In a surprise move, India’s central bank, Reserve Bank of India, Wednesday cut its key lending rates by 25 basis points.
The repurchase (repo) rate stands reduced to 7.5 percent from 7. 75 percent, while the reverse repo rate has been adjusted to 6.5 percent from 6.75 percent.
“To summarize, softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 percent in the second half,” Reserve Bank of India Governor Raghuram Rajam said in a statement.
Introducing an overhaul of its monetary policy, the Indian Finance Ministry and the Central Bank of India have agreed to inflation rate targeting, a common practice in the developed economies.
The Central Bank will aim to lower inflation to 6 per cent by January 2016 and further to around 4 per cent by March next year.