Speaker 1: Bloomberg Audio Studios, podcasts, radio news broad a. Ram Rajhan
Speaker 1: is Professor of Finance at the University of Chicago Boot
Speaker 1: School of Business and former Reserve Bank of India governor,
Speaker 1: among several other sense cities had throughout the years. Here
Speaker 1: and let's just get right to it here. No one's
Speaker 1: expecting any change in monetary policy itself out of the
Speaker 1: dead on Wednesday, but they have to update that dot plot,
Speaker 1: update that summary of economic projections. Do you think they're
Speaker 1: going to be confident enough to actually say or telegraph
Speaker 1: that rates will come down at some point this year?
Speaker 2: Well, I think we would expect dot plots to move
Speaker 2: a little, probably down to two or one cuts this year.
Speaker 2: You know, it's foud to tell whether it'll be two
Speaker 2: or one, but it'll come down. And the equally important
Speaker 2: question is where do they expect interest rates to end
Speaker 2: up at. Do they sort of push up the long
Speaker 2: term real rate in a sense, which currently seems to
Speaker 2: be about point sixty five percent? Do they move that
Speaker 2: up a little to take into account the sense that
Speaker 2: the long term real rate is going to be higher.
Speaker 3: And of course, in the middle of all this, Rahram
Speaker 3: is this idea that the US economy has defied expectations,
Speaker 3: expectations that it would slow down. It's been remarkably resilient,
Speaker 3: and the job market, which is showing signs of cooling,
Speaker 3: still continues to add jobs and defy economist estimates. Why
Speaker 3: is the US economy outperforming everyone's expectations.
Speaker 4: Well, there's a bunch of things going on right.
Speaker 2: So one of course is we've had a fantastic boost
Speaker 2: to supply from the immigration that's been happening over the
Speaker 2: last couple of years post COVID. We've also had in
Speaker 2: a sense some productivity growth, but we've got spectacular balance sheets,
Speaker 2: both on the household side as well as on the
Speaker 2: corporate side. And finally, you know, the US had a
Speaker 2: much larger physical boost then for example, Europe had, So
Speaker 2: in that sense, all these things are coming together to
Speaker 2: create a stronger economy. So even while Europe has started
Speaker 2: cutting rates because to some extent it hasn't had the
Speaker 2: same kind of boost in the US, you still find
Speaker 2: households are confident they are spending. You know, many people,
Speaker 2: anybody who really wants a job has a job at
Speaker 2: this point and is confidentially spending. So yes, the signs
Speaker 2: of slowing are at the margin, and they are there.
Speaker 2: We've seen, for example, job openings come down, but at
Speaker 2: this point they're not enough for the felt fed to
Speaker 2: feel confident.
Speaker 4: It wants to see either a slowing.
Speaker 2: In the economy or a slowing in inflation from current levels,
Speaker 2: and it's not seeing either.
Speaker 1: All right, I want to get your thoughts here too,
Speaker 1: not just on what's going on in the US, but
Speaker 1: what's going on over in India. Obviously you were on
Speaker 1: the Central Bank there and we talk about and you've
Speaker 1: obviously written some great books here, including up Breaking the
Speaker 1: Mold that how India can move forward. We just had
Speaker 1: a really pivotal election, pretty big pivotal decision on monetary policy.
Speaker 1: Where is the Indian economy going right now?
Speaker 2: In your perspective, it's actually in a very interesting state.
Speaker 2: Because this election was a good one for India. It
Speaker 2: re established to some extent the move towards a more
Speaker 2: democratic India, which I think in the long run is good.
Speaker 4: But India has some important choices to make.
Speaker 2: Does it follow China to try and become a manufacturing giant?
Speaker 2: In my personal view, I think that's a mistake because
Speaker 2: the world doesn't have room for another China like manufacturing giant.
Speaker 2: There simply is no place, both in terms of the
Speaker 2: growing protectionism across the world, but also in terms of sustainability.
Speaker 2: We can't consume so much in terms of manufactured goods.
Speaker 2: But India has another option services, and you're seeing some
Speaker 2: of that happen. Service exports from India are taking off,
Speaker 2: and maybe India should focus on that.
Speaker 1: All right, Well, you can all read all about it
Speaker 1: in his book Got to Leave Bit There Garaj Breaking
Speaker 1: the Mold India's untraveled path to prosperity rag Aam Rajan
Speaker 1: over the University of Chicago