Business & FinanceTop StoryTop StoryLatest News
Supply Shocks to Weaken Monetary Policy Effectiveness: CEA Nageswaran
Sentiment: NeutralHigh Priority
What Happened?
Chief Economic Advisor V Anantha Nageswaran stated that monetary policy tools may be less effective in addressing inflation due to supply-side disruptions. He emphasized the need for fiscal measures.
Key points
- Nageswaran highlighted that fiscal measures will be more crucial than interest rate adjustments.
- He noted that since 2022, few countries have met their inflation targets.
- Supply chain disruptions from the Russia-Ukraine war have led to rising energy prices globally.
- The Reserve Bank of India raised the repo rate to 5.50% to combat inflation exceeding 6%.
- Nageswaran predicts supply shocks will dominate for the next 25-30 years.
- He called for agriculture to be a primary driver of economic growth.
Key insights
- Countries may need to adapt their inflation targeting frameworks due to persistent supply issues.
- The reliance on fiscal measures could reshape economic policy priorities globally.
- The ongoing geopolitical tensions may lead to long-term changes in global supply chains.
Why it matters
The effectiveness of monetary policy in controlling inflation could be compromised, impacting economic stability.
Tags
Entities
V Anantha Nageswaran· PersonReserve Bank of India· OrganizationRussia-Ukraine war· Event
Source
Business Standard
