Higher inflation is supposed to coincide with higher market rates. Why? Two main reasons. First, market rates contain inflation, so if inflation rises then so too should market rates. Second, higher inflation will typically cause central banks to raise rates; maybe not immediately, but eventually. Market rates would then typically rise as a consequence of the former and in anticipation of the latter. But let's break this out. Inflation only matters if it persists. In other words, if inflation rises well above trend but then falls back to well below trend, then it matters far less, or at least it is less scary. ... (full story)