The National Bank of Rwanda (BNR) has lowered its interest rate from 7% to 6.5%, a rate that had been established in May this year.
This reduction is based on the slowing pace of market price inflation, which remains within BNR’s targeted range. In the second quarter of 2024, market prices increased by 5.1%, up from 4.7% in the first quarter of the year.
The Governor of the National Bank of Rwanda, John Rwangombwa, explained that during a Monetary Policy Committee meeting held this week, it was observed that the inflationary trends seen in May are still present.
He stated, “In the numbers we see throughout the year, inflation will not exceed 5%. We foresee that this year and the next, the pace of market prices will remain below 5%, which is within the desired range set by the National Bank.”
“Due to this, we found it necessary to reduce the National Bank of Rwanda’s interest rate from 7% to 6.5%.”
BNR aims to keep the inflation rate between 2% and 8% to maintain economic stability. Currently, inflation has risen from 4.7% in the first quarter of 2024 to 5.1% in the second quarter.
The increase to 5.1% from 4.7% was driven by the rising cost of goods and services, excluding perishable food items and energy products, which outweighed the reduction in inflation for perishable food items.
The inflation rate for goods and services, excluding perishable food items and energy, increased to 6.4% from 5.6%, primarily due to higher transportation costs following fare hikes in March and April this year.
However, this increase was somewhat offset by a decline in the inflation rate for perishable food items, which fell to 1.6% from 2.5%, thanks to a good harvest of crops like sweet potatoes, cassava, tomatoes, beans, and bananas during the 2024 B growing season, as well as from the A season of 2024.
BNR identifies potential challenges that could drive inflation higher than expected, including geopolitical issues like conflicts in the Middle East and the ongoing Russia-Ukraine war. Additionally, if climate change issues affect agriculture, it could hinder crop production, leading to lower-than-expected yields.
Rwanda’s Economy Continues to Grow
In June, the National Institute of Statistics of Rwanda (NISR) reported that Rwanda’s economy grew by 9.7% in the first quarter of 2024.
At that time, the Gross Domestic Product (GDP) was valued at RWF 4,486 billion in the first quarter of 2024.
This represents an increase compared to the GDP recorded in the same quarter of the previous year, which was valued at RWF 3,904 billion.
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Photo: RBA
