Chicago’s Rajan Says U.S. Needs ‘Less Aggressive’ Fed Policies

The Federal Reserve, under political pressure to combat unemployment, risks creating financial instability through its record monetary stimulus, according to University of Chicago Professor Raghuram Rajan.

“A more stable and less aggressive U.S. monetary policy will not only lead to more stable U.S. growth; it will also reduce the volatility of capital flows coming into and out of emerging markets,” Rajan said in a paper scheduled to be published in the March/April issue of Foreign Affairs. He predicted the financial crisis two years before it hit.