Rwanda’s central bank raised its benchmark interest rate by 50 basis points to 8.75 percent, stepping up its monetary tightening as persistent inflationary pressures and higher energy costs threaten to keep price growth above target through next year.
The Monetary Policy Committee increased the Central Bank Rate from 8.25 percent, where it was set in May, saying the move was necessary after revising upward its inflation outlook. Headline inflation rose to 14.5 percent in July, from 13.2 percent in the second quarter, with fresh food and energy prices among the main drivers.
The National Bank of Rwanda now expects inflation to average 13.1 percent in 2026, well above its 2%-8% target range. It expects inflation to gradually return within the target band in the second half of 2027, with average headline inflation projected at about 7.9 percent for the year.
Energy remains a major source of pressure. Energy inflation reached 44.8 percent in July, while fresh food inflation accelerated to 16 percent. Core inflation, which strips out some of the more volatile components, stood at 11.4 percent.
The Bank said the inflation outlook remains vulnerable to further shocks, particularly adverse weather conditions and a prolonged conflict in the Middle East, which could push food, fuel and imported costs higher.
“The decision to increase the central bank rate is a major step to bring inflation back within the target band, to safeguard price stability, which is a necessary condition to sustain economic growth but also protect the purchasing power of Rwandans in the medium term,” the National Bank Governor, Soraya Hakuziyaremye said.
The latest increase also comes as the transmission of monetary policy to the broader economy remains gradual. The interbank rate rose to 7.73 percent in the second quarter following May’s rate increase, while lending and deposit rates have been slower to adjust.
The Governor said the slower adjustment reflects “the structural characteristics of our market and limitations in the monetary policy transmission mechanism,” adding that further financial deepening is needed.
Despite the tightening, Rwanda’s economy has remained resilient. First-quarter economic growth was about 10 percent, while the central bank’s composite index of economic activity points to sustained momentum in the second quarter, supported by trade, financial services, manufacturing, mining and construction.
Governor Hakuziyaremye said exports rose 51 percent in the second quarter, while imports increased 28 percent, driven particularly by capital goods for major projects. The Rwandan franc also remained relatively stable, depreciating by less than 1 percent against the dollar in the first six months of the year.
But the Bank warned that prolonged global uncertainty, higher energy and import costs, supply-chain disruptions and weaker external demand could weigh on growth.
For now, the MPC’s focus remains firmly on restoring price stability. The Bank said it will continue coordinating with the Ministry of Finance and Economic Planning on monetary and fiscal measures aimed at bringing inflation back into the 2%-8% target band and, over the medium term, toward 5 percent.
“The central bank will continue to work closely with the Ministry of Finance and Economic Planning to make sure that we continue to have appropriate coordination between monetary policy and fiscal policy to reduce inflation and bring it back within our target band of 2%-8%,” Governor Hakuziyaremye said.
The new 8.75 percent Central Bank Rate will remain in place for three months, according to the Governor’s presentation. The next policy decision will therefore be closely watched for signs of whether the Bank believes inflation is finally turning lower or whether another round of tightening may be needed.
