In the year to mid-September, consumer prices in Nepal rose 6.34%. A year earlier the same measure stood at barely a third of that. The figure comes from Nepal Rastra Bank's Current Macroeconomic and Financial Situation report for the first two months of fiscal year 2026/27, published on October 15. It is the second straight monthly reading above the central bank's own 5.5% inflation target for the year.
The number sitting beside it deserves more attention. Commercial banks' weighted average deposit rate, the rate ordinary savings earn, stood at 3.15% in the same NRB report, down from 4.02% a year earlier. Prices rising at 6.34% a year. Deposits paying 3.15%. Put plainly, money left in a savings account is losing about three percentage points of purchasing power every year. That is the quietest tax in the economy, and it is running at full speed.
Food prices are doing the pushing
Food and beverage inflation reached 7.54% in the year to mid-September, running hotter than the headline rate. For a country where food takes a large share of household spending, that matters more than the headline suggests. September followed the August floods that damaged roads and crops across hill districts, and disrupted transport routes are exactly the kind of shock that shows up first in vegetable and staple prices. Single-month readings can be noisy, and a flood-disrupted month is the noisiest kind, but the direction of the trend is now two months old: August already printed 5.96%, up from 1.68% a year earlier.
This is a genuine reversal of the last three years. Annual inflation fell from 7.74% in FY2022/23 to 3.08% in FY2025/26, and that long decline is what gave NRB room to cut its policy rate from 7.0% to 4.25%. That room is now gone. Inflation is above target, and the target was only set this fiscal year.
The central bank cut rates into rising inflation
In its first-quarter monetary review this month, NRB cut the policy rate to 4.25% anyway. Cutting into rising inflation looks contradictory until you see the central bank's other problem. Private-sector credit is growing at about 7% a year against an 11% target, and it has missed its target in seven of the last eight years. The interbank rate sits on the floor of NRB's rate corridor. Money is pouring into the banking system and not being lent out.
So the two problems now point in opposite directions. Inflation argues against further easing. Weak credit argues for it. NRB's October cut shows which problem it fears more: an economy where cheap money sits idle because borrowers will not borrow, no matter the rate.
Money keeps arriving from abroad
Nepal received Rs 436.36 billion in remittances in the first two months of FY2026/27, up 23.9% from a year earlier. In dollar terms the inflow reached $2.85 billion, up 13.5%. The second month added Rs 221.31 billion on top of the first month's Rs 215.05 billion, so the flow is accelerating, not fading.
Here is the detail that reframes the number: new approvals for foreign employment fell to 78,320 while re-entry approvals rose to 52,163. Fewer new workers are leaving, yet more money is arriving. The growth is coming from the existing stock of workers abroad sending more, not from more departures. Foreign exchange reserves reached $26.48 billion by mid-September, enough to cover 17 months and 24 days of imports, and NRB's own buying added to the pile: net purchases of $665.8 million in the first month injected Rs 101.87 billion of fresh rupees into the financial system. That is the mechanical link between money earned abroad and money circulating at home.
The rupees pool, but the lending stalls
Deposits at banks and financial institutions stood at Rs 8,256.21 billion in mid-September, down a marginal Rs 20.71 billion in the month but up 14.5% over the year. Credit to the private sector stood at Rs 5,880.64 billion, up just Rs 23.58 billion in the month, growing 7% over the year. Deposits grow at double the pace of lending. The average lending rate fell to 6.48% from 7.76% a year ago, and still the borrowing did not follow.
Put the pieces together and the picture is coherent. Remittances and the central bank's own dollar buying push rupees into banks. Banks, short of willing borrowers, park the money and cut what they pay depositors. Depositors earn 3.15% while prices rise 6.34%. The gap between those two numbers is not a statistic. It is a transfer, quiet and automatic, from everyone holding savings to everyone spending.
Two caveats belong here. First, one disrupted month does not make a trend, and food prices may settle as flood damage is repaired. Second, the deposit rate is an average across banks and products; individual savers will earn more or less. But the direction is what matters: inflation rising, deposit rates falling, and the spread between them at its widest in years.
The report does not announce a crisis. It describes an economy where money arrives faster than it can be used, prices rise faster than savings grow, and the central bank is easing into inflation it already overshoots. The question it leaves open is the simplest one: how long do savers keep paying for it.
This article is published for research and education purposes only. It is not investment advice, and nothing here should be read as a recommendation to buy, sell, or hold any security. Figures cited reflect publicly reported information at the time of writing and may be revised.