The Central Bank of Rwanda raised its lending rate from 6.0% to 6.5% on Tuesday as it battles a drastic rise in the cost of living.
High food prices as well as external shocks, including the impact of the war between Russia and Ukraine, have fueled an increase in the prices of imported commodities, including oil, gas, fertilizers and oils of sunflower.
It is the third rate hike by the country’s central bank’s Monetary Policy Committee (MPC) this year, which says recent drastic price increases remain a major concern.
According to the Governor of the Central Bank of Rwanda, John Rwangombwa, inflation in the country has risen sharply due to high prices of imported goods as well as local food prices, as agricultural production remains limited.
Agricultural sector “The poor performance of the agricultural sector is a key driver of inflation. We expect inflation to remain high for the rest of the year and the first half of next year before slowing down in the second half of 2023,” Rwangombwa told a press briefing.
Despite central bank intervention, inflation remains above target, rising sharply in double digits, well above the initial annual average target of 12.1%.
For example, Rwanda’s headline consumer price index (CPI) inflation rose by 31% on a yearly basis and 5.6% on a monthly basis in October, according to figures released by the National Institute of Statistics of Rwanda.
The urban consumer price index increased by 20.1% on an annual basis (October 2022 and October 2021) and by 2.7% on a monthly basis (October to September 2022), while the rate annual average inflation rate over one year was 10.5. percent.
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