Monetary stimulus ...RATE HIKE by USA..!!!

Monetary stimulus may backfire, provoke savings glut, says Rajan
Fears that the world might be setting the stage for a repeat of the years after the Asian crisis of the '90sBloomberg  |  Washington  September 6, 2014 Last Updated at 23:05 ISTAggressive monetary policy by developed economies might hurt global growth by pushing emerging markets to pile up foreign-exchange reserves, instead of spending, Reserve Bank of India (RBI) Governor Raghuram Rajan said.
A regular critic of the unprecedented monetary stimulus the world's richest nations have put in place, Rajan said the world was "setting the stage for a repeat" of the years that followed the Asian financial crisis of the late 1990s. At that time, developing economies, traumatised by capital outflows and painful bailouts, started accumulating reserves as insurance, leaving it to US consumers to buoy global consumption.
"Any emerging market today is going to look at the currency volatility and say 'whatever money comes in, I am going to be careful about it, I am going to build some reserves,'" Rajan said in a speech in Chicago on Friday. "That kind of policy will depress global demand."
Overseas investors pulled $8 billion from rupee-denominated debt last year, pushing the currency to an all-time low, as theUS Federal Reserve signalled it would begin paring its record monetary stimulus. Rajan, who took office a year ago, has overseen a recovery of the currency, raising interest rates three times in his first five months, as he also seeks to tame Asia's fastest inflation.
"We have had six or seven years of this and we still have a weak recovery, so you have to ask if this is the answer," he said of developed economies' stimulus policies, such as record low interest rates and asset purchases.
How much more?
"How much more can you do of this stuff and of course what is the payback when you are unwinding," he asked at the event, organised by the Chicago Council on Global Affairs.
Indian policy makers have now rebuilt foreign-exchange reserves to near a record high as investors weigh the timing of an interest-rate increase by the Federal Reserve. India will probably be less vulnerable to a global shift of funds, Rajan said last month.
"I don't want to jump up and down," Rajan, a former chief economist at the International Monetary Fund, said of data released last month that showed India's economy grew 5.7 per cent in the quarter ended June. Still, the figure is "reassuring" and should help the country meet a 5.5 per cent (growth) forecast for the (current) financial year, and "maybe a little better".
Expansion might be in the six per cent range next year and about seven per cent after that, he said.
BUILDING THE CUSHION
Raghuram Rajan has been building foreign exchange reserves since he took over as the RBI governor last September, amid a currency crisis. From a 39-month low of $274 billion on September 6 last year, the country's forex reserves had risen to $318.64 billion as on August 29, a level close to an all-time high. Rajan pushed the average duration of bond holdings to three years and built up an adequate level of reserves to curb exchange-rate volatility. The reserves would help in times when there are outflows from the domestic market on account of a rate increase by the US, expected in the first half of 2015.

http://www.business-standard.com/article/finance/monetary-stimulus-may-backfire-provoke-savings-glut-says-rajan-114090600831_1.html