The United States should be more aware of how its policies affect the rest of the world, India's central bank chief said on Friday, a day after complaining that global monetary policy coordination had broken down.
Raghuram Rajan, a former chief economist at the International Monetary Fund, took charge at the Reserve Bank of India last September during the country's worst financial crisis since 1991.
India's financial markets have boomed as U.S. Federal Reserve efforts to bolster economic growth at home with cheap money encouraged investors to seek higher returns in emerging economies. As the Fed began to talk of unwinding its policy last year, the money began to flow back out.
"I have been saying that the U.S. should worry about the effects of its policies on the rest of the world," Reserve Bank of India Governor Rajan said at an event on Friday organised by The Times of India newspaper.
"We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, rather than what is just right given the circumstances of their own country," he said.
Rajan's comments were echoed by the IMF on Friday, which called for "vigilance" by central banks to ensure that a financial market rout in the developing world does not lead to an international funding crunch. [ID:nL2N0L50TM]
The turn in Fed policy, combined with signs the Chinese economy is slowing, has sent markets from Turkey to South Africa and Brazil reeling over the past week.
Turkey and South Africa responded by raising interest rates this week to help support their currencies. The Reserve Bank of India also tightened monetary policy, saying the action was aimed at pushing down high consumer inflation.
On Thursday, Rajan had called on developed countries to play their part in restoring international monetary cooperation during an interview with Bloomberg India TV.
"International monetary cooperation has broken down," Rajan told the TV channel.
Source: Reuters
Raghuram Rajan, a former chief economist at the International Monetary Fund, took charge at the Reserve Bank of India last September during the country's worst financial crisis since 1991.
India's financial markets have boomed as U.S. Federal Reserve efforts to bolster economic growth at home with cheap money encouraged investors to seek higher returns in emerging economies. As the Fed began to talk of unwinding its policy last year, the money began to flow back out.
"I have been saying that the U.S. should worry about the effects of its policies on the rest of the world," Reserve Bank of India Governor Rajan said at an event on Friday organised by The Times of India newspaper.
"We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, rather than what is just right given the circumstances of their own country," he said.
Rajan's comments were echoed by the IMF on Friday, which called for "vigilance" by central banks to ensure that a financial market rout in the developing world does not lead to an international funding crunch. [ID:nL2N0L50TM]
The turn in Fed policy, combined with signs the Chinese economy is slowing, has sent markets from Turkey to South Africa and Brazil reeling over the past week.
Turkey and South Africa responded by raising interest rates this week to help support their currencies. The Reserve Bank of India also tightened monetary policy, saying the action was aimed at pushing down high consumer inflation.
On Thursday, Rajan had called on developed countries to play their part in restoring international monetary cooperation during an interview with Bloomberg India TV.
"International monetary cooperation has broken down," Rajan told the TV channel.
Source: Reuters
