Citing moderating inflation but possible turmoil from Trump Administration tariffs, the Reserve Bank of India (RBI) cut key policy interest rates by 0.25% on Wednesday.

India's central bank reduced its key repo rate to 6% from 6.25%, and also cut by 0.25% the standing deposit facility to 5.75%, and the marginal standing facility rate and the bank rate to 6.25%. It was the second policy session in succession that the RBI cut rates.

The RBI also publicly shifted its official monetary policy stance to "accommodative" from "neutral," a signal that central bankers may lean to reducing rates in the future to stimulate economic expansion.

The RBI has an inflation target of 4% annually, within a band of plus or minus 2%.

Giving some room to the RBI to operate, the nation's official on-year inflation rate dropped 3.62% in February, down from a revised 4.26% in the previous month, and thus striking below the mid-point of the RBI's inflation target range.

Like many other nations, India experienced bouts of inflation during and in the aftermath of the COVID-19 pandemic era, with on-year inflation rate cresting at 7.79% in April of 2022.

To battle inflation, the RBI raised its key repo rate from 4% in March 2022 to 6.5% by March of 2023, before this year's rate reductions brought the key rate back down to 6%.

Citing global uncertainties, the RBI modestly lowered its gross domestic product (GDP) forecast for India to 6.5% in the fiscal year starting April 1, from its previous projection of 6.7%.

"The recent trade tariff-related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation. Financial markets have responded through a sharp fall in the dollar index and equity sell-offs with significant softening in bond yields and crude oil prices," explained the RBI.

In addition, the RBO lowered its inflation forecast for the fiscal year to 4% from 4.2%.