Cuts in RBI rates depend on inflation: Rangarajan

C Rangarajan, chairman of the prime minister's economic advisory council (PMEAC), said the Reserve Bank of India's decision to keep all key policy rates unchanged in its mid-quarterly policy review released today is on expected lines, but the central bank might start loosening its monetary policy stance only if inflation continues to decline (See: RBI leaves policy rates unchanged; hints at cuts) 

On the cutting of key policy rates in the near future as hinted by the RBI, Rangarajan said this would happen only if inflation continues to decline.

''The move is on expected lines ... if inflation continues to show a declining trend, then perhaps the RBI will start reversing its policy. Therefore, it is predicated only on one assumption and that is the inflation going down,'' Dr Rangarajan told PTI.

He added that inflation will start declining. ''Particularly food prices will come down more sharply as we have indicated, not only in December but in January as well.

''The impact of the base effect will be seen as food prices generally come down in winter season. So I do believe inflation will come down sharply and that might provide the correct environment in which the RBI can act further in the direction of easing action,'' he said.

Planning Commission deputy chairman Montek Singh Ahluwalia declined to comment on RBI's policy stance.