The bank also cut its lending rate to 10.5 per cent.

The cut is the bank’s fourth so far this year.

Inflation continued to fall in May, declining to 10.2 per cent from 11.7 per cent in April. This represents a 13.4 percentage point drop in yearly inflation since August 2008.

Falling food prices have pushed overall inflation down. Food inflation decreased from 31 per cent in August 2008 to 12.5 per cent in May 2009.

Economic growth in the third quarter of the 2008-09 financial year slowed to 4.3 per cent compared with 7.1 per cent in the same quarter a year earlier.

“Against this background, the MPC [Monetary Policy Committee’s] assessment of the balance of risks surrounding the inflation and growth outlook over the medium term remains unchanged as risks to the domestic growth outlook continue to be on the downside while inflationary pressures are subsiding,” according to a bank statement on 18 June.

“The MPC will continue to take the necessary measures to contain the adverse effects of the global economic turmoil on the domestic economy, provided that they do not conflict with the price stability objective.”