The world economy needs to begin preparing for low inflation.

New Delhi: The world economy may return to a state of low inflation, according to Raghuram Rajan, a former governor of India's central bank, and central bankers should keep this in mind as they pursue restrictive monetary policies.

Rajan, who is currently professor of finance at the University of Chicago Booth School of Business, said when inflation switched from the low to high regime, central banks needed to assess whether their policies were flexible enough.

"We should probably be prepared to return to a low inflation regime," he told a conference organized by the Bank of Thailand and the Bank for International Settlements on Friday.

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Rajan said, "We need to look at what has restricted us. We need to determine whether we failed to notice the rise of inflation or whether we are simply saving our instruments for future use." Was waiting for it to end."

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He noted that headwinds such as de-globalization, slowing growth in China, and K-shaped recovery in emerging economies could hurt growth, making it important for central banks to pursue policies that are timely. responsible for changes in the dynamics of inflation.

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Rajan claimed that central bankers in emerging markets have done an excellent job of anticipating the need to raise interest rates during these uncertain times and that "has served them well."

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