Rising inflation globally has brought the role of central banks under sharp scrutiny with many experts pointing to their failure in reading the exact nature of price pressures last year. 

Former RBI Governor Raghuram Rajan, in an interview to the Bloomberg, said on Friday that the central banks would do a far more effective job if they focused only on controlling inflation. He said that issues like climate change and job creation, though peripheral to the central bank mandate, can better be dealt with by direct policymaking. 

Central banks in most of the countries are fighting a stubborn inflation which has risen to decades high as a melange of factors have come together in creating a perfect storm. 

Ultra-loose monetary policy and supply-side bottlenecks due to COVID and Russia’s invasion of Ukraine have added to price pressures globally. Advanced economies like the US and the UK have seen worst inflation prints in decades. 

“You can maybe criticise them a little bit for being a little late on reacting to inflation, but it’s hard to say that they have got it completely wrong,” Mr Rajan said at the Jackson Hole gathering of central bank governors on Friday. 

“It’s okay to assume may be it pauses after that to see how the economy is progressing, but you need a very serious recession by April for the Fed to start cutting,” Mr Rajan said. 

Investors will closely listen to US Federal Reserve Chairman Jerome Powell, who is likely to reinstate the central bank’s commitment in raising rates further to tame inflation. 

The RBI has also hiked rates by a total of 140 basis points since May to bring inflation under control. The retail inflation, which peaked in April, has started tapering but is still above the RBI’s comfort zone of 2-6 per cent.