National Bank of Rwanda has maintained the key repo rate—at which it lends to commercial banks— at 5 per cent and said domestic economic growth is likely to slow down. The central bank rate was already increased in February in anticipation of higher prices.
John Rwangombwa, the Bank’s Governor, told journalists on Thursday shortly after the Monetary Policy Committee meeting that there was low production in the agriculture season A hence leading to the continued rise in commodity prices.
The decision to maintain the central bank rate comes in the wake of rising prices of goods and services on the local market with the April inflation rate increasing to 9.9 per cent, well above the central bank’s upper band for 2022.
Economists had expected the central bank to raise its rate given sustained external inflationary pressures which have been exacerbated by the Russia-Ukraine war—trimming the global supply of wheat and gas.
In a recent interview with The New Times, Maurice Toroitich, a seasoned banker, said that the current inflation is a result of the challenges in supply chains caused by Covid-19 in the past two years, which were also compounded by the effects of the Russia-Ukraine war.
“We are likely to see an inflationary environment for a while,” he said.
Toroitich suggests that a boost in local production would trim imports and help stave off imported inflation.
“But it takes time to build,” he noted, adding that based on the current events, "we are likely to see sustained inflation for about six to 12 months.”
Rwangombwa said that the Bank was working with stakeholders to limit the impact of external pressures on Rwanda’s purchasing power. And that, the Monetary Policy Committee will continue to monitor domestic and global economic developments to inform future decisions.