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Fed unlikely to cut interest rates: Rajan

Rajan said the government doesn’t have budgetary room to continue the capital expenditure to keep going like the first two quarters of this year and have to slow down.

TNOCT2015PTI524 24 02 2016 11 57 8CHENNAI: Former Reserve Bank of India governor Raghuram Rajan said the US Fed is unlikely to cut the rates in the upcoming rate setting meeting at the end of January.Speaking at an event in Chennai on his latest book ‘Breaking the mould: Reimagining India’s economic future’, he said goods disinflation is tapering, while services inflation is high with tight labour market conditions. “In this situation it is unlikely the US Fed would take a gamble and cut rates soon.”

He added that it will wait until it sees inflation come down much closer to the target. Rajan said the government doesn’t have budgetary room to continue the capital expenditure to keep going like the first two quarters of this year and have to slow down. He cautioned about overly dependent on construction sector for growth referring to recent problems in China.

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