The Reserve Bank of India (RBI) Governor Raghuram Rajan has asserted that central banks of developed nations must also consider emerging nations while framing monetary policies. Underscoring that India is well placed to weather any financial crisis, RBI Governor has highlighted that advanced nations must recognize the impact of their monetary policy decisions on other economies.
Referring to the US Federal Reserve tapering, Raghuram Rajan emphasized that the US needs to take heed of countries vulnerable to the stimulus withdrawal. As the US Fed has started gradual withdrawal of its fiscal stimulus, India and other emerging economies have been asking the US to be more predictable in monetary policy. The US Fed has reduced its monthly bond purchases by $20 billion to $65 billion amid signs of an improving US economy. However, its recent move has caused flight of capital out of emerging economies, which has in turn affected their currencies.
Meanwhile, at the conclusion of two-day summit of G20 on February 22-23, all central banks maintain their commitment that monetary policy settings will continue to be carefully calibrated and communicated, in the context of continuing exchange of information and being mindful of impacts on the global economy.