In its mid-quarter policy review today, the Reserve Bank of India (RBI) decided to reduce the key repo rate by 25 basis points from 7.75 per cent to 7.5 per cent with immediate effect. Consequently, the reverse repo rate stands adjusted to 6.5 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 8.5 per cent with immediate effect. The RBI has left the cash reserve ratio (CRR) unchanged at 4 per cent.However, the apex bank said that high current account deficit (CAD) and inflationary expectations limit possibility of further easing of rates.This is the second policy rate cut by the RBI this calendar year to help revive a faltering economy, taking comfort from moderating core price pressures and the government's commitment to trim the fiscal deficit.The apex bank in its press release said that since January 2013, global financial market conditions have improved, but global economic activity has weakened. It noted that on the domestic front too growth has slowed down significantly, even as inflation remains at a level which is not conducive for sustained economic growth.The apex bank expressed growth concerns, saying headline inflation is likely to remain range-bound at the current levels over the next fiscal year. In addition, it said that elevated food prices, including pressures stemming from minimum support prices (MSP) increases, and the wedge between wholesale and retail inflation have adverse implications for inflation expectations.On the CAD, the RBI said the risk remains significant notwithstanding the likely improvement in fourth quarter and added that financing of the CAD with stable flows remains a challenge. On liquidity management, RBI said it will continue using all instruments including government bond buybacks to inject liquidity.RBI has retained the growth and inflation forecast at 5.5 per cent and 6.8 per cent respectively for the current fiscal.