The Reserve Bank of India has unexpectedly cut its key interest rate by a quarter of a percentage point to 7.75 percent.

The surprise decision announced Wednesday, a full two weeks before the central bank's planned review on Feb. 3, follows several months of drops in inflation.

India's short-term lending rate has been held at 8 percent since January 2014 to cope with escalating inflation, which hit double digits last year.

But helped by lower oil prices, inflation has eased since Prime Minister Narendra Modi was elected in May on promises of reviving flagging economic growth.