How long will it work?

" 'It is of paramount importance to get inflation down,' Federal Reserve Governor Lael Brainard said in a speech," CNN. "She said the central bank would move to 'rapidly' shrink its $9 trillion balance sheet this year, unraveling the huge bond-buying program launched at the start of the pandemic, while also hiking rates." "Federal Reserve officials discussed how they want to reduce their trillions in bond holdings at the March meeting, with a consensus around $95 billion a month, minutes released...showed," CNBC. "Officials 'generally agreed' that a maximum of $60 billion in Treasurys and $35 billion in mortgage backed securities would be allowed to roll off, phased in over three months and likely starting in May." Two headwinds facing the Reserve Bank of India (RBI) are rising oil prices and the tightening of monetary policy by the Federal Reserve which will encourage capital to return to the US from emerging markets, said Prof Arvind Panagariya. Now is the time for the RBI to "let the rupee depreciate a bit" because "we need to support our exports and also provide some ability to compete against imports", ET. The RBI is doing exactly the opposite. "The RBI...announced a $5-billion sell-buy swap auction on April 26, the second such auction in as many months," TOI. "This could also help stabilise the rupee-dollar exchange rate, market players said." By selling dollars the RBI increases the exchange rate of the rupee against the dollar. The rupee fell to 77.02 against the dollar on 7 March when Brent crude touched $130 a barrel, BS. The exchange rate is 75.91 this morning, xe.com, while Brent crude is trading at $99.91 per barrel, oilprice,com. This may seem to be related, but while international prices have been falling, prices of petrol and diesel in India have been increased 14 times, by a total Rs Rs 10 per liter, NDTV. The RBI's Inflation Expectations Survey of Households came down by 70 basis points to 9.7% in January, while it was 10.6% three months ahead and 10.7% one year ahead, rbi.org. With the relentless rise in fuel prices inflation expectations are bound to rise. Indian households are holding on to "$3.12 trillion in excess cash compared to the fiscal year ended March 2019, wrote Niranjan Rajadhyaksha. "The rate at which money flows through the economy has come down because of cash kept in cupboards or under the mattress as a precaution." "Indian consumers have started purchasing smaller packs of packaged goods as high inflation puts pressure on household budgets," Mint. So, the government inflicts higher prices, the hapless consumer cuts consumption which hinders growth, and the RBI tries to control inflation by strengthening the rupee and increase consumption by increasing liquidity. "The RBI can't do both, that is, provide liquidity to the economy and stem the rupee's fall, at the same time," wrote Vivek Kaul. Right. But, does the RBI know?