Rwanda's Central Bank holds policy rate at 6.5%

Rwanda’s Central Bank has expressed optimism about achieving a growth rate of above 7 per cent in 2025 as domestic inflation continues to ease. The bank recently held its latest Monetary Policy Committee meeting where it decided to maintain the Central Bank rate at 6.5 per cent. Governor Soraya Munyana Hakuziyaremye explained that the decision was based on projections of inflation, which are expected to be around 6.5 per cent this year and decline to 3.9 per cent in 2026. However, she acknowledged the uncertainties in the global trade landscape that could impact inflation rates. The Central Bank aims to keep inflation within its target band of 2 per cent to 8 per cent. The bank also addressed concerns about the trade deficit, noting that while it is not directly within their mandate, they monitor it due to its potential impact on the exchange rate and imported inflation. Despite a 10 per cent increase in the trade deficit in the first three months of 2025, largely driven by a rise in imports, the bank emphasized that the imports were primarily for capital goods and raw materials for investment and future production. Foreign exchange inflows from sources like FDI and remittances have helped keep the country's reserves at a satisfactory level, providing a buffer against external shocks. Governor Hakuziyaremye highlighted the importance of regional and continental trade to enhance economic resilience against global trade disruptions. The Central Bank is also diversifying its investment portfolio by including gold as an asset based on criteria such as capital preservation, liquidity, and returns. The decision to invest in gold aims to hedge against external shocks and optimize returns. The bank has received approval to start investing in gold from the next financial year and is closely monitoring risks associated with this new asset. In terms of economic outlook, the bank anticipates growth driven by the services, construction, and manufacturing sectors, with digital payments playing a significant role in boosting economic activity. While global inflation is decelerating, Rwanda's inflation projections remain steady, providing a stable macroeconomic environment. Governor Hakuziyaremye emphasized the importance of a thriving digital financial services sector in achieving the government's goal of a cashless economy. Regarding exchange rate stability, the bank clarified that the Rwandan franc has not experienced significant depreciation in recent months. With adequate reserves and access to dollars in the market, the bank is closely monitoring any potential pressures on the currency and taking necessary actions to maintain stability. While external shocks like trade tariffs could impact the exchange rate, the Central Bank reassured that there is no immediate cause for concern. In conclusion, Rwanda’s Central Bank remains optimistic about the country's economic prospects, highlighting efforts to navigate global uncertainties and promote sustainable growth. By maintaining a prudent monetary policy stance, diversifying investments, and fostering digital financial innovation, the bank aims to ensure stability and resilience in the face of evolving economic challenges.