Can we afford to wait?

"For its sake and that of both the US and global economy, the Fed must regain control of the inflation narrative. Its failure to do so in the past 12 months is turning the perception of the Fed from the world's most powerful bank, long respected for its ability to anchor global financial stability, to an institution that too closely resembles an emerging-market bank that lacks credibility and inadvertently contributes to undue volatility," wrote Mohamed A El-Erian. In March, "The Federal Reserve raised interest rates by a quarter percentage point and signaled hikes at all six remaining meetings this year," ET. El-Erian was unimpressed. "This unfortunate sequence is painfully familiar to some developing countries," he wrote. "First, through a misdiagnosis of the economic situation or policy inertia, or a combination of both, the central bank falls behind inflation realities and erodes its inflation-fighting credibility." Then, the central bank tightens its monetary policy, markets fall and the bank "finds itself in a dilemma of either risking a recession by validating the ever-more hawkish market pricing or seeking to minimize such damage, often unsuccessfully, by enabling high and potentially more destabilizing inflation to persist even longer." El-Erian is not hinting at the Reserve Bank of India (RBI). India is a lower middle income country, World Population Review. "Having realized that its inflation forecast was out of line with emerging reality, RBI wasted no time in raising (interest rate) it. That shows intellectual openness," wrote Chief Economic Adviser to Government of India V Anantha Nageswaran. "Monetary policy is a short -run aggregate demand management tool, as per textbooks." "In addressing supply-side inflation, central banks have an unenviable task." "India is in a better position than many competing economies and is likely to avoid stagflation as the rebound has gathered momentum, the RBI said in its monthly state of economy report," ET. If we are unable to afford the basic necessities of life because of exorbitant prices, is it any consolation that 22% of people in Sri Lanka are in danger of starvation? UN. While India's Covid stimulus measures were deemed to be less than 1% of GDP by experts, ET, in the US, "Beginning under then-President Donald Trump and continuing through President Joe Biden's administration, Congress has approved some $4.5 trillion in total aid spending, according to Treasury Department data," CNBC. Which means that demand compression through higher rates will work in the US. High rates in the US leads to a stronger dollar. "Bar a handful of outliers, including the Brazilian real and the Peruvian sol, the dollar is omnipotent versus pretty much every currency in both the developed and developing world. That's putting the squeeze on policy makers everywhere to defend their currencies or risk importing yet more inflation into their already beleaguered economies," ET. "The country's foreign currency reserves declined by USD 4.599 billion to USD 596.458 billion in the week ended June 10," FE. If the Fed is trying to reduce $8.93 trillion in assets, FRED, does the RBI think it can defend the rupee with less than $600 billion? El Erian vs Nageswaran, who wins? Can we afford to find out?