BNR Interest Rate Reduced to 6.5%

Elias Hakizimana Aug 21, 2024 0 Comments

By The Inspirer.

The National Bank of Rwanda (BNR) has lowered its interest rate to 6.5% from the 7% that was set in May of this year.

The reduction is based on the continued decrease in the inflation rate, which remains within the range BNR considers acceptable. In the second quarter of 2024, market prices rose to 5.1%, up from 4.7% in the first quarter of this year.

BNR Governor John Rwangombwa explained that during this week’s Monetary Policy Committee meeting, it was concluded that the inflationary conditions observed in May are still present.

He stated, “Based on our projections for the entire year, inflation will not exceed 5%. We believe that this year and next, the inflation rate will remain below 5%, which is within the target range set by the National Bank of Rwanda.”

***BNR Governor John Rwangombwa addressing journalists during a press conference, where he discussed the recent decision to reduce the central bank’s interest rate from 7% to 6.5%.***

“Because we see inflation within our desired range, we found it necessary to reduce the National Bank’s interest rate from 7% to 6.5%.”

BNR has set a target inflation range of 2% to 8% to ensure economic stability. Currently, inflation is within this range, having risen from 4.7% in the first quarter of 2024 to 5.1% in the second quarter.

The increase to 5.1% from 4.7% was driven by a rise in the core inflation rate, which excludes volatile food and energy prices. This rise outweighed the decline in the inflation rate of perishable food items.

Core inflation, which excludes perishable food and energy prices, increased to 6.4% from 5.6%, mainly due to higher transportation costs following fare hikes in March and April this year.

However, this increase was moderated by a decline in the inflation rate of perishable food items, which fell to 1.6% from 2.5%, thanks to a good harvest of sweet potatoes, cassava, tomatoes, beans, and bananas during the 2024 B agricultural season, as well as produce from the 2024 A season.

BNR has identified potential risks that could unexpectedly drive up inflation, including political issues like conflicts in the Middle East and the ongoing Russia-Ukraine war. Additionally, climate-related challenges could negatively impact agriculture, leading to lower-than-expected yields.