Rwanda maintains rate as inflation rises, but still benign

    Rwanda's central bank maintained its key policy rate at 6.5 percent, saying headline inflation remains benign but rising due to higher vegetable prices, transportation costs and housing inflation.
    The National Bank of Rwanda (BNR), which cut its rate by 50 basis points in 2014, added that it was continuing to implement an accommodative policy to support financing of the economy, with outstanding credit to the private sector up by an annual 25.3 percent in May compared with 15.8 percent in the same period last year.
     The central bank added that the exchange rate of the Rwandan franc "remains fundamentally market driven", and depreciated by 3.3 percent against the U.S. dollar as of today while it appreciated by 3.6 percent against the euro.
    Supported by the the central bank's accommodative policy since 2013, Rwanda's Gross Domestic Product expanded by an annual 7.6 percent in the first quarter of this year, up from 6.5 percent in the fourth quarter of 2014, as agriculture grew by 4 percent, industry by 7 percent and the services sector by 8 percent.
    "This good performance is expected to continue in 2015 as real GDP is projected to grow by 6.5%," the central bank said.
     Last month the International Monetary Fund said Rwanda's economic growth this year is expected to remain strong and the outlook is stable, while the cautious fiscal stance and the monetary policy stance are consistent with the need to preserve policy buffers.
    In January the IMF forecast inflation of around 2 percent in March, due to higher prices for fresh products, rising to 3.5 percent in December, with the main risks to the outlook food supply shocks and global oil prices.
    In its quarterly statement,  the Financial Stability Committee added that Rwanda's financial sector remains "sound and resilient" with solvency ratios at 25.9 percent for banks and a non-performing loan ratio at 6.3 percent.
    "Although this is not alarmingly high, the BNR target is to reduce this rate to below 5%," the central bank said.

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