Rajan Says Fed Delayed Rate Hike On U.S. Growth Concerns

Brazil and Russian Federation are deep in recession and South Africa is teetering on the brink, while China’s economy saw its weakest performance in 24 years in 2014. Most emerging markets have witnessed good inflows from foreign investors over the last 10-12 years.

“Brazil tried to grow too fast”.

Stating that part of the credit for creation of UIDAI can be attributed to a letter recommending such a system written by celebrated academic Prahalad and himself, Rajan said it has a host of advantages like plugging duplication of beneficiaries, avoiding overborrowing and helping a person avail of credit.

Rajan was critical about the impatience to regain growth and highlighted the experience of both Brazil and China.

“Brazil may have overspent, China may have over-invested, and look where they are now”, Rajan said.

Despite the clamour for a rate cut to boost the stagnating economy, Reserve Bank governor Raghuram Rajan has made it clear that the central bank favours a rate of interest that benefits both borrowers and savers. One basis point is one hundredth of a percentage point.

India’s consumer inflation in August hit a record low of 3.66 percent. Some sections of the market were expecting the Fed to hike rates for the first time in nine years this week. “By continuing with reforms that the government and regulators have announced, a sustainable growth potential can be achieved”, the RBI chief said while delivering the 4th C.K. Prahalad Memorial Lecture in Mumbai.

Also on Friday, Rajan said the RBI would focus on keeping the interest rates low in the near-term as well as in the future.

WITH the US Fed maintaining a status quo on interest rates, the Street has now shifted its focus towards a likely rate cut by RBI later this month. “What we will have to do is continue what we have been doing which was anyways the intention regardless of the Fed decision”. “US Fed seems to more concerned about getting certain their job revival figures”. “While the monetary policy will be accommodative there is room to expand sustainable growth potential”.

“For us at the RBI, the key tasks are to keep inflation low, not just today, but well into the future”, he said.

“Optimistic about the capital markets, Oswal said the Fed postponement gives a great opportunity to buy many stocks available at lower prices”. “This short window of opportunity strengthens our call for a 25 bps rate cut by the RBI in the upcoming policy, amid comfortable domestic inflation dynamics”, Kotak Economic Research said in a report on Friday.