WEBVTT - Raghuram Rajan Talks Monetary Policy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news broad a. Ram Rajhan

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<v Speaker 1>is Professor of Finance at the University of Chicago Boot

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<v Speaker 1>School of Business and former Reserve Bank of India governor,

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<v Speaker 1>among several other sense cities had throughout the years. Here

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<v Speaker 1>and let's just get right to it here. No one's

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<v Speaker 1>expecting any change in monetary policy itself out of the

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<v Speaker 1>dead on Wednesday, but they have to update that dot plot,

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<v Speaker 1>update that summary of economic projections. Do you think they're

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<v Speaker 1>going to be confident enough to actually say or telegraph

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<v Speaker 1>that rates will come down at some point this year?

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<v Speaker 2>Well, I think we would expect dot plots to move

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<v Speaker 2>a little, probably down to two or one cuts this year.

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<v Speaker 2>You know, it's foud to tell whether it'll be two

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<v Speaker 2>or one, but it'll come down. And the equally important

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<v Speaker 2>question is where do they expect interest rates to end

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<v Speaker 2>up at. Do they sort of push up the long

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<v Speaker 2>term real rate in a sense, which currently seems to

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<v Speaker 2>be about point sixty five percent? Do they move that

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<v Speaker 2>up a little to take into account the sense that

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<v Speaker 2>the long term real rate is going to be higher.

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<v Speaker 3>And of course, in the middle of all this, Rahram

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<v Speaker 3>is this idea that the US economy has defied expectations,

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<v Speaker 3>expectations that it would slow down. It's been remarkably resilient,

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<v Speaker 3>and the job market, which is showing signs of cooling,

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<v Speaker 3>still continues to add jobs and defy economist estimates. Why

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<v Speaker 3>is the US economy outperforming everyone's expectations.

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<v Speaker 4>Well, there's a bunch of things going on right.

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<v Speaker 2>So one of course is we've had a fantastic boost

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<v Speaker 2>to supply from the immigration that's been happening over the

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<v Speaker 2>last couple of years post COVID. We've also had in

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<v Speaker 2>a sense some productivity growth, but we've got spectacular balance sheets,

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<v Speaker 2>both on the household side as well as on the

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<v Speaker 2>corporate side. And finally, you know, the US had a

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<v Speaker 2>much larger physical boost then for example, Europe had, So

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<v Speaker 2>in that sense, all these things are coming together to

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<v Speaker 2>create a stronger economy. So even while Europe has started

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<v Speaker 2>cutting rates because to some extent it hasn't had the

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<v Speaker 2>same kind of boost in the US, you still find

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<v Speaker 2>households are confident they are spending. You know, many people,

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<v Speaker 2>anybody who really wants a job has a job at

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<v Speaker 2>this point and is confidentially spending. So yes, the signs

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<v Speaker 2>of slowing are at the margin, and they are there.

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<v Speaker 2>We've seen, for example, job openings come down, but at

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<v Speaker 2>this point they're not enough for the felt fed to

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<v Speaker 2>feel confident.

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<v Speaker 4>It wants to see either a slowing.

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<v Speaker 2>In the economy or a slowing in inflation from current levels,

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<v Speaker 2>and it's not seeing either.

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<v Speaker 1>All right, I want to get your thoughts here too,

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<v Speaker 1>not just on what's going on in the US, but

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<v Speaker 1>what's going on over in India. Obviously you were on

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<v Speaker 1>the Central Bank there and we talk about and you've

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<v Speaker 1>obviously written some great books here, including up Breaking the

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<v Speaker 1>Mold that how India can move forward. We just had

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<v Speaker 1>a really pivotal election, pretty big pivotal decision on monetary policy.

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<v Speaker 1>Where is the Indian economy going right now?

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<v Speaker 2>In your perspective, it's actually in a very interesting state.

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<v Speaker 2>Because this election was a good one for India. It

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<v Speaker 2>re established to some extent the move towards a more

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<v Speaker 2>democratic India, which I think in the long run is good.

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<v Speaker 4>But India has some important choices to make.

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<v Speaker 2>Does it follow China to try and become a manufacturing giant?

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<v Speaker 2>In my personal view, I think that's a mistake because

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<v Speaker 2>the world doesn't have room for another China like manufacturing giant.

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<v Speaker 2>There simply is no place, both in terms of the

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<v Speaker 2>growing protectionism across the world, but also in terms of sustainability.

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<v Speaker 2>We can't consume so much in terms of manufactured goods.

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<v Speaker 2>But India has another option services, and you're seeing some

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<v Speaker 2>of that happen. Service exports from India are taking off,

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<v Speaker 2>and maybe India should focus on that.

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<v Speaker 1>All right, Well, you can all read all about it

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<v Speaker 1>in his book Got to Leave Bit There Garaj Breaking

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<v Speaker 1>the Mold India's untraveled path to prosperity rag Aam Rajan

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<v Speaker 1>over the University of Chicago