<b>Abheek Barua:</b> Why the fuss about inflation?

RBI sees rise in demand on the back of cheaper borrowing as a risk for inflation going forward

The decision by the Reserve Bank of India (RBI) to hold the policy rate when the markets (including myself) expected a cut led to massive sell-off in the bond market reversing the downward trajectory that bond yields had been moving on for the past few months. The 10-year benchmark bond yield climbed nearly half a percentage point since the policy. What added to the momentum of the rise in yields was the central bank’s shift in stance from “accommodative” to “neutral” — gobbledygook that basically means that this was perhaps the end of rate cuts for the foreseeable future.

To be