End of rate cut cycle

The bond market suggests that inflation will stay elevated

Even as the central bank has kept key policy rates unchanged since August, bond yields have surged 70 basis points, suggesting that the debt market is not comfortable with the situation. Investors are seeing surging inflation as a potential threat to a still struggling economy and a daunting challenge to policymakers. Since markets do not like uncertainty, investors seem to have built an expectation hypothesis about where the rates could go, and are adding an “uncertainty premium” to bond yields. What could be the prescription when the inflation rate rises but growth rates are weak? Theoretically, the Reserve Bank of