The Monetary Policy Committee of the National Bank of Rwanda (BNR) has maintained its central bank rate (CBR) at 6.5 per cent, a level the bank says is considered adequate to keep inflation within the target range.
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The decision on policy rate – the key interest rate that guides borrowing in the economy – comes on the back of easing inflationary pressures.
The bank indicated that inflation in the third quarter of 2024 remained within the target range of 2 to 8 per cent due to improved domestic agricultural production, and prior monetary policy measures by the central bank.
it also noted that government initiatives to ease price pressures and declining global prices for key commodities have helped reduce imported inflation in the past few quarters.
Inflation projections for 2025 have been slightly adjusted upward to account for the potential impact of delayed rainfall during the ongoing Season A, which may affect the harvest of certain crops.
"There was shortage of rainfall in the current agricultural season especially in Eastern Province. Maize and beans produce might be affected by the change in weather and thus their prices may be affected,”John Rwangombwa, the Governor of the central bank, said while briefing the media on the latest decision from the Monetary Policy Committee meeting and outcomes of this week&039;s Financial Stability Committee meeting on November 21.
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Maize is usually cultivated on arable land in the country during Agriculture Season A which starts in September.
Season A typically accounts for 70 per cent of the total agricultural produce that feeds the country.
Evariste Tugirinshuti, the president of Rwanda Maize Farmer Cooperatives Federation, last month, told The New Times that "only 40 per cent of the farmers in some areas received rainfall."
However, the central bank said inflation is expected to remain within the target range averaging around 4.6 per cent in 2024 and 5.8 per cent in 2025.
In the third quarter of 2024, headline inflation dropped to 4.1 per cent from 5.1 per cent in the previous quarter.
The reduction was driven by the eased pressures in core inflation, which fell to 5.3 per cent from 6.4per cent and food inflation which dropped to 0.2 per cent from 1.6 per cent.
These declines, BNR said, offset the slight increase in energy inflation to 5 per cent from 4.6per cent.
Economy remains strong
Rwanda’s economic performance remained strong over the first two quarters of 2024, achieving an average growth rate of 9.8 per cent, the central bank showed in their MPC statement.
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"This robust growth was broad-based, with both the industry and services sectors experiencing double-digit expansion, while agriculture rebounded from the climate shocks of the previous year,” it said.
Merchandise exports increased by 13.5 per cent, primarily driven by a strong performance in coffee and minerals, as well as gains in manufacturing exports and fuel re-exports.
Merchandise imports grew by 8.5 per cent, reflecting robust demand for processed food items.
Consequently, the trade deficit widened by 5.7 percent in the third quarter of 2024.
"The biggest driver of Rwandan depreciation is the trade deficit,” Rwangombwa noted.
In the third quarter of 2024, the widening current account deficit exerted pressure on the exchange rate of the Rwandan franc against major currencies. However, this pressure was partially offset by an increase in remittances and services exports.
As of the end of September 2024, the Rwandan Franc depreciated by 6.5 per cent against the US dollar compared to December 2023, lower than 13.5 per cent recorded in the corresponding period last year.
Nonetheless, the Central Bank noted, foreign reserves coverage remains adequate and is projected to stay above the four-month benchmark in the medium-term.