The National Bank of Rwanda has further lowered its benchmark interest rate for the second consecutive meeting this year, aiming to continue supporting the economy while citing stable inflation projections for the rest of the year.
The Monetary Policy Committee cut the key policy rate by 50 basis points to 6.5 percent. The Committee had previously reduced the rate by 50 basis points in May, down from 7.5 percent.
“We expect inflation to be around the 5 percent benchmark, within our band of 2 to 8 percent, and aligned with our medium-term objective for this year and next year, 2025, assuming normal agricultural production and other economic fundamentals. Therefore, the Monetary Policy Committee has decided to reduce the central bank rate by 50 basis points to 6.5 percent,” Central Bank Governor, John Rwangombwa told reporters during a press briefing.
According to the Governor, inflation is projected to remain within the target band, averaging around 5 percent in 2024 and 2025. However, risks to the forecast include adverse weather conditions and global geopolitical tensions.
Rwangombwa highlighted potential risks that might impact stable inflation, particularly the global geopolitical tensions due to conflicts in the Middle East and in Ukraine and Russia. These could create uncertainties around international commodity prices and weather conditions that could affect future agricultural supply and food prices. He emphasized that the national lender will closely monitor these risks.
Rwanda’s economy performed well, driven by the recovery of the agricultural sector and the consistent strong performance of the service and industry sectors. According to the National Bank, this robust growth is projected to continue into the third quarter of 2024.
“We had strong economic growth in the first quarter of this year at 9.7 percent, with all subsectors growing in double digits. When you look at the composite index of economic activities that we track at the National Bank, based on this trend, we expect to see the economy remaining strong in the second quarter,” Rwangombwa said.
Other Highlights:
• In the second quarter of 2024, the trade deficit widened by 9.5 percent, driven by a 6.4 precent increase in imports, while exports observed a slight increase of 0.9 percent.
• The financial sector continues to grow, with growth reflected across all sectors. Lending institutions expanded due to rising deposits and capital. The pension sector grew with higher contributions and investment income, while the insurance sector’s growth was fueled by increased premiums, investment income, and capital boosts.
• According to the national lender, financial institutions are expected to maintain their resilience, supported by capital and liquidity buffers that will continue to facilitate intermediation and absorb unexpected losses.
