Rwanda's central bank left its key repo rate steady at 6.5 percent, saying the accommodative policy stance it has adopted since the second quarter of 2014 had started to yield results as aggregate demand has been improving though it is still low.
The National Bank of Rwanda (BNR), which last cut its rate by 50 basis points in June 2014, said outstanding credit to the private sector grew by an annual 26.3 percent in November compared with 17.5 percent in the same 2014 period.
Rwanda's Gross Domestic Product expanded by an annual 6.1 percent in the third quarter of this year, down from 7.1 percent in the second quarter, but the central bank said it expects the good economic performance to continue in the fourth quarter based on the CIEA index of economic activities that expanded by 10.2 percent.
"The actual output is evolving below potential which implies the BNR can continue to stimulate the economic activities without creating inflationary pressures," the central bank said.
Rwanda's headline inflation rate rose to 4.8 percent in November from a 2.9 percent in October, the BNR said, noting this was mainly caused by a seasonal rise in food prices.
The central bank confirmed that the exchange rate of the Rwandan franc (FRW) "remained fundamentally market driven," adding that during the fourth quarter the foreign exchange market has been stable thanks to "effective communication and enforcement of discipline in the market."
The franc has been depreciating since September 2012 and between December 2014 and today the FRW depreciated by 7.27 percent against the U.S. dollar while it appreciated by 4.07 percent against the euro, and also appreciated against most regional currencies, the BNR said.
The franc was quoted at 745.5 to the U.S. dollar today, down 8 percent this year.
The central bank added, in its review of financial stability, that the country's financial sector remains adequately capitalized with the capital adequacy ratio of banks and microfinance institutions at 24.2 percent and 31.2 percent, respectively, against the benchmark of 15 percent.