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Raghuram rajan CFO
August 27, 2021

‘Green’ Investments Must Not Be Mandated By Central Bank: Raghuram Rajan

admin Global News

By BW CFO World Online Bureau

Former Governor of RBI outlines that central banks should not mandate Green Investments instead they should focus on the financial stability of such funds, crypto and cybersecurity.

The obligations of promoting sustainable investments should lie with governments and not central banks, which already have significant other policy commitments, said Raghuram Rajan, former Reserve Bank of India governor.

He opines that the RBI should refrain from areas like green investments, as their scope of providing financial and monetary stability are already wide.

“Asking the central bank to say you should buy only green bonds, not brown bonds, etc., is forcing the banks to put their time on a matter which is primarily a fiscal matter,” he said at Reuters’s Global Markets Forum on Wednesday.

Rajan sees ‘potential’ in well-regulated stablecoins but remains unsure on what is propelling their valuations other than a favourable environment with easy monetary policy.

Rajan, who earlier served as the Indian RBI Governor and Chief Economist for the International Monetary Fund, added that the apex bank should focus more on the financial stability of these green investments and other threats such as crypto currencies and cyber security.

“Ideally, the Feds would like to observe as long as possible and make sure that the economy is well on track towards growth”, he said. “Of course, the problem is the Delta variant, plus whatever variants are lurking in the background,” he said.

Talking on diverse subjects, he predicted inflationary pressures in the United States to be temporary, but said prices may remain elevated for longer than expected due to strong wages, unavailability of workers, and additional fiscal involuntary measures.

“Firms are feeling confident enough to pass through price increase , they don’t do that until they think that these higher prices are to stay,” Rajan remarked.

Referring to India, Rajan said inflation there could rise in the short term as pent-up demand meaning the unusually strong demand takes hold, resulting in supply-side shortcomings, but demand will fall over the medium-term due to stressed households and economic scarring from the pandemic.

He believes that the Central Banks in many emerging countries are being enterprising and raising interest rates.

(Reuters)

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