Mumbai: India’s new central bank Governor Urjit Patel led the country’s new Monetary Policy Committee to cut interest rates for the first time since April, against the forecast of most private economists.

Patel began his tenure with a quarter percentage point reduction in the benchmark rate, to 6.25 per cent, bringing it to the lowest level in more than five years. The Reserve Bank of India’s new MPC — a signature initiative of Patel’s predecessor Raghuram Rajan — voted 6-0 in favour of the move, after “frank, often intense, but always friendly” discussion, Patel said.

The RBI’s new leader, who previously had a reputation as a hawk on inflation, cited a weakening global growth outlook and uncertainty about the US presidential election at the start of a 15 minute press briefing on the decision. Lower borrowing costs will be welcomed by members of Prime Minister Narendra Modi’s administration, who have highlighted the view that inflation pressures are limited in the world’s fastest-growing major economy.

Tuesday’s move was predicted by 16 of 39 economists in a Bloomberg survey, with one seeing a cut to 6 per cent and the rest no change. The rupee rose 0.2 per cent to 66.46 per dollar in Mumbai, and the Sensex index of stocks was 0.3 per cent higher. State Bank of India, a lender saddled with non-performing assets, outperformed with a 1.7 per cent rise after Patel urged “firmness but pragmatism” in bad-debt clean-up efforts.

“Today’s decision implies a slight dovish bias among the new Monetary Policy Committee, which contrasts with the more hawkish approach of the previous governor, who had sole decision-making power over policy rates,” Saravana Kumar, chief investment officer of LIC Mutual Fund. “This suggests that we could see further modest loosening over the coming months. But the scope for aggressive rate cuts is limited.”

Key points from the RBI’s research department:

India’s expansion slowed in the three months through June amid anaemic investment and weakening consumption, complicating the outlook for Modi, who’s facing as many as seven state elections next year.

The country is also in the midst of geopolitical tensions after saying last week it attacked terrorist camps over the border in Pakistan, sending stocks and the rupee to their steepest drop in three months.

India in August cemented an inflation target of 4 per cent through 2021, while allowing it to fluctuate in a 2 per cent to 6 per cent band. Rajan had aimed to reach 4 per cent by March 2018.

“While the statement has not spelt out the timeline for attaining the 4 per cent midpoint, the initial indications point to some flexibility around the time period for attainment of the midpoint,” said Rajeev Radhakrishnan, head of fixed income at SBI Mutual Fund, India’s fastest growing fund.