The IMF-World Bank Meet has kicked off in Singapore today. Raghuram Rajan, chief economist of IMF believes that the pause in the US rate hike is 'right'.

Rajan further adds that China should not be solely blamed for global imbalances. Rajan is hopeful but not confident of reviving Doha trade talks. Excerpts from CNBC's exclusive interview with Raghuram Rajan on the sidelines of the IMF-World Bank Meet, made available to domain-b:

Do you expect to see volatility in oil prices? I know that we will see continued volatility and that stems from the very low excess capacity that we have right now. As one can see a fairly mild hurricane season so far, it has taken off some of the froth of oil prices.

A better situation with Iran has also helped. Going forward, it is not clear whether all the geopolitical events necessary to calm down the market will continue. Perhaps, if the situation reverts in the Middle East or if Nigeria starts having more problems, as we already know, there is a strike out there. So I think the oil market is tight enough.

As far as fundamentals go, certainly our medium term projection for oil is much lower than where it is now. But if one looks at the futures markets, they are very high. And if one looks at the froth that has built up because of the limited excess capacity, that is quite substantial.

How would the US slowdown affect Asian economies? The US slowdown would be more insulated than in the past and it differs across the Asian economies.

India's is largely domestic demand-led and is unlikely to be seriously affected. The question is also how much, and if one takes our measures, it would suggest that China may get a percentage of its growth rate, if the US slows considerably by a per cent more than we expect.

Now a per cent of 10-11 per cent may not be particularly bad, and so in that sense maybe it will not have a dramatic effect; as dramatic that it had in the past.

You talked about inflation risk being a very big concern for you. The US Federal Reserve is currently in a 'pause' stance right now, do you think what they are doing is right and if they act again, what should they be doing? I think the pause is exactly right because one wants to see the extent of demand slow down from the housing market. As I said, there is still more to come and there are considerable lags from the housing market to consumption and from the past increases in interest rates to the housing market. So given these lags, it is appropriate to see how growth is progressing before taking further actions.

The question is how much time does the Fed have to observe because if in the process, we get strong wage growth, unit labour cost goes up as productivity falls, then inflationary expectations could become entrenched, if it pauses too long. So I think the pause is appropriate. If the pause is appropriate, it could move in either direction and we have to see how the data comes in, and how it reacts. It may not have the luxury of waiting for all the data before it reacts.

Will that then suggest that you would have to raise rates again, where would normalised US interest rates be? It is not necessary that it would have to raise the rates. Certainly, the market seems to be factoring in a reduction in rates next year because it assumes that perhaps the slowdown will be more than the current forecast through the housing market.

But in terms of where normal rate of interest should be, I think the Fed believes it is somewhere in the vicinity, because it certainly has paused. Most people would say that it is growth rate of the economy plus inflation. At this point, it is probably between 5 per cent and 7 per cent, that is a pretty wide margin but that would suggest room on either side.

You also mentioned the issue of global imbalances and we have been hearing a lot of talk especially pointing at China for its trade surplus, for its huge accumulation of foreign reserves as well. Is that a fair assessment of the Chinese economy? No, I don't think it is a fair assessment. I think fingers need to be pointed towards many directions. I think China is just one part of it, and I think Chinese exchange rate is one small part of what the Chinese have to do.

Clearly, they have to focus on improving domestic demand and that includes other things, such as improving consumption, financial sector reform, increasing retail finance and so on. So there are a lot of things that the Chinese have to do apart from just moving the exchange rate.

But others also have a role. Clearly, the US has to increase its savings and some of that has to come through more fiscal savings, which again is in the control of the central government. But growth in the rest of the world has to pick up too; Europe and Japan are central here and they clearly need more structural reforms.

So the IMF suggests that everybody has to do their bit and we need everybody to do it because it is in their own interest that can help the global economy.