US Fed Recruits Raghuram Rajan, 2 Other Indians For Monetary Policy Review

In an initiative to review the US Monetary Policy, new Fed Chair Kevin Warsh has launched five independent task forces to re-evaluate monetary policy, recruiting notable global experts, including three Indians– former Reserve Bank of India governor and economist Raghuram Rajan, Raj Chetty, and Asha Sharma. These panels will advise the Federal Open Market Committee (FOMC) on critical areas like data accuracy, productivity, and balance sheet strategies.

Rajan to review balance sheet policy

Former RBI Governor Raghuram Rajan joins the Balance Sheet Policy task force, where he will work alongside former Fed governor Jeremy Stein and Harvard’s Karen Dynan to review and analyse the implications of the Fed's existing balance sheet framework.

Chetty and Sharma are assigned to key panels

Harvard economist Raj Chetty, known for his research on economic mobility, joins the Data task force. He will collaborate with Doug McMillon and Kevin Murphy to enhance the precision and speed of economic data used for policy decisions. Meanwhile, Microsoft EVP and Xbox CEO Asha Sharma has been named to the Productivity and Jobs task force. Together with Marc Andreessen and Charles I. Jones, she will examine how emerging technologies—like AI—influence the economic landscape.

Walsh Outline 

Chair Warsh underscored the necessity of this review during a time of economic transformation, reaffirming the Federal Reserve's dedication to its mandate of price stability and maximum employment. The comprehensive initiative also draws on the expertise of notable figures such as former Bank of England Governor Mervyn King, Nobel laureate Thomas Sargent, Doug McMillon, and Marc Andreessen.

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US Fed Kept Rate Unchanged

Earlier, at its latest policy meeting on January 27-28, the U.S. Federal Reserve decided to leave its main benchmark interest rate unchanged at 3.5 to 3.75 per cent. This was done citing slow job growth, signs of stabilisation in the labour market, and somewhat rising inflation.

In its January 28 policy statement, the Federal Open Market Committee (FOMC) said that, in support of its target, the committee decided to maintain the federal funds rate target range at 3-1/2 to 3-3/4 per cent.

This decision was largely in line with expectations. The FOMC voted 10-2 to leave the federal funds rate target range unchanged at 3.5-3.75 per cent. Governors Waller and Miron abstained, while Dovish did not, favouring a 25 basis point rate cut.