Rajan Pushes for Immediate US Rate Hike to Tame Inflation

Former Reserve Bank of India governor Raghuram Rajan has called for the US Federal Reserve to raise interest rates, citing accelerating inflation and loose financial conditions. He stated that the Fed should have already raised rates or should do so now.

Rajan said financial conditions in the US are not restrictive enough to control inflation. He pointed out 'very strong' investment in data centers as a key driver of growth and noted a 'very strong fiscal deficit' that doesn't appear to be decreasing.

He also mentioned that American consumers are drawing down their savings while continuing to spend, suggesting an economy that is not being held back by borrowing costs. When asked about Fed chair Kevin Warsh's communication with markets, Rajan said he has 'the right instincts', but would like to see evidence of a plan to control inflation.

Rajan is co-leading one of five task forces established by Warsh, which is examining the Fed's approach to balance-sheet policy. He also commented on the Indian rupee, saying it has been more resilient than expected and is not in a panic situation.