India's inflation has come off a peak but is still high, Bloomberg quoted the Reserve Bank of India Governor D. Subbarao as saying, a comment that is likely to cool expectations for a rate cut later this month.
"When growth is slowing down you can stimulate the economy either by monetary easing or by fiscal stimulus, but both monetary and fiscal side have no room for stimulus. So that is the big concern,"
Expectations for a rate cut had gathered momentum this week after headline inflation slowed to its lowest level in three years.
The central bank, which is scheduled to review policy on January 29, has kept its key borrowing rate at 8 percent since April, defying calls from business and politicians to do more to cushion the economy from a downturn that has dragged it towards its slowest growth rate in a decade.