Beware of the rupee.

"The US Federal Reserve has cut interest rates for the first time this year, lowering its benchmark policy rate by 25 basis points to 4% to 4.25% range. The move marks the beginning of a monetary easing cycle aimed at supporting a slowing labor market, even as inflation remains elevated." ET. Fed Chair Jerome Powell "indicated more cuts would follow at meetings in October and December, said the softening job market was now top of the mind for him and his fellow policymakers." "Powell said he believes the recent pace of job creation is running below the break-even rate needed to hold the unemployment rate constant, and that with businesses doing very little hiring overall, any increase in layoffs could quickly feed into higher unemployment." Reuters. Stephen Jen and team "averaged out the CPI inflation and federal funds rate (FFR) trajectories over the past six cycles spanning 1971 to 2016 and compared those to the respective trajectories in the current cycle." "Over the period analysed, the Fed waited only five months after inflation started rising before making its first hike, on average. In the current cycle, inflation began to go up in the summer of 2020, but the Fed did not start hiking until the summer of 2022. Thus, the Fed waited 22 months to pull the first trigger." Reuters. The Reserve Bank of India (RBI) went even longer, for a full 24 months, having cut interest rate by 40 basis points (bps) to 4% in May 2020 (rbi.org.in) before increasing it in an unscheduled meeting in May 2022 by 40 (bps) to 4.4% (Mint). This was probably a panic reaction just before the Fed announced a full 50 basis points rise. The RBI has been mandated to keep CPI inflation at 4% with a margin of 2% on either side (ET). Deviations from the 4% target was probably meant to be an occasional slip. However, the RBI cut interest rate in May 2020, despite CPI inflation at a peak of 7.6% in January 2020 and at 7.2% in April 2020. The inflation rate was at 6.3% (rateinflation.com), higher than the upper margin allowed, even as it was cutting rates. "The RBI has cut the repo rate three times this calendar year, with two 25 bps reductions in the first two Monetary Policy Committee (MPC) meetings," and a 50 bps cut in June, for a total of 100 bps cut in 2025. HT. However, India's CPI inflation is well within the RBI's range. "Research and ratings firm Crisil said that the headline inflation during 2025-26 is projected to be 3.2%, lower than the earlier estimate of 3.5%." ET. Now that the Fed has started on a downward path should the RBI slash its policy rate by higher amounts? Last week, "The Indian rupee dropped to an all-time low against the US dollar," having "closed at 0.39% lower at 88.4425 against its previous close of 88.1000." Reuters. It recovered to 87.745 but has gone above 88 again. in.investing.com. Will a weaker rupee partially cancel out Trump's tariffs and increase exports, or will it increase the price of imports and inflation which may dampen consumer spending during the festival season? Tinkering with the interest rate is easy. The rupee has its own market. And, it directly affects us. Beware.