Central Bank Explains Decision to Hold Interest Rate Steady

The National Bank of Rwanda (BNR) on Thursday, May 15, announced that it would maintain its key interest rate at 6.5 per cent, citing easing energy markets and contained inflationary pressures.

This was announced during the quarterly Monetary Policy Committee (MPC) and Financial Stability Committee (FSC) press briefing, which reviewed recent global and national economic trends and outlined potential interventions.

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Also known as the key repo rate, this is the rate at which the central bank lends to commercial banks. Adjusting it influences liquidity in the banking system and helps stabilize the broader economy.

A lower repo rate reduces borrowing costs for businesses and consumers, stimulating lending and economic activity.

Speaking to The New Times in an exclusive interview, Central Bank Deputy Governor Justin Nsengiyumva said the decision reflects a data-driven approach, noting that Rwanda's inflation remains within the central bank's target range of 2 to 8 percent, despite recent increases in food and core inflation.

The decision to hold the rate steady, he said, signals the central bank's confidence that existing monetary conditions remain adequately tight to manage inflation.

However, he warned of risks stemming from rising global trade policy uncertainties, including newly imposed U.S. tariffs.

The International Monetary Fund (IMF) indicated in its recent forecast that global economic growth will grow 2.8 per cent slower than the 2.8 per cent growth rate that had previously predicted, due to recent tariffs and other geopolitical uncertainties.

The IMF also indicated that economic growth for sub-Saharan Africa has been revised down to 3.8 percent, from an initial forecast of 4 percent.

"When we look at global growth outlook, we ask ourselves, 'what does it tell us about Rwanda?' Then when we look at the forecast of prices globally, for instance, the prices of energy will decline," he said.

According to Nsengiyumva, BNR forecasts headline inflation to average around 6.5 per cent through the remainder of 2025, before easing to 3.9 per cent in 2026.

Recent data by the National Institute of Statistics of Rwanda (NISR) showed that inflation increased by 6.3 per cent in April.

NISR attributed the increase mainly to higher prices in hotels and restaurants.

Nsengiyumva highlighted that global uncertainties, especially shifting trade policies among advanced economies, were a key consideration in the bank's decision-making process.

While some central banks, such as the European Central Bank, have started cutting rates, the Deputy Governor emphasized that Rwanda's monetary policy decisions remain guided by domestic inflation data and economic conditions.

He indicated that the BNR is monitoring current trade tensions, including recent tariff moves, but noted that the impact on Rwanda so far has been "minimal."

Meanwhile, Rwanda's economy is projected to maintain its growth momentum, with GDP expected to expand by 7.1 per cent.