The Monetary Policy Committee (MPC) of the National Bank of Rwanda (BNR) has lowered the benchmark interest rate by 50 basis points to 7 per cent, bringing it back to the levels last seen in August 2023.
Until August 2023, the Central Bank had increased the policy rate by 300 basis points in a long tightening cycle that was aimed at containing high inflationary pressures.
As a result, inflation has declined significantly from 20.2 per cent in the first quarter of 2023 to 4.7 per cent in the first quarter of this year.
While speaking to the media on Wednesday, May 29, Central Bank Governor John Rwangombwa attributed the cut to several positive economic signals on the local market including the slowdown in commodity prices.
“As we had projected in our last MPC sessions we expected inflation to ease to around 5 per cent but we see it at 4.7 per cent [in Q1 2024]. Our average projection for this year is expected to remain the same,” he said.
Rwangombwa also pointed out that the market recorded a positive agricultural performance in Season A, a trajectory the central bank projects to be maintained.
“We saw good performance in agriculture in season A, we expect good performance in Season B, much as it would likely not be as big as the performance recorded in Season A,” he noted.
The governor, however, cautioned that global geopolitical crisis especially in the Middle East, where a war between Israel and Palestine is underway, is a possible risk on the commodity prices.
“Based on these economic fundamentals the monetary policy decided to reduce the repo rate by 50 basis points to 7 percent from 7.5 per cent,” Rwangombwa said.
