Bloomberg Audio Studios, podcasts, radio news broad a. Ram Rajhan is Professor of Finance at the University of Chicago Boot School of Business and former Reserve Bank of India governor, among several other sense cities had throughout the years. Here and let's just get right to it here. No one's expecting any change in monetary policy itself out of the dead on Wednesday, but they have to update that dot plot,
update that summary of economic projections. Do you think they're going to be confident enough to actually say or telegraph that rates will come down at some point this year?
Well, I think we would expect dot plots to move a little, probably down to two or one cuts this year. You know, it's foud to tell whether it'll be two or one, but it'll come down. And the equally important question is where do they expect interest rates to end up at. Do they sort of push up the long term real rate in a sense, which currently seems to be about point sixty five percent? Do they move that up a little to take into account the sense that the long term real rate is going to be higher.
And of course, in the middle of all this, Rahram is this idea that the US economy has defied expectations, expectations that it would slow down. It's been remarkably resilient, and the job market, which is showing signs of cooling, still continues to add jobs and defy economist estimates. Why is the US economy outperforming everyone's expectations.
Well, there's a bunch of things going on right.
So one of course is we've had a fantastic boost to supply from the immigration that's been happening over the last couple of years post COVID. We've also had in a sense some productivity growth, but we've got spectacular balance sheets, both on the household side as well as on the corporate side. And finally, you know, the US had a much larger physical boost then for example, Europe had, So in that sense, all these things are coming together to
create a stronger economy. So even while Europe has started cutting rates because to some extent it hasn't had the same kind of boost in the US, you still find households are confident they are spending. You know, many people, anybody who really wants a job has a job at this point and is confidentially spending. So yes, the signs of slowing are at the margin, and they are there.
We've seen, for example, job openings come down, but at this point they're not enough for the felt fed to feel confident.
It wants to see either a slowing.
In the economy or a slowing in inflation from current levels, and it's not seeing either.
All right, I want to get your thoughts here too, not just on what's going on in the US, but what's going on over in India. Obviously you were on the Central Bank there and we talk about and you've obviously written some great books here, including up Breaking the Mold that how India can move forward. We just had a really pivotal election, pretty big pivotal decision on monetary policy. Where is the Indian economy going right now?
In your perspective, it's actually in a very interesting state. Because this election was a good one for India. It re established to some extent the move towards a more democratic India, which I think in the long run is good.
But India has some important choices to make.
Does it follow China to try and become a manufacturing giant? In my personal view, I think that's a mistake because the world doesn't have room for another China like manufacturing giant. There simply is no place, both in terms of the growing protectionism across the world, but also in terms of sustainability. We can't consume so much in terms of manufactured goods. But India has another option services, and you're seeing some
of that happen. Service exports from India are taking off, and maybe India should focus on that.
All right, Well, you can all read all about it in his book Got to Leave Bit There Garaj Breaking the Mold India's untraveled path to prosperity rag Aam Rajan over the University of Chicago