The National Bank of Rwanda reduced its benchmark rate by 25 basis points to 6 percent, the lowest level since July 2011, as slowing inflation gave it room to bolster economic growth.
The reduction follows a 25 basis-point cut in December 2016, which was the first since 2014. Policy makers cited subdued inflation, which eased to 6.5 percent in May from 8.1 percent in February.
The Monetary Policy Committee decided to change the policy stance for quarter three of 2017 because of the good trends in inflation that is reducing pressures on the exchange rate and the good developments in the monetary aggregates.
The quarterly Financial Stability Committee and Monetary Policy Committee today observed the financial sector remains adequately capitalized, liquid and profitable.
The Financial Stability committee noted an increase in Non-Performing Loans and resolved to continue engaging banks and microfinance institutions to enhance their credit underwriting and monitoring practices.
“Monetary Policy committee observed a decline in inflation, stability in exchange rate and increase in credit to private sector compared to the same period last year,” Central Bank governor, John Rwangombwa told reporters at a press conference.
Central Bank projects inflation to be between 5.5 to 6 percent by the end of this year.
Central Bank observed that pressures on the franc exchange rate have significantly eased following the improvement in the trade balance coupled with the completion of some big projects. Consequently, relative to December 2016, the franc depreciated by 1.15 percent as of June 22. 2017 compared to 4.6 percent same period 2016.
Rwanda’s economy is expected to grow 6.2 percent this year compared to 5.9 percent in the previous year. The real composite index of economic activities, total turnovers and the credit to the private sector respectively grew by 8.6 percent, 16.1 percent and 6.9 percent in the first five months of 2017 from 16.5 percent, 9.7 percent and 6.6 percent in the corresponding year 2016.