Rajan the dove

RAGHURAM RAJAN, the governor of Reserve Bank of India, has a reputation as a monetary-policy hawk, a central banker who frets more about stubborn inflation than sluggish growth. But he also has a fondness for surprises. Twice this year he cut the central bank’s main rate outside the usual schedule of the RBI’s bi-monthly monetary-policy meetings. Today he sprung a bigger surprise by cutting interest rates by half a percentage point, to 6.75%. Some analysts had thought Mr Rajan might even keep rates on hold. Most expected a cut to 7%. Inflation has been stable at 3.7%, well below the RBI’s near-term target of 6% and lower even than its medium-term goal of 4%. The economy has been growing at a respectable annual rate of 7%, but could still use a little stimulus. Yet no one really expected such a big cut.

What prompted it? The decision of the Federal Reserve not to raise interest rates in America earlier this…Continue reading]]>


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