Environment favourable for policy action by RBI, says Jayant Sinha

With inflation declining and the US Fed handing emerging markets a lifeline by not raising interest rates, the environment for monetary policy action by the Reserve Bank of India is a "favourable" one , the finance ministry said on Friday.

The Fed on Thursday heeded to calls from the World Bank and IMF by deciding not to go for first rate increase in almost a decade, stemming outflows from emerging economies.

Minister of State for Finance Jayant Sinha said central banks globally tend to take a data-driven approach towards their monetary policies. "We are in a favourable environment now. Obviously, all of these have to be balanced and RBI has to take its decisions," he said.

He was asked if there was a case for RBI to cut interest rates before its scheduled monetary policy review on September 29. "Let us see how Governor (Raghuram) Rajan and RBI process all of these factors and decide for themselves which course monetary policy should take," he said.

RBI has cut interest rate by 0.75 per cent this year in three tranches. It refrained from reducing the rate further in the last bi-monthly monetary policy in August. Since then, consumer as well as wholesale inflation have dived to record lows in August on falling global commodity prices.