Rwanda retains key repo rate at 6.5pc

Rwanda’s central bank has maintained its key repo rate at 6.5 per cent in a bid to tame the speed of price increases, the franc’s volatility and to stimulate lending.

The repo rate is the percentage at which the central bank lends to commercial banks.

Inflation has remained above the central bank’s medium target of 5 per cent in the last three months rising to 6.4 per cent in August driven by increasing food prices as a result of the dry weather.

John Rwangombwa, the National Bank of Rwanda governor said they expect inflation to slow down to 6 per cent while the franc is projected to depreciate further against the dollar by 9.8 per cent by the end of the year. In the last eight months, the Rwandan franc has depreciated by 8 per cent against the greenback.

“One side is pushing us to tighten, the other side is pushing us to ease the monetary policy stance. And we though the best position for the two conflicting situations is to remain prudent at the level we are, not to stifle financing the economic sectors. But not also to loosen and worsen inflation pressures,” Mr Rwangombwa said.

The central bank has retained the repo rate at 6.5 per cent for over two years.

The economy has slowed down to 5.4 per cent in the second quarter of the year, but the government expects it to expand and hit the 6 per cent target in 2016.

While Rwanda grapples with rising inflation rate, it has remained moderate in other East African economies. In Uganda, the cost of living eased to 4.8 per cent in August from 5.1 per cent in July, Kenya 6.3 per cent from 6. 4 per cent while Tanzania 4.9 per cent from 5.1 per cent.