On Friday, the central bank of Nepal reduced the benchmark policy rate at which it provides loans to commercial banks from 8.5 percent to 7.5 percent.

According to Prakash Kumar Shrestha, head of the central bank’s Economic Research Department, following the third quarter monetary policy review, “there is contraction in economic activities and the move is expected to reverse the slowdown.”

Retail inflation increased slightly to 7.76% in the nine months to mid-April from 7.28% in the same period a year earlier, above the central bank’s aim of keeping annual inflation to 7% but falling short of levels over 8% in September last year.

According to Shrestha, who was referring to India, Nepal’s southern neighbor and the source of all of its fuel and almost all of its consumer goods, “inflation is largely stable and is expected to further ease because of stable inflation in India,” and “inflation is largely stable.”

According to a second statement from Finance Minister Prakash Sharan Mahat, as remittances and tourist revenue increased, forex reserves, which had fallen to around $9 billion in July, increased to $10.9 billion, enough to fund imports for more than nine months.

The government’s center-left coalition is under pressure to lower interest rates to single digits after trade and business representatives in Nepal complained over higher rates that reached 13% last year.

According to Deependra Bahadur Kshetri, a former governor of the central bank, “this could have put pressure on the central bank to lower rates.”

Kshetri said that while there had been some progress in the external sector recently, it was still too soon to “follow relatively softer monetary policy.”

According to the government-run National Statistics Office, a decline in manufacturing, construction, and commerce might cause the $40 billion economy to expand by only 1.68 percent this year, falling short of the government’s 8% objective.

This month, the IMF predicted that Nepal might see growth of 4.4%. In a fresh letter to Congress on Monday afternoon, Treasury Secretary Janet Yellen reaffirmed that the US is still expected to go over the debt limit as early as June 1.

Congress now has fewer than three weeks to take action in light of Yellen’s confirmation of the deadline. Failing to do so would result in the nation’s first-ever debt default, which would have serious economic repercussions and may send the nation into a recession.

According to Reuters and NBC News, Treasury Secretary Janet Yellen acknowledged that the organization won’t likely be able to fulfill all US government payment commitments by early June in her second letter to Congress in as many weeks.

By June 1, the debt cap may be legally obligatory, according to her.

The updated date takes into account further information on receipts of income and payments since Yellen informed Congress on May 1 that Treasury will probably run out of money to pay for government obligations in early June, maybe as early as June 1.

It comes before of US President Joe Biden’s upcoming meeting with House Speaker Kevin McCarthy and his next international tour, which begins on Wednesday.

The exact day Treasury exhausts extraordinary measures may be a few days or weeks later than these projections, according to Yellen’s letter from today, which is a change from her message on May 1 that merely foresaw a date “a few weeks later.” As new material becomes available, she promised to provide Congress another update the following week.

On Wednesday, Biden departs for a week-long trip to Australia after attending a meeting of the Group of Seven leaders in Japan. McCarthy said on Monday that the weekend’s prolonged staff-level negotiations had stalled out.

A “constitutional crisis” and a “economic and financial catastrophe” for the US and the rest of the world’s economy, according to Yellen, might result from Congress’s failure to increase the $31.4 trillion federal debt ceiling.

The United States stands a “significant risk” of going into default on its debt commitments during the first two weeks of June, according to the nonpartisan Congressional Budget Office, and payment operations have been shaky throughout May.

If Treasury can access the quarterly tax payments due on June 15 and the fresh borrowing options that become available on June 30, according to some experts, including the Congressional Budget Office, it may avoid defaulting until August.

In a letter sent out on Monday, Yellen urged swift action. “We have learned from past debt limit impasses that waiting until the very last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” Yellen said. For assets expiring in early June, she said that Treasury’s borrowing costs had already significantly risen.

She warned that if Congress doesn’t lift the debt ceiling, it would hurt American families’ ability to make ends meet, undermine our nation’s status as a global leader, and cast doubt on our capacity to protect our national security interests.

According to a government source, Germany will practically reduce the amount of liquefied natural gas (LNG) terminals it had originally intended to build in the Baltic Sea as Berlin reassesses its LNG requirements in light of local opposition and the easing of energy constraints.

According to the source, who spoke on the condition of anonymity to Reuters, two floating LNG terminals with an annual capacity of around 10 billion cubic meters (bcm) would be situated at Mukran off the Ruegen coast, down from the 18 bcm originally anticipated.

The utility RWE, which said last month that it did not want to manage any LNG infrastructure on a long-term basis, will not run the floating stations in Ruegen, a well-liked tourist destination. Instead, Deutsche Regas will do so.

The government will include the project in its LNG Acceleration Act, which provides a summary of Berlin’s LNG infrastructure ambitions, it was further said.

Germany pushed to hasten the development of its LNG infrastructure last year in response to Moscow’s invasion of Ukraine and a dramatic decline in piping Russian gas shipments to Europe’s largest economy, which highlighted Berlin’s reliance on Russia.

Germany avoided an energy deficit last winter because to the construction of three floating terminals that were authorized, put into service, and opened at the ports of Wilhelmshaven, Brunsbuettel, and Lubmin in less than a year.

Berlin has rebuffed concerns from environmental organizations over the excessive projected capacity, stating that German ports would also serve European neighbors, and intends to replace part of its floating terminals with permanent stations starting in 2026. The markets anticipate that monetary easing may be necessary in the next months to help the economic recovery. On Monday, China’s central bank rolled over maturing medium-term policy loans while maintaining the interest rate at its previous level.

According to Reuters, the People’s Bank of China (PBOC) declared that the interest rate on 125 billion yuan ($18.08 billion) in medium-term lending facility (MLF) loans to select financial institutions will remain at 2.75 percent from the previous transaction.

The purpose of Monday’s operation was to completely satisfy the demands of financial institutions and “maintain reasonably ample banking system liquidity,” the PBOC said in an online statement.

In a Reuters survey of 30 market observers last week, 26 participants, or 86.7%, forecast no change to the MLF rate, while 4 respondents anticipated a marginal rate drop.

In December, the government eased strict economic restrictions that had been stifling credit demand in the second-largest economy in the world. However, there are mounting worries that momentum is waning following the first upswing.

Beijing would likely need to step up its easing measures in order to keep the economic recovery on track given the indications of a sluggish investment climate and muted domestic demand.

After the nation’s top banks reported declining margins in the first quarter, several experts predicted that an impending rate drop would put more pressure on lenders’ profitability.

Xing Zhaopeng, senior China analyst at ANZ, said that banks may not be able to decrease rates since their net interest margins are so near to the 180 basis point warning line.

Financial concerns might arise if lending rates are reduced further, he warned.

A net 25 billion yuan in additional funds were injected into the banking system as a consequence of the operation, which coincided with the expiration of 100 billion yuan in MLF loans this month.

According to a statement posted online, the central bank also added 2 billion yuan via seven-day reverse repos while maintaining the same borrowing rate of 2.0%.

“We think disappointing credit data and rising deflation risks increase the probability of more monetary policy easing in the form of an interest rate cut,” Barclays analysts said in a report issued last week.

If authorities want to stop the disinflation/deflation cycle, they must take a comprehensive strategy and make concerted policy measures to stabilize the housing market and increase consumer and corporate confidence.

However, they observed, “the bottleneck is weak demand and the bank system is flush with liquidity.” They pointed out that the PBOC seemed to favor raising banks’ reserve requirement ratios (RRR) and other structural instruments. Following a rise in the dollar index and higher US rates due to concerns about US inflation, the Indian rupee is anticipated to decline on Monday, compounding losses from the previous week.

According to non-deliverable futures, the rupee will start the day at about 82.20–82.22 to the US dollar, up from 82.1625 in the previous session.

The dollar index increased 0.6% on Friday to hit its highest level in a month, while the US two-year yield returned to about 4%. According to Reuters, rising rates and stronger dollar demand were caused by fresh concerns about the US inflation prospects.

According to a study released on Friday by the University of Michigan, consumers’ long-term inflation expectations increased this month to their highest level since 2011, which diminished the perception that the US Federal Reserve was through with its tightening cycle.

The chances of an interest rate increase from the Fed at its meeting in June increased somewhat, while the default scenario still calls for a pause.

Michelle Bowman, the governor of the Federal Reserve, said last Friday that if inflation remains high, the government would likely need to increase interest rates further. She also stated that significant data released this month has not persuaded her that pricing pressures are subsiding.

According to ANZ, the Chair of the Fed, Jerome Powell, will be one of the ten speakers planned for the next days.

In a note, ANZ said that “their assessments of whether recent labor market and inflation data support pausing in June or not will be scrutinized.”

The Thai baht strengthened due to the nation’s election results, while all other Asian currencies fell. The offshore yuan fell to its worst point in more than two months.

82.25, a high USD/INR hit on April 19, is predicted to provide support for the Indian rupee, along with the rest of Asia FX, which is anticipated to struggle. In the short run, the dealer added, India’s inflation statistics was “supportive” of the currency.

In April, annual retail inflation in India decreased to a level not seen in 19 months, or 4.7%.


** One-month non-deliverable rupee future at 82.32; one-month onshore forward premium at 10.5 paise

** On Friday, the NSE May USD/INR futures price finished at 82.2225.

At 4.75 paise in May, the USD/INR forward premium

102.66 for the dollar index.

** Brent oil futures are down by 0.5% to $73.8 per barrel.

Ten-year US Treasury yield is 3.46 percent.

Nearest-month futures for the SGX Nifty are down 0.2% at 18,282.

According to NSDL statistics, on May 11, foreign investors purchased Indian shares totaling a net $120.7 million.

Foreign investors, according to NSDL statistics.

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