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“The policy stance is guided by the need for continuous vigil and preparedness to pro-actively respond to risks to the economy from external developments, especially those stemming from global financial markets,” said RBI Governor Duvvuri Subbarao.
The repo rate is the key interest rate at which the RBI lends to the system.
The bank also cut the country’s GDP growth forecast for the 2014 financial year to 5.5 per cent from 5.7 per cent, citing both global and domestic uncertainty.
The RBI said it will try to keep inflation at five per cent by the end of March next year.
“Global currency market movements in June-July 2013 have prompted a re-calibration of monetary policy,” the central bank said in a macroeconomic report on Monday.
The recent liquidity tightening measures, taken to support the rupee, will be rolled back in a calibrated manner as stability is restored to the foreign exchange market, announced the RBI.
The Indian Prime Minister Manmohan Singh promised more reforms during a brainstorm meet with industry leaders on Monday to discuss the economy.
Dr Singh has also tasked the Prime Minister’s Council on Trade and Industry to submit a report within a month “on what can be done in the next 2-3 months” to bolster investor confidence.