RBI Governor Raghuram Rajan on Monday addressed a packed hall at the Tata Institute of Fundamental Research. This was his first public engagement after saying on Saturday he wanted to go back to academia after his term at the central bank comes to an end on September 3. Excerpts from his speech:
Brexit can be quite damaging if it happens. Of course, we have factored in some probability of it happening. If it doesn't happen, you could see some significant rebound. We are preparing for it and monitoring the markets"
We will do what it takes to moderate market volatility, but once the initial bouts of wave abate, people look for good fundamentals"
By focusing on WPI, we could be deluded into thinking we control inflation, even though it stems largely from actions of central banks elsewhere. In doing so, we neglect CPI which is what matters to our common man, and is more the consequence of domestic monetary policy"
If a critic believes interest rates are excessively high, he either has to argue the government-set inflation target should be higher than it is today, or that the RBI is excessively pessimistic about the path of future inflation. He cannot have it both ways, want lower inflation as well as lower policy rates"
Decades of studying macroeconomic policy tells me to be very wary of economists who say you can have it all if only you try something out of the box"
In recent years, our fight against inflation also meant the policy rate came down only when we thought depositors could expect a reasonable positive real return on their financial savings. This has helped increase household financial savings relative to their savings in real assets, and helped bring down the current account deficit"
