India is prepared for potential financial fallout if the Federal Reserve increases interest rates before April 2015, Reserve Bank of India Governor Raghuram Rajan said yesterday in Washington.
“Nobody is prepared for every eventuality, but for most eventualities, we are prepared,” Rajan said in an interview with Bloomberg News after an event in Washington. “For us, the specific timing matters less than that it should happen when U.S. growth is strong.”
The Fed is “mostly” right in how it is managing monetary policy, Rajan said during a panel discussion at George Washington University, adding the central bank needs to improve communications because measures it’s taking now will affect what emerging markets do in the future. Still, he said he doesn’t expect a U.S. rate increase by April 2015.
Rajan’s call for better global policy coordination underscores the challenges faced by emerging markets, which suffered an investment rout last year amid speculation the Fed would soon begin paring stimulus. India has built up foreign-currency reserves and is seeing capital inflows, the RBI chief said, yet even improving emerging economies are exposed to spillovers from Fed policy moves.
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