The BIS Review 71/2000  2  daily average yield on long-term bonds shifted upwards to reach a peak of 15.2% on 10 May 2000, before the return to more stable financial conditions reduced it to 13.7% on 22 August 2000. The monthly average inflation-adjusted yield on long-term government bonds amounted to 5.5% in July 2000, compared with 10% in September 1998.
Under these circumstances, if monetary policy is tightened appreciably in the face of a surge in headline inflation, the policy would likely be excessively tight and lead to an unnecessary decline in employment.