In response to a question regarding the tensions between the Trump administration and the Federal Reserve Chair Jerome Powell, Reserve Bank of India Governor Sanjay Malhotra said that the autonomy of the central bank is very important, he said in an exclusive interview to NDTV Profit on Tuesday.
“Central bank independence, of course, you know, is very important. We have, over the years, moved globally — we have moved towards that for some reason because it’s important to separate that from government,” he said.
Jerome Powell said that he had received a criminal probe by the US Department of Justice which focussed on alleged irregularities in renovation costs at the Fed’s headquarter. Without directly addressing the charges pressed against the Fed Chair, Malhotra said that the principles of autonomy should be preserved across jurisdictions.
Malhotra on global economy
As the world is grappling with rising geo-political tensions and trade wars, Malhotra said that while these are challenging and uncertain times, the global economy has held up and has been resilient. “While there is challenge, I think each country has seen in it as an opportunity and improve,”
On foreign investments in the banking space, Malhotra said that the interest has formed due to the resilience and strength of the banking sector and investors see long term prospects. “Going forward, capital flow investments should continue at a faster pace.”
With regard to the volatility in the rupee, Malhotra reiterated that the central bank does not target any price band for rupee and that their policy has been consistent. “We will ensure that the movement of the rupee is orderly and is not excessively volatile.”
Malhotra on future rate cuts
When asked if there are any more possibilities of a rate cut, he said that the policy has a neutral stance and the changes in the growth and inflation dynamics would guide their decisions.
He also said that the external risks have to be factored in. “We continue to remain nimble and agile,” he added.
He also said that with the 25-basis point repo rate cut in December, there is still some room left for transmission to happen. “We are trying to give appropriate conditions of liquidity so has to enable transmission to happen.”