the government and industry leaders repeatedly stressing <g data-gr-id="64">on </g>the need to lower the cost of capital to give a boost to the economy, especially in the wake of retail inflation hitting record low levels and wholesale inflation being in the negative zone for 10 months in a row.
Next Story
