RBI Governor Says Market is Overburdening Central Banks

Central banks are under too much pressure to fix struggling economies, according to the man in charge of India’s monetary policy.

Reserve Bank of India governor Raghuram Rajan hinted that using cheap money to tackle economic problems – rather than painful reform – had to stop.

And he warned said that more intervention by central banks now risked doing “more harm than good”.

Mr Rajan accurately predicted the global financial crisis in 2008.

In an exclusive BBC interview in Mumbai he said: “I have been a little concerned about the immense burden for action that is falling on central banks and I think it is quite legitimate for central banks to say at some point we can’t carry the burden ourselves in fact we may not have the tools to do everything that is asked of us.”

“Don’t keep asking us to do more because at some point we get into territory where the consequences may be more bad than good if we actually act.”

Mr Rajan acknowledged that his situation was not typical in the current climate, because unlike most global economies, India still has high inflation – running at close to 6%. Interest rates are also high – at 7.25% despite having been cut three times this year to try and stimulate growth.

via BBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza