Home Business & TechMarkets Rwanda’s central bank maintains lending rate at 6.5%

Rwanda’s central bank maintains lending rate at 6.5%

by Lillian Gahima
6:41 pm

Rwanda’s central bank maintains its key repo rate at 6.5% and promises to tie inflation between 2% and 2.5% from now until end of March 2015.

Central Bank Governor John Rwangombwa told journalists Tuesday afternoon that urban inflation rose by 0.2% from 0.5% from October to November, citing aftershocks of an earlier economic slowdown by end of 2013.

Rwanda uses urban inflation rate to monitor the behavior of its monetary policy.

Due to increased economic financing beginning 2014, through the third quarter, the economy picked up, registering a 7.8% GDP increase.

As a result also, money market interest rates declined due to comfortable liquidity conditions while lending and deposit rates dropped.

The Monetary Policy Committee (MPC) said money supply rose by 18% between December 2013 and November 2014, compared to 12.4% registered in the same period in 2012 and 2013. The initial projection was 14.3%.

Meanwhile, credit to the private sector increased by 18.1% by the end of the third quarter of 2014, against 11.3 % registered in the same period of 2013. The projection was 16.1%.

Against these factors, Rwangombwa said, the MPC will maintain the current key repo rate until the end of the first quarter 2015.

He said the move will support the economic financing.

Meanwhile, interbank rate decreased to 5.5% from 5.7% in September while lending rates remained between 16.7% and 17.5% .

Deposit rates remain between7.3% and 8.2%.

Treasury bills rate slightly declined to 5.1% in November from 5.5% in September 2014.

By: Lilian Gahima