The Reserve Bank of
The bank said the measure was a temporary, ad-hoc response to global financial pressures.
"There has been a sharp deterioration in the global financial environment with the number of troubled financial institutions rising, stock markets weakening and money markets strained. Central banks across the world have stepped up their liquidity operations, including coordinated actions, and some have banned/limited short selling of financial stocks," the bank said in its statement.
"These new developments have impacted domestic money and forex markets with a marked increase in volatility and a sharp squeeze on market liquidity," it said.
Many market watchers expected the move, which will become effective Oct. 11, though it came earlier than anticipated.
The cut is the latest is a series of steps the Reserve Bank of
Domestic overnight interest rates peaked at over 15 percent at the end of September, before falling 11.5 percent on Oct. 6, according to Goldman Sachs.
Goldman said it believes interest rates in
Markets reacted well initially with