India needs to see a substantial softening of headline inflation - Rajan

MUMBAI (Reuters) - India needs to see a substantial softening of both headline inflation as well as some momentum in the right direction for core inflation, Reserve Bank of India (RBI) governor Raghuram Rajan said.

"There are indications that vegetable prices may be turning down shortly ... our current reading from the metros suggest a significant fall in vegetable prices both at the wholesale and retail level which gives us reason to keep interest rates stable," Rajan speaking at the post policy press conference said.

The RBI unexpectedly kept the country's policy interest rates on hold on Wednesday, despite calling current inflation too high, citing the prospect of easing retail prices and its concerns about the weak domestic economy.

Rajan added the RBI was trying to calibrate monetary policy primarily to target inflation in an environment where growth is weak.

(Reporting by Suvashree Dey Choudhury and Rafael Nam; Editing by Anand Basu)