India’s government bond yield curve will climb in the medium term as high inflation eases back into the central bank’s comfort zone in months and prompts purchases of short-term debt, he said, chief financial officer at DBS Bank India on Friday.

Separately, the yield on the 10-year bond, which is nearing its peak, is unlikely to rise above the key 7.25% mark anytime soon, said Ashhish Vaidya, managing director and head of finance and measures.

“The yield on the benchmark bond should remain in the 7.10%-7.25% range, and I don’t expect it to jump much. Once we see some disinflation, yields may soften and reach the lower end of the scale, leading to an upside upside.”

Inflation in India broke through the upper bound of the central bank’s comfortable range of 2% to 6%, rising to 7.44% in July, much higher than the 4.87% increase recorded in June, due to higher vegetable and cereal prices.

The yield on the benchmark 7.26% 2033 bond traded at 7.23% after hitting a more than four-month high of 7.26% on Thursday, following non-stop gains in the US and surging local prices.

“Inflation is expected to remain high for the next two months and return to range from time to time. The Reserve Bank of India will try to wait as long as possible, not act hastily and not seek to tighten its policies,” Vaidya said.

Yields are at the high end of the cycle and over the next six months the yield curve will start to steepen, he added. Supply pressures could also deepen the curve, with more supply at the longer end, he added.

Vaidya expects India’s rate cut to start only in April-June, with the easing cycle shallow relative to the United States. “We could see a 50-75 basis point cut in repo rates and nothing else… the US could see a 150-200 basis point cut.”

Regarding the rupiah, however, Vaidya expects the currency to strengthen fundamentally in the medium term, after suffering some losses in the short term.

“I expect the currency to trade in an 81.50 to 83 range in the near term,” he said, adding that a break of 83 may not last long.

The rupee was trading at 83.07 to the dollar, not far from a record low of 83.29 hit in October. (Reporting by Dharamraj Dhutia, editing by Swati Bhat and Eileen Soreng)