The US Federal Reserve has appointed former Reserve Bank of India (RBI) Governor Raghuram Rajan to a key panel reviewing its balance sheet as part of a wider reform drive aimed at reshaping monetary policymaking after years of elevated inflation.
Rajan will be joined by two other Indian-origin experts -Delhi-born American economist Raj Chetty and senior Microsoft executive Asha Sharma -in the Federal Reserve’s newly announced task forces.
Rajan to join Federal panel
The appointments were announced by newly appointed Federal Reserve Chairman Kevin Warsh, whose five task forces also include former Bank of England Governor Mervyn King, former Walmart CEO Doug McMillon, Nobel laureate Thomas Sargent and venture capitalist Marc Andreessen.
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Announcing the initiative on Thursday (July 16), Warsh said the panels would bring fresh perspectives to the central bank.
“I am honoured that the best minds from a range of disciplines have agreed to work with us to sharpen our performance as an institution. The goal is straightforward: to ensure the Fed is best positioned to achieve our objectives in this consequential time,” he said as quoted by NDTV.
Focus on monetary policy
While Warsh did not detail Rajan’s specific responsibilities, he said the review was intended to improve the Federal Reserve’s approach after inflation remained above its target for more than five years.
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According to a PTI report, Rajan will serve on the balance sheet policy task force alongside Harvard economist Karen Dynan and former Federal Reserve Governor Jeremy Stein. The panel will examine the costs, benefits and institutional implications of the Federal Reserve’s current balance sheet framework, including its asset holdings and their role in implementing monetary policy.
Five task forces formed
Warsh also explained the rationale behind the appointments.
“I reached out to 15 people whom I have known and trusted with a diversity of views. It’s a move towards transparency and new ideas.”
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He said the five groups would review communications, balance sheet policy, economic data, productivity and jobs, and the inflation framework.
“Our purpose here is to make better decisions in the conduct of monetary policy and put these years of high inflation behind us.”
Indian-origin experts included
Rajan, who led the RBI from 2013 to 2016, previously served as chief economist and director of research at the International Monetary Fund and remains a prominent voice on global macroeconomic issues.
His appointment comes as the Federal Reserve reassesses its monetary policy framework following the pandemic-era expansion of its nearly USD 9 trillion balance sheet.
Chetty will co-lead the data task force with McMillon and economist Kevin Murphy, while Sharma will join Andreessen and Stanford economist Charles I. Jones on the Productivity and Jobs task force to assess the impact of artificial intelligence and other emerging technologies on productivity, employment and economic growth.
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