Valdis Dombrovskis, the EU's economy chief, emphasized that the European Central Bank will need to act in response to the sharp rise in inflation driven by the ongoing war in Iran. He stated that it is clear the ECB must address these price pressures, with markets anticipating a possible rate hike at the June meeting. While reaffirming the ECB's independence, Dombrovskis and other ministers called for temporary government interventions and highlighted the importance of not letting the current energy crisis worsen.

UK government borrowing reached £24.3 billion in April, the highest for the month since 2020, driven by increased spending on benefits and pensions amid rising inflation. The figure surpassed the UK Office for Budget Responsibility's forecast of £20.9 billion. The borrowing surge comes as the government faces financial pressures from the Iran war and political instability, with public debt already at 94.2% of GDP.

US Treasury yields fell as oil prices retreated on optimism that an agreement to end the US war in the Middle East might be reached soon. The 10-year note's yield neared 4.55%, extending its decline from over 4.68% two days ago.

Cross-border bank credit grew by 11.5% in 2025, the fastest rate since the 2008 financial crisis, driven by loans and deposits, according to the Bank for International Settlements. Euro-denominated credit to emerging markets outpaced dollar credit, with emerging Europe, Africa and the Middle East seeing significant increases.

Japan's core inflation dropped to a four-year low of 1.4% in April, below economists' expectations, potentially weakening the case for an interest-rate increase from the Bank of Japan. The BOJ recently raised its core inflation outlook to 2.8% because of higher crude oil prices, but the latest data show that inflation remains below the central bank's target.

Argentina's economy saw a significant rebound in March, with economic activity growing 3.5% from February, surpassing economists' expectations, according to data from Indec. Argentina is facing a dilemma as it successfully replenishes foreign reserves from a surge in dollar inflows driven by commodity exports and corporate bond sales. While this helps meet International Monetary Fund targets, it also increases the supply of pesos, potentially reigniting inflation. The International Monetary Fund has approved a $1 billion disbursement to Argentina after the second review of a $20 billion debt agreement, raising total disbursements to $15.8 billion.

The Reserve Bank of India favors managing inflation over raising interest rates to support the rupee, sources say, noting that other measures are available to stabilize the currency. Since the start of the Iran conflict, the rupee has dropped nearly 6% against the US dollar, and interest rate swaps are pricing in at least 40 basis points of hikes in the next three months.

The US Federal Reserve has proposed a framework for "skinny" payment accounts for nonbanks, allowing access to Fedwire and other services but excluding the automated clearing house. The proposal includes a $1 billion cap on closing balances and suggests Reserve Banks pause decisions on Tier 3 institutions' access requests until the policy is finalized. The proposal is open for public comment for 60 days.

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