Raghuram Rajan, former governor of the Reserve Bank of India (Photographer: Dhiraj Singh/Bloomberg)

‘Very Little’ Ammunition Left for Japan and Europe’s Central Banks, Rajan Says 

(Bloomberg) -- While the U.S. and China are able to cut interest rates, the Bank of Japan and the European Central Bank have less room to maneuver in the event of another downturn.

That’s the view of former Reserve Bank of India Governor Raghuram Rajan, now a professor at the University of Chicago, expressed during an interview with Bloomberg Television’s Francine Lacqua and Tom Keene on Wednesday.

“As far as QE goes, they’ve pretty much done what they could and whatever modest effect it has had is pretty much out there,” Rajan said, referring to the monetary authorities of Japan and the euro area. “There’s very little more ammunition in the central bank tank. And so my guess is we have to look for other instruments in those countries.”

Blighted by concerns about protectionism, evidence is mounting that the global economy is losing steam. China is in the throes of a slowdown, Japan appears to be off to a rough start to the year, Italy has sunk into recession and Germany only narrowly avoided one.

Last week, the ECB responded to sharp downward revisions to its 2019 projections for growth and inflation by announcing a fresh series of long-term bank funding and promising to keep interest rates at their current rock-bottom levels for longer.

In Britain, Bank of England Governor Mark Carney is due to leave his post at the end of January 2020. In response to a question of whether in theory he’d agree to become Carney’s successor, Rajan replied: “the only answer I have to this is that I’m really very happy at the University of Chicago.”

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