Scope to cut rates if inflation heads to 5%: Rajan

Rajan said the central bank has used up all its "space available" to cut interest rates

The Reserve Bank of India (RBI) will have more room to cut interest rates if the central bank gains confidence in reaching its 5 per cent target for consumer inflation by March 2017, said Governor Raghuram Rajan on Wednesday.

Rajan, in an interview with TV channel CNBC Awaaz, called the current repo rate of 6.50 per cent "appropriate" and added the central bank has used up all its "space available" to cut interest rates, pinning further easing on inflation.

"If we get confident of achieving 5 per cent inflation target by March 2017 then we will get more space to cut," Rajan said in an interview.

The RBI left the repo rate unchanged on Tuesday after stronger-than-expected inflation data in April. India will next report monthly consumer prices data on Friday.

In a separate interview with TV channel NDTV, Rajan said he had never had "a serious disagreement" with Finance Minister Arun Jaitley as he sought to dispel speculation about potential disagreements between the Finance Ministry and the RBI.

Photograph: PTI