RBI likely to hike reverse repo by 20 bps despite uncertainty on Omicron

If Omicron becomes a major issue, risks to India's inflation will likely rise further

Despite uncertainty related to the Omicron variant’s likely impact going forward, we think sufficient progress has been achieved on the macro front for RBI to hike the reverse repo rate by 20 bps to 3.55 per cent in the December policy, while maintaining the accommodative stance. With a 20 bps hike already being fully priced in, we think RBI should use this opportunity to increase the reverse repo rate, as the action is unlikely to have any meaningful impact for markets. Or, in other words, RBI should not have a problem to take actions which are non-disruptive for markets and