MUMBAI: The Reserve Bank of India (RBI) cut its key interest rate for the first time in nearly five years on Friday, as it seeks to boost the sluggish economy and sees inflation easing towards its 4 per cent target.

The Monetary Policy Committee (MPC) cut the repo rate by 25 basis points to 6.25pc after having kept it unchanged for eleven straight policy meetings.

The decision was in line with a Reuters poll, where over 70pc of economists had predicted a quarter-point reduction, and marked the first reduction in India`s key rate since May 2020.

The MPC noted that though growth is expected to recover, it is much lower than the 8.2pc in 2023-24 and inflation dynamics have opened space for rate easing, RBI Governor Sanjay Malhotra said in the first policy review since his appointment in December.-Reuters