RBI becomes first central bank in Asia to cut rates this year

STOCK MARKET - The Reserve Bank of India (RBI) cut its main policy rate on Wednesday by a quarter percentage point to a more than 6-1/2 year low, saying a slump in inflation opened room for monetary easing, while pinning further action on upcoming economic data.

The rate cut is the RBI's first easing move since one of the same size in October and the first by a central bank in Asia since December - a show of confidence in a country that has experienced a surge in foreign investments into debt and shares this year.

Cutting the repo rate by 25 basis points to 6.00 per cent - the lowest since November 2010 - had been widely anticipated as a slump in food prices sent June consumer inflation to a more than five-year low of 1.54 per cent.

The RBI said easing prices had provided "some space" for monetary policy accommodation: inflation is now well below the RBI's 4 per cent target and its projection of 2.0-3.5 per cent in April-September.

The rate cut will likely ease some of the pressure from the government and markets for action to lift the economy, which had annual growth in January-March of 6.1 percent - fast by global standards but India's lowest number in over two years.

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