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Powell doctrine: on raising interest rates

The Chairman of the U.S. central bank signals a gradualist approach to raising interest rates
U.S. Federal Reserve Chairman Jerome Powell’s speech last week at the conference for central bankers in Jackson Hole, Wyoming was a strong defence of the current gradual approach to raising(वृद्धि/ऊँचा उठाना) interest rates. With the American economy growing(बढ़ता हुआ) at a strong pace(गति), inflation(मुद्राप्रसार) being close to the Fed’s 2% target and unemployment(बेरोजगारी) at a 20-year low, President Donald Trump has been so sharply (शीघ्रता से/कठोरता से) critical(महत्वपूर्ण/नाजुक) of this approach of raising interest rates that it has led to suggestions that he is encroaching(अतिक्रमण/तोड़ना) on the Fed’s independence. Mr. Trump is worried that rising interest rates could derail the country’s economic growth, check the stock market boom, and thereby affect his own popularity and electoral chances. Mr. Trump, however, has not been the only one critical of the Fed’s policy. Coming from another perspective(दृष्टिकोण/परिप्रेक्ष्य),some are concerned that the Fed may in fact be raising interest rates too slowly, despite strong signals of an overheating economy. At Jackson Hole, in his first speech as Fed chief, Mr. Powell sought to defend his gradualism( क्रमिकता) from his critics(आलोचकों/समीक्षक) on both sides of the divide. He emphasized(ज़ोर देना/महत्त्व देना) the imprecise(अनिश्चित) nature of economic variables( प्रभावित करने वाली वस्तुएँ/चर) such as unemployment and inflation in the modern economy in drawing attention to the risks of raising rates either too fast or too slow. In stressing(प्रभाव डालना/ज़ोर देना) why macroeconomic forecasting(पूर्वानुमान) is so difficult, Mr. Powell seemed to suggest that much of monetary policy-making is simply about groping(तलाशने/ घूमना)in the dark.

The speech also contained(सम्मिलित) some important hints about the Fed’s likely policy direction in the coming years. Apart from the assurance that interest rate hikes(वृद्धि) will be gradual as before, the Fed Chairman had a message that has implications(उलझाव/प्रभाव /निहितार्थ )for the monetary policy stance of central banks in emerging market countries. He hinted that “risk factors abroad(विदेशों )” could lead to a change in the Fed’s policy stance in the future. It is probably(शायद) thisportion(भाग/विभाग) of the speech that the markets may perceive as a dovish statement, even though Mr. Powell framed his speech primarily as a defence of the moderately hawkish policy of gradually raising interest rates. The Fed’s tightening policy stance has rattled several emerging markets, most notably Turkey and Brazil, which have seen their currencies tank under selling(बिक्री ) pressure(दबाव). The Reserve Bank of India, too, has had to raise rates twice(दुगना) in the last few months, in part to defend the rupee. The stock market rallied in response to Mr. Powell’s statement, and the U.S. dollar, which has strengthened(मज़बूत बनाना) this year, witnessed a fall. It is well-known that the U.S. central bank has historically(ऐतिहासिक दृष्टि से) been non-committal when it comes to framing policy with the concerns of emerging markets in mind. A shift in policy under Mr. Powell would mark a significant(महत्वपूर्ण/सार्थक) change in the Fed’s outlook towards the rest of the world.



Important Vocabulary

1.Sharply (शीघ्रता से/कठोरता से)
Synonyms: clearly, strongly, discernibly, distinctly, pointedly

2.Strengthened(मज़बूत बनाना)
Synonyms: bolster, build up, enhance, enlarge, establish
Antonyms:abridge, condense, curtail, decrease, destroy

Synonyms: apparently, doubtless, no doubt, perhaps, possibly
Antonyms: improbably, uncertain, unlikely

4.Stressing(प्रभाव डालना/ज़ोर देना)
Synonyms: repeat, underline, underscore, accent, belabor
Antonyms:attenuate, reduce, relax

Synonyms: horn in, impinge, infringe, intrude, trespass
Antonyms:give, ignore, keep off

Synonyms: defective, false, faulty, imprecise, incorrect
Antonyms: accurate, correct, honest, just, perfect

7.Emphasized(ज़ोर देना/महत्त्व देना)
Synonyms:accentuate, affirm, assert, highlight, indicate,
Antonyms: deny, lose, mumble, depreciate, forget

8.Groping(तलाशने/ घूमना)
Synonyms: cast about, flounder, examine, explore, finger
Antonyms: leave alone




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