Is the RBI likely to cut repo rates in the current policy announcement on 08-Oct?

Rate cuts are very unlikely, in fact the discussion is about whether the RBI could raise rates or even curtail liquidity. That will be the big debate when the 3-day MPC meet commences on 06 October. The meeting will culminate in the announcement of the monetary policy on 08 October before 12.00 noon. The broad consensus on the street is that the RBI would maintain repo rates at 4% and also hold on to its accommodative monetary stance.

However, there are a section of analysts led by Citigroup, who do believe that the RBI has a strong case to hike reverse repo rates from 3.35% to over 3.50 or 3.55%%. This option was suggested by MPC member, Jayanth Varma, as an alternative to rate hikes as it would be more palatable and would also serve the immediate purpose. Th reverse repo rate hike would also give a hint to markets that the RBI was not keen on further liquidity infusion.