India cuts key rate for first time since '04

India's central bank unexpectedly lowered its key repurchase rate for the first time since 2004 as global credit-market turmoil threatens to plunge the world economy into recession.

The Reserve Bank of India cut its overnight lending rate to 8 percent from 9 percent, according to a statement in Mumbai yesterday. The action came after the bank reduced the cash reserve ratio by 2.5 percentage points to 6.5 percent since Oct 11.

The move signaled Governor Duvvuri Subbarao sees weaker growth a bigger threat than inflation in Asia's third-largest economy. China's economic growth slumped to a five-year low last quarter and Vietnam reduced borrowing costs yesterday, as JPMorgan Chase & Co and UBS AG said the world economy is sliding into its first recession since 2001.