The Monetary Policy Committee (MPC) has decided to increase the Central Bank Rate (CBR) by 50 basis points, from 8.25 per cent to 8.75 per cent, the National Bank of Rwanda (BNR) said on Thursday, August 27. ALSO READ: Central bank raises key interest rate to 8.25% The Central Bank Rate is the interest rate set by a country's central bank. It is the rate that influences how much commercial banks pay to borrow money from or earn on certain deposits with the central bank. The decision to increase the interest rate, BNR said, is expected to anchor inflation expectations, limit second-round effects and support inflation's return to the target range of 2-8 per cent in the second half of 2027. By increasing the policy rate, borrowing becomes more expensive, which can reduce excessive spending and demand in the economy, the BNR explained. For households, higher interest rates mean that borrowing money, for example, through loans may become more expensive. As a result, people may be encouraged to save more and avoid unnecessary borrowing and spending. Higher interest rates encourage saving and discourage unnecessary borrowing. ALSO READ: Central Bank raises key interest rate by 50 bps to reign in inflation Both households and businesses are therefore encouraged to make more informed decisions about consumption, borrowing and saving. “The Monetary Policy Committee will continue to monitor economic conditions closely and is committed to ensuring a return to the 5 per cent inflation objective in the medium term,” the statement reads. The Monetary Policy Committee (MPC) reviewed recent domestic and global economic developments, updated its economic projections and determined the appropriate level of the Central Bank Rate (CBR). Inflation increased from 9.1 per cent in the first quarter of 2026 to 13.2 per cent in the second quarter, before reaching 14.5 per cent in July 2026. It is projected to average 13.1 per cent in 2026, slightly below the previous forecast of 13.9 per cent. ALSO READ: How will central bank’s rate hike tame inflation? However, the MPC identified risks that could add to inflationary pressures. These include the onset of the El Niño rains which may affect domestic and international food prices, and the tensions in the Middle East which could keep international commodity prices elevated for longer. Rwanda's economy grew by 10.0 per cent year-on-year in the first quarter of 2026, supported by broad-based expansion across all sectors. Economic activity remained strong in the second quarter despite heightened global uncertainty. The Composite Index of Economic Activities increased by 10.9 per cent year-on-year, indicating continued economic momentum. The trade deficit widened despite strong export growth Merchandise exports increased by 51.0 per cent in the second quarter of 2026, mainly supported by strong mineral exports amid favourable global prices. Non-traditional exports rose by 39.4 per cent, driven largely by processed cooking oil, cement and wheat flour. Re-exports also increased by 26.0 per cent, reflecting stronger regional demand. The Rwandan franc continues to stabilise against major currencies The Rwandan franc depreciated modestly by 0.87 per cent against the US dollar in the first half of 2026, significantly lower than the 2.96 per cent recorded during the same period in 2025. Against other major currencies, the Rwandan franc appreciated by 2.05 per cent against the euro, compared with a depreciation of 15.96 per cent over the corresponding period last year. Meanwhile, it depreciated by 3.80 per cent against the Chinese renminbi (RMB), an improvement from the 4.88 per cent depreciation recorded in the first half of 2025. “In addition to the continued effect of foreign exchange reforms implemented in 2025, this slower depreciation was supported by available foreign currency from growing remittances, continued increase in exports and foreign direct investment. As a result, international reserves remained adequate, covering 4.2 months of imports as of end June 2026, exceeding the benchmark of 4 months.”
