Rajan backs Fed rate hikes, takes softer stance on rupee

Former Reserve Bank of India Governor Raghuram Rajan has backed the US Federal Reserve's move toward higher interest rates as a necessary measure to control inflation, signalling his confidence in the central bank's current direction.

Rajan expressed particular support for the Fed's commitment to bringing down inflation, noting that the institution's leadership understands the gravity of price pressures affecting the global economy. His endorsement comes amid broader debates about the appropriate pace and scale of monetary tightening across major central banks.

On the domestic front, Rajan adopted a more relaxed perspective regarding the rupee's recent weakness against the dollar. Rather than viewing currency depreciation as an immediate concern, the former central banker appears to see it as a manageable adjustment, suggesting that moderate rupee movements need not trigger policy interventions.

Rajan's comments reflect a nuanced view of the current macroeconomic environment, where the inflation-fighting efforts of major central banks are being carefully weighed against their potential impacts on emerging market currencies and capital flows. His position suggests that controlling global inflation takes precedence over short-term currency stability concerns for India's external sector.