Nageswaran says supply shocks may blunt rate tools
In short
Chief Economic Advisor V Anantha Nageswaran said on Friday that interest-rate moves may not work as well against inflation in a world with more supply shocks.
He said governments may need fiscal and other policy tools instead. He warned that raising rates may not fix supply problems and could even make them worse.
What the reporting says
Chief Economic Advisor V Anantha Nageswaran on Friday said interest-rate changes may become less effective against inflation as supply-side disruptions intensify. Speaking at the 9th Annual Food Systems Dialogue, he said fiscal and other public policy measures will matter more because rate hikes do not fix supply-driven problems and can even be counter-productive. He also said countries may need flexibility in inflation targeting amid persistent supply issues.
Why it matters
V Anantha Nageswaran argued at the 9th Annual Food Systems Dialogue that supply-side disruptions can weaken the effect of monetary policy. He said interest-rate adjustments may be less useful for inflation control than fiscal and other public measures, and that rate hikes can be counter-productive in supply-driven shocks. The comments matter for policymakers and markets focused on inflation, rates and policy targeting.