Don't intend to flip-flop on policy: Rajan

The government is comfortable with setting a 4 per cent inflation target plus/minus 2 per cent beyond 2016, RBI Governor said.

The Reserve Bank of India does not intend to flip-flop on policy and is in discussions with the government for a new monetary framework which it hopes to finalise shortly, Governor Raghuram Rajan said.

The central bank's talks with the government suggest 'things will be on track with respect to fiscal deficit,' he added during a press conference with reporters.

The RBI held interest rates steady as widely expected at its policy review on Tuesday, but said it could cut interest rates by early next year depending on whether inflation eases further and on fiscal developments.

The government is comfortable with setting a 4 per cent inflation target plus/minus 2 percent beyond 2016, Rajan clarified.

The central bank is 'certainly seeing disinflationary process' and global crude oil developments are positive for India.

The central bank is already providing 'substantial liquidity' to the market, consistent with the policy rate, Rajan said.

Image: RBI Governor Raghuram Rajan; Photograph: Reuters