Rwanda cuts rate 25 bps as inflation decelerates

    Rwanda's central bank eased its policy stance for the third quarter of this year by cutting its key repo rate by 25 basis points to 6.0 percent, citing decelerating inflation, easing pressure on the exchange rate of the Rwandan franc and development in monetary aggregates.
     It is the first change in rates by the National Bank of Rwanda (BNR) this year and follows a similar-sized rate cut in December last year in what was the first easing since June 2014.
      Rwanda's inflation rate eased to 11.7 percent in May from 12.9 percent in April, the third consecutive month of decelerating inflation and the BNR said the "trend is expected to continue in 2017H2."
     The BNR added the decline in inflation was reflected in food, housing and transport while imported inflation dropped from 8.8 percent in the first quarter to 7.4 percent in April and 6.8 percent in May while core inflation declined from 5.5 percent in the first quarter to 4.8 percent and 4.9 percent in the same period.
     Rwanda's economy grew by 5.9 percent last year and in the first five months of this year the CIEA composite index, total turnover and credit to the private sector grew by 8.6 percent, 16.1 percent and 6.9 percent, respectively from the same 2016 period.
     "Pressures on the FRW exchange rate have significantly eased following the improvement in the trade balance coupled with the completion of some big projects," the central bank said.
      As of June 22, the franc had depreciated by 1.15 percent relative to December 2016 compared with a depreciation of 4.6 percent in the same 2016 period, and is expected to be below the initial projection for 2017, the BNR said.
     Today the franc was trading around 840 to the U.S. dollar, down 3.4 percent this year.
     Last month the International Monetary Fund (IMF) reached a preliminary agreement with Rwanda's government, saying it expects economic growth to recover gradually this year due to good rains and expanding domestic food production which should help inflation decelerate as food supply constraints recede.

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