Rajan warns of global assets crash

Reserve Bank Governor Raghuram Rajan has warned that global markets are at the risk of a “crash”, due to the lingering of competitive loose monetary policies being followed by the developed economies.

Warning that the current build-up of financial sector imbalances may cause sudden price reversals and sharp spikes in volatility, Rajan said, “We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost”.

In an interview to London-based Central Banking Journal on Wednesday, he said, “Unfortunately, a number of macro-economists have not fully learnt the lessons of the great financial crisis. They still do not pay enough attention — en passant — to the financial sector. Financial sector crises are not as predictable. The risks build up until, wham, it hits you.”