Rwanda's central bank cut its benchmark repo rate by 50 basis points to 6.5 percent, citing limited inflationary pressures, a positive outlook for financial stability and a continuing economic recovery.
The National Bank of Rwanda (BNR), which has held rates steady since a cut by 50 basis points in June 2013, said inflation is expected to be around 3.0 percent in the next quarter, with limited inflationary pressures from trading partners, including stable international oil prices and a good performance of the economy.
However, the central bank acknowledged some inflationary risk linked to agricultural production and geopolitical problems that could lead to higher oil prices.
Rwanda's inflation rate decelerated to 1.9 percent in May from 2.7 percent in April.
Rwanda's economy grew by an annual rate of 7.4 percent in the first quarter of this year, up from 4.1 percent in the previous quarter, and the central bank said data showed that "the recovery continues in the 20145 quarter 2."
In the April to May period, the growth in industry and services turnover rose by 20 percent compared with growth of 10.7 percent in the same 2013 period, the bank said.
In March the central bank forecast 2014 growth of around 6.0 percent, up from 2013's 5.0 percent when growth moderated due to cuts in donor support, reflected in lower government spending.
Economic growth is being supported by a high increase in credit to the private sector, the bank said, with new authorized loans up by 46 percent in the first five months of this year compared with a contraction of 13.7 percent in the same 2013 period, or a rise to 269.8 billion RWF from 185.1 billion.
The central bank's statement also included comments about the outlook for financial stability, with the bank saying this continues to be positive and characterized by a strong capital base or solvency, favorable liquidity levels as well as improved asset quality and profitability.
"Hence, the current financial position of the sector provides comfort for resilience to potential shocks," the bank said.