The National Bank of Rwanda has decided to maintain its lending rate at 7 percent, in continued efforts to tame inflation.

Also known as the key repo rate, this is the fee at which the Central Bank lends to commercial banks. Adjusting it upwards or downwards allows the regulation of liquidity in the banking system with an aim to stabilise the economy.

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The decision was announced on Thursday, May 11, during the release of the quarterly Monetary Policy Committee and Financial Stability Statement, a review of recent global and national economic developments as well as potential interventions.

Central bank Governor John Rwangombwa said that given the monetary policy measures taken so far, they are confident that inflation will go down below 5 percent by 2024.

"No need for further increase yet, and not ready for any reduction because inflation is still high,” he noted.

The Central Bank last increased the key repo rate in February from 6.5 percent to 7 percent.

As a result, interbank rate increased to 7.36 percent in the first quarter of 2023 from 5.29 percent in the same period of 2022, and lending rates decreased from 16.5 percent to 15.9 percent, mainly looking at the loans approved by banks.

However, Rwangombwa said there hasn’t been significant change in interest rates when compared to the same period in 2022.

In the past few months, Rwanda started to see a slow but steady decline in consumer prices compared to the tough inflation experienced in 2022.

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According to the National Institute of Statistics of Rwanda (NISR), consumer prices increased by 17.8 per cent in April, down from 19.3 per cent in March, and 20.8 per cent in February.

The slow decline in the speed of commodity price rises is attributed to different measures taken by the government to bring about economic stability.

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Measures taken include injecting subsidies in fuel and fertilizers as well as tightening the Central Bank’s lending rate.

Others include the recent decision to waive value-added tax on maize flour and rice as well as establishing maximum prices for maize, maize flour, rice and irish potatoes which are Rwanda's major staple foods after an inspection by the Ministry of Trade and Industry observed unreasonable price hikes by some traders.

With the continued efforts, the central bank predicts inflation to decelerate towards the benchmark band between 2 per cent and 8 per cent in the second by the end of 2023.

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Rwangombwa noted that they expect a strong economic growth in the first quarter of 2023, despite another poor season of agricultural production.