Mubasher: India’s central bank unexpectedly slashed its key interest rate, after holding it steady in the prior two policy meetings, shifting to a “neutral” monetary policy stance from “calibrated tightening.”

The Monetary Policy Committee (MPC) decided to lower the repurchase rate by 25 basis points (bps) to 6.25%, effective immediately, the Reserve Bank of India (RBI) stated on Thursday.

India became the first Asian nation to relax borrowing costs this year.

The rate setting body voted 4 to 2 on reducing the repo rate, with two policymakers voting to hold the rate unchanged.

The committee asserted its commitment to attain the medium-term target for inflation of 4%, while voiced its concerns about economic growth headwinds, hinting at more rate cuts.

“The shift in stance from calibrated tightening to neutral provides flexibility to address, and the room to address, sustained growth of India’s economy over the coming months as long as inflation remains benign,” RBI governor Shaktikanta Das said.

Inflation slowed to an 18-month low of 2.2% last December, remaining well below the central bank’s medium-term target.

The next policy meeting is slated for 2 and 4 April, while the minutes of the latest meeting will be released on 21 February.