How will the controlled RBI deal with the uncontrolled US Fed?

"India's retail price for petrol is currently among the highest in the world in terms of US dollars per litre," wrote Shayan Ghosh & Kalpana Pathak. Price of petrol in the capital Delhi is Rs 101.19 on 24 September, Economic Times (ET), which converts to about $1.50 per litre. The average price of petrol in the US was about $3.50 per US gallon, eia. Since one US gallon amounts to 3.78541 litres, the average cost of petrol per litre in the US is below $1. Care Ratings "believes that a comparison with the price of a staple item such as milk is more appropriate. This comparison shows that in India, the ratio of petrol price to milk ($ per litre for both) is the highest in the world -- 1.91." "The sharp rise in the prices of fuels used for transportation feed onto core inflation through transportation services prices," said Shashanka Bhide, member of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI). In March, "The government.... asked the Reserve Bank to maintain retail inflation at 4 percent with a margin of 2 percent on either side for another five year period ending March 2026," ET. Despite the mandate, in its August meeting the RBI "kept the repo rate unchanged for the seventh time at 4 percent, citing the need to support the ongoing growth recovery amid continued uncertainty and global financial market volatility," Hindustan Times (HT). Retail inflation came down to 5.3% in August from 5.9% in July, Business Standard (BS). The Consumer Price Index (CPI) grew by 5.4% in the US in June 2021, compared to 6.26% in India, HT. To account for disruptions due to the pandemic in 2020, a comparison between June 2019 and June 2021 shows that CPI inflation increased by 6.07% in the US compared to 12.88% in India. Services contribute 58.58% of the CPI basket in the US while food and beverages, basic necessities, constitute 45.86% of the Indian basket, showing the difference in wealth between the two nations. Much of the inflation in the US is due to base effect because the CPI grew by just 0.65% in June 2020, compared to 3.18% in June 2019. "Federal Reserve Chair Jerome Powell said the US central bank could begin scaling back asset purchases in November and complete the process by mid-2022, after officials revealed a growing inclination to raise interest rates next year," ET. However, "The Federal Open Market Committee (FOMC) decided to maintain the target range for its benchmark policy rate at zero to 0.25%, and continue purchases of Treasuries and mortgage-backed securities at a pace of $120 billion per month. The vote was unanimous." Rising prices mean a decreasing buying power for the rupee against the dollar and at some point the exchange rate must adjust. The rupee is trading at 73.68 to one dollar, xe. If the rupee falls against the dollar, the price of fuel is likely to jump sharply, and retail inflation will rise in tandem, unless the government cuts taxes to compensate for the rise. The strength of the rupee is due to a flood of dollars into Indian markets raising stock market indices to record territory, Times of India (TOI). "After reaching a record high in the previous week, the country's foreign exchange reserves declined by USD 1.34 billion to USD 641.113 billion in the week ended September 10, 2021, according to RBI data, BS. This brings us to Robert Mundell who was awarded the Nobel Prize for showing that "policymakers can choose any two, but not all three, macroeconomic objectives -- foreign capital mobility, fixed exchange rates and inflation management", wrote Amol Agrawal. "RBI managed this trinity by increasing liquidity via multiple programmes, keeping bond yields low. This was at the cost of almost ignoring the inflation target." Why is the RBI ignoring a direct mandate from the government to control inflation? Because, Article 58 gives the government powers to direct the RBI to do so and it has the power to appoint its own stooges to the board of the RBI, wrote Pramit Bhattacharya et al. All very cozy. The only problem is what the US Fed will do. And the Fed is not controlled.