Headline inflation does not need to get to a particular number for the Reserve Bank of India to act on interest rates, Deputy Governor Subir Gokarn said.
RBI Governor Duvvuri Subbarao, speaking on the same conference call, said core inflation of 4% to 4.5% was in the realm of possibility and that the central bank would like the number to reach that level eventually.
Subbarao also said the bank's open market operations (OMOs) to buy back government debt have limitations beyond a point.
The RBI will need to assess how liquidity is behaving before taking a view on future OMOs, he added.
He also said the government needs to focus on expenditure compression in lowering the fiscal deficit.
Subbarao and Gokarn were speaking in a conference call with analysts a day after the central bank cut cash reserve requirements for banks but held key interest rates steady.
