Wish we knew.

"In an article titled 'State of the Economy', RBI said that inflation has edged down, but its persistence at elevated levels warrants appropriate policy responses. RBI said that the conduct of monetary policy in India is now oriented completely to bringing down inflation from unconscionably high levels as its priority." Mint. The RBI kept its policy rate unchanged at 4% since May 2020. "RBI has held the key repo rate at record lows since May 2020 and reiterated time and again that it will remain supportive of economic growth." NDTV. Until May this year, when "In a surprise move, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI)...unanimously decided to increase the repo rate by 40 basis points (bps) in an off-cycle meeting, citing inflation concern." BS. 'Off-cycle' probably stands for panic. Why? "Inflation has peaked in April this year and the momentum is expected to come down as per projection, said RBI in its August bulletin." Mint. That is correct. "The consumer price index-based (CPI-based) inflation rate for May 2022 cooled from the eight-year high in April and came in at 7.04 percent on the back of the base effect and cheaper food prices." BS.  Since then, "India's retail inflation eased in July to 6.71% due to moderation in food inflation, but stayed well above the RBI's tolerance limit of 4-6% for the seventh consecutive month, data from the National Statistical Office showed." Mint. If RBI had waited for its scheduled meeting in June it would have been proved right. So, were there orders from above? "At the third fortnightly review, the government has increased the windfall profit tax on the export of diesel to Rs 7 per liter, and brought a Rs 2 liter tax on ATF (aviation turbine fuel) exports." FE. This would increase the price and reduce exports of these items and the excess in domestic markets will hopefully reduce the price for Indians. But, it would also reduce dollar inflows. "Alongside, the tax on domestically produced crude oil has been cut to Rs 13,000 per tonne from Rs 17,750." This may reduce transport costs and slow down rising prices of goods and services. "The affordable smartphone segment is shrinking because of inflation, high input costs and parts shortages, even as the premium phone market expands, indicating that spending by wealthier Indians is roaring even as their poorer counterparts cut back." Mint. "Retail businesses across India reported a growth of 18% in sales as compared to pre-pandemic levels (July 2019) according to the Retail Business Survey by the Retailers Association of India (RAI)." ET. Today, poor people may do without shoes but will be very upset at not being able to afford a smartphone. And, that means votes. The price of crude oil will find a "strong floor" at $85 a barrel and the rupee will fall to 82-85 to the dollar, said Kishore Narne of Motilal Oswal. To pour oil on troubled waters, dictionary, "The USD/INR in the next couple of months is likely to quote in the range of 78.10 and 80.80," wrote Navneet Demani, Senior Vice President at Motilal Oswal. Will the rupee fall to 85, will prices soar, will rate hikes cause a recession, we don't know. Do they?