Rajan Says Inflation Views Aligned with Government - TV
February 25, 2014 3:04 PM EST
Reserve Bank of India (RBI) Governor Raghuram Rajan said the government and the central bank shared similar views on inflation management, while reiterating a call for the U.S. Federal Reserve to be more sensitive to emerging economies.
Reserve Bank of India (RBI) Governor Raghuram Rajan (Photo: Reuters)
Rajan's comments, in an interview with CNBC, come after Finance Minister P. Chidambaram last week chided the central bank over its focus on fighting inflation, saying the RBI needed to abide by government policy to promote economic growth.
An RBI panel last month proposed the introduction of inflation targeting into monetary policy, with the specific aim of a consumer price index (CPI) of 4 percent, with a 2 percent band on either side.
The RBI has raised interest rates by three-quarters of a percentage point since September to bring down consumer inflation, which fell to 8.79 percent last month from double digits in November, even as the government has traditionally preferred to focus on bolstering growth.
"It's not as if the government is on a different page on what we've been doing on inflation thus far. They may have different views on what they would like to see done, but there is a process, there is a conversation," Rajan said in an interview with CNBC, broadcast by Indian channel CNBC-TV 18 on Monday.
"I think there is fair amount of coordination at the highest level."
The government and the central bank have often been at odds in fighting inflation.
While the central bank has often blamed the government's expansive fiscal policy and failure to ease infrastructure bottlenecks for high inflation, a growth-obsessed government, at times, has found it hard to digest interest rate increases.
The RBI is not technically independent - the governor and his deputies are appointed by the government - although it generally enjoys latitude in policymaking.
Rajan said the central bank panel report on inflation was consistent with the government's stance.
"We have a committee which has suggested a target, which is also by the way, consistent with the process the finance ministry's committee has suggested, so there is no disagreement about the broader need to get a framework in place," he said.
"I think in terms of how I see the process, is really that the government sets the objective, and the central bank delivers on that objective," Rajan said.
Rajan also reiterated his call for the Federal Reserve to take into account the impact of its withdrawal of monetary stimulus on emerging economies, despite saying he was comfortable with the current pace of tapering.
"I actually welcome a measured pace of tapering. The only thing I have been calling for is that in the communication there should be some sensitivity to conditions in emerging markets," Rajan told CNBC.
"And this is not from our perspective, this is broadly emerging markets, some of whom have been in trouble in the last few months. But I am fully prepared for a tapering that continues at this measured pace."
Most Popular Slideshows
- Kristen Stewart Moving On With Nicholas Hoult, Jennifer Lawrence Dating Chris Martin – Reports [PHOTOS]
- Kate Middleton Suffocated in Kensington Palace, Queen Elizabeth Reported War With The Duchess [PHOTOS]
- Chris Martin Dating Reports: Jennifer Lawrence Vs Gwyneth Paltrow [PHOTOS]
- 9/11 Dust Cloud Most Likely Have Created Pregnancy Issues: Celebrities Who Posed Nude During Pregnancy
Join the Conversation
- Russia Demands Ukraine Release Communications With Doomed Malaysia Airlines MH17, Preliminary Report On Investigations Out This Month
- Muslim Leaders Refuse to Approve Tony Abbott’s Terrorism Law
- Ebola Update: Liberian Forces Receive Shoot Orders Against People Trying to Cross from Sierra Leone Border
- Historic First Time: Catholic Pontiff Pope Francis Supports Military Intervention Against ISIS In Iraq
- Chinese Airlines Receives Lawsuit for Rejecting HIV-Positive Passengers
- Saudi Arabia: Brothers Beheaded For Smuggling Marijuana Into The Kingdom
- ISIS: More Journalists Beheading To Come After James Foley and Steven Sotloff [Video]
- Moto X+1 is Likely Nexus 6 Template; Motorola Shamu is 1st Android Silver with Snapdragon 810 – Reports
- James Foley’s Executioner Has British Accent—A Chilling Reminder That ISIS Has Foreign Members
- ISIS Posts Graphic Beheading Video of US Journalist James Foley
- iPhone 6 Release Date Remains On Course for Sept-Oct 2014 as Apple Delays iWatch Debut to 2015
- After James Foley, ISIL Threatens to Behead Another American Journalist Steven Sotloff