New Delhi, March 21 -- Central banks in emerging markets often face the dilemma of whether to quell inflation or spur economic growth, but it's unusual for the US Federal Reserve to be caught in a cleft. This week, it took the safe option of holding its policy rate steady at 4.25-4.5%, while signalling two possible cuts later this year.

America's new tariffs are expected to not just be inflationary, as import prices rise, but stagflationary, as their disruptive effect slows its economy down.

The Treasury yield curve reflects market expectations of inflation, interest rates and growth. Normally, short-term bonds yield less than long-term ones, as the latter must account for future rate uncertainty. Post-pandemic inflation followed by Fed...