The Nepal Rastra Bank has kept all the provisions in the monetary policy unchanged after its first quarter review published on Friday, November 29.

On July 26, the monetary policy for the fiscal year, which began on July 16, had reduced the bank rate to 6.5 percent from 7 percent and the policy rate to 5 percent from 5.5 percent, while keeping the deposit collection rate unchanged at 3 percent. These rates have been kept constant, the review says. 

Bank rate, policy rate and the deposit collection rate are the upper, middle and lower limits of the NRB’s interest rate corridor. 

“The central bank has been managing liquidity in a way that supports economic growth by analyzing inflation and the status of foreign exchange reserves,” says the review. “Based on the current state of the economy, the level of foreign exchange reserves, and an analysis of inflation, a cautious and flexible approach to the monetary policy for the fiscal year has been continued.”

Governor Maha Prasad Adhikari, while unveiling the policy, said earlier in July had said that the central bank has continued its agenda of a ‘cautiously accommodative’ monetary policy to make the economy vibrant. 

Read: Monetary Policy ‘Cautiously Accommodative’ to make the Economy Vibrant: NRB

The review mentions the possibility of a surge in inflation in the coming days.

“The inflation has remained within the target range up to the first quarter of the current fiscal year…..Given that food group inflation is high in India, and the ongoing geopolitical tensions in the Middle East along with the increasingly complex Russia-Ukraine war, there remains a risk of disruptions in the supply chain, which could exert pressure on consumer prices,” it says.

The central bank aims to limit the inflation within 5 percent this fiscal year. The average CPI-based inflation in the first three months of the current fiscal year was 4.26 percent while the year-on-year consumer price inflation stood at 4.82 percent in mid-October 2024 compared to 7.50 percent a year ago. 

While the food and beverage inflation stood at 7.18 percent in mid-October, the nonfood and service inflation stood at 3.49 percent, according to the central bank.