India's central bank cuts its key rates unexpectedly by a quarter point in an unscheduled review on Thursday.
Reserve Bank of India governed by Raghuram Rajan lowered the repo rate to 7.75 percent from 8 percent with immediate effect. The reverse repo rate was adjusted to 6.75 percent from 7 percent.
The repo rate is the rate at which the central bank lends to commercial banks and the reverse repo rate is the rate at which the central bank accepts deposits from banks.
The cash reserve ratio was maintained at 4 percent.
Rajan said the path of inflation, while below the expected trajectory, has been consistent with RBI's assessment of the balance of risks. Lower crude oil prices helped to reduce inflation. Moreover, weak demand conditions also moderated inflation excluding food and fuel.
On current policy settings, inflation is likely to be below 6 percent by January 2016, he said. These developments have provided headroom for a shift in the monetary policy stance.
Key to further easing are data that confirm continuing disinflationary pressures, he said. Also critical would be sustained high quality fiscal consolidation as well as steps to overcome supply constraints and assure availability of key inputs.
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