Rwanda central bank lowers key rate by 50 basis points

AFRICAN BUSINESS AND ECONOMYAugust 21, 2024 at 10:53 AM UTC

TLDR

Rwanda’s central bank cuts key interest rate to 6.5% for the second time, projecting inflation to stay around 5%
Annual inflation in Rwanda remains below 6%, dropping to 4.9% in July from a peak of 21.7% in Nov 2022
Governor John Rwangombwa highlights risks from geopolitical tensions and adverse weather on commodity and food prices

Rwanda’s central bank reduced its key interest rate by 50 basis points to 6.5% on Wednesday, citing projections that inflation would remain within its target range, averaging around 5%. This marks the second consecutive rate cut, following a reduction from 7.5% in May.

Annual inflation, which peaked at 21.7% in November 2022, has stayed below 6% since early 2024, reaching 4.9% in July—comfortably within the central bank's 2%-8% target range.

Despite the positive trend, Governor John Rwangombwa noted that geopolitical tensions and adverse weather conditions could pose risks to commodity and food prices.

Key Takeaways

Rwanda's economy showed resilience with an 8.2% growth rate in 2023 and sustained expansion in the first quarter of 2024, driven by robust performances across agriculture, services, and industry sectors. The government anticipates steady growth rates of 6.6% in 2024, 6.5% in 2025, 6.8% in 2026, and 7.2% in 2027. In May, the International Monetary Fund (IMF) completed the third review under the Policy Coordination Instrument and the Resilience and Sustainability Facility (RSF) arrangements, along with the first review under the Standby Credit Facility (SCF). Following this review, Rwanda accessed around $76.2 million under the RSF and $88.4 million under the SCF, bolstering the nation's financial stability and economic resilience.

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