Will $100 billion be enough?

"After more than 20 years of low stable inflation, it's come roaring back in the US - at more than 9% - and it may never return to its pre-pandemic levels," wrote Allison Schrager. "Between more trade and  globalization, especially with goods coming from cheap-labor countries, the global economy had an over-abundance of stuff. Technology made stuff even cheaper." Inflation was driven by demand and central banks knew how to manage it. Now, "The inflation problem we face is a supply and demand problem." "As per the minutes, the FOMC reaffirmed its commitment to lowering inflation to 2% by continuing to raise the federal funds rate and long term interest rates," wrote Vivek Kaul. "As the Fed raises rates, it will end up creating a problem for those who are overleveraged." They will cut expenditure which will lead to a demand shock and cause an economic recession. "In this scenario, there will be great pressure on the Fed and other central banks, from politicians and people at large, to go back to quantitative easing." "The American greenback is hovering at a 20-year high against its fellow major currencies, creating a huge problem for everyone outside America buying dollar-denominated goods, like crude oil. And no commodity is more important than crude oil," wrote Javier Blas. Brent crude is down to $106 per barrel this morning. oilprice. com. The price of petrol in the US has fallen from near $5 a gallon to around $4.5 per gallon. eia.gov. The Indian rupee has fallen to a low of 80.02 to the dollar this morning. xe.com. So, even if the government has to pay less in dollars to import crude, the price of petrol and diesel in India will remain high because the rupee is weaker and may fall further. "Central banks across the world have been issuing mea culpas, having fallen behind the curve," wrote Rajrishi Singhal. No such apology from the Reserve Bank of India (RBI). RBI Governor Shaktikanta Das insisted that RBI was absolutely right to tolerate inflation in pursuit of economic growth. ET. Naturally it ignores why its strategy failed. "Unfortunately, the RBI's latest annual report does not provide a critical assessment of why the investment rate continues to languish; instead, it sings hosannas to the government." "A weaker Indian currency will drive inflation up, which is already a grave concern due to high commodity prices. India's dollar debt will also face the music," wrote Rajani Sinha. RBI's duty is to lower inflation and for that it should support the rupee. But, how? "In an indirect call for an interest rate hike, veteran banker Uday Kotak has sounded caution over central banks not following the US Federal Reserve in monetary measures. Kotak said that those who had gone out of line had faced severe depreciation." TOI. The US Fed has raised rates by 150 basis points this year whereas the RBI has raised by just 90 basis points. Instead the RBI has been selling dollars to keep the rupee higher, ET, and thus control inflation. And is prepared to spend $100 more if it so desires. ET. And then the rupee will collapse.