Do the math.

"Year-on-year inflation rate based on All India Consumer Index (CPI) for the month of January 2025over January 2024 is 4.31% (Provisional)." "It is the lowest year-on-year inflation after August 2024." pib.gov.in. Speaking in the Parliament, Finance Minister Nirmala Sitharaman said, "This is now closer to the lower end of RBI's inflation target which is in the range of 4%." CNBC. The FM is being really economical with the truth because, in 2021, "The government...asked the Reserve Bank to maintain retail inflation at 4% with a margin of 2% on either side...ending March 2026." ET. Class 3 math knowledge tells us that 4% is the target and 2% is the "lower end". The FM knows that according to the Annual Status of Education (ASER) 2024, "The percentage of Class 3 children who can perform at least subtraction at the basic arithmetic level was 33.7% in 2024, up from 25.9% in 2022 and higher than the pre-pandemic level of 28.2% in 2018." India Today. While this information is of great relief, it means that a vast majority will not catch the fake news. Of greater concern is the unexpected rise in prices in the US in January "with the headline CPI now at 3%, up from the 2.9% rise in December, and the core CPI at 3.3%, up from the 3.2% rise in December." JP Morgan. However, the Producer Price Index increased by 0.4% in January 2025 compared to the 0.3% estimate by Dow Jones. ET. JP Morgan analysts still expect the US Federal Reserve to "cut interest rates this year, but the recent strength of the labor market and higher-than-expected inflation may delay these cuts to the latter half of the year." On 7 February, the RBI cut its interest rate for the first time since May 2020 by 25 basis points (bps) to 6.25%. Reuters. In its meeting on 29 January, the US Fed decided to keep its Funds rate on hold at 4.25%-4.50%. CNBC. The difference between interest rates in the US and India is now less than 2%, whereas the rupee has depreciated by over 3% against the dollar in 2024 (ET). It therefore makes sense for foreign investors to shift their investments from India to the US. As funds withdraw from India the rupee comes under greater pressure forcing the RBI to sell dollars and buy rupees from the market. That creates a shortage of liquidity in banks and nudges lending rates higher. The RBI has probably sold $12 billion in the last three days and then has conducted Variable Repo Rate (VRR) auctions (InsightsIAS) to infuse more liquidity into banks. It conducted a VRR auction worth Rs 2.5 trillion, will conduct another worth Rs 750 billion today and possibly one worth Rs 2.75 trillion next week. FE. "The repo rate is the interest rate at which the RBI lends money to commercial banks for their short-term liquidity requirements. ET. By cutting its repo rate by 25 bps the RBI was making it cheaper for banks to borrow so that banks would lend at lower rates. But "its actions on the forex front had the opposite effect of what it was trying to do with monetary policy." The RBI thought it could ignore the Impossible Trinity which says that a central bank "cannot pursue an independent monetary policy, maintain a fixed exchange rate and have free flows of capital at the same time." Mint. As the rupee depreciates the cost of imports will go up and inflation will rise. FE. It was unwise for the RBI to cut its interest rate when the US Fed hit the pause button. The RBI should not listen to the FM when she says that 4% is the "lower end" of its inflation target. The RBI should do its own math.