Mild inflation expected as exchange rate is stifled – BNR

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Central Bank's Governor John Rwangombwa with his vice Monique Nsanzabaganwa addressing press.

Central Bank’s Governor John Rwangombwa with his vice Monique Nsanzabaganwa addressing press.

The national bank of Rwanda (BNR) held its repo rate at 6.50 percent on saying it was achieving its objective of increasing financing to the economy without the exchange rate suffering significant pressure.

Central Bank’s Governor John Rwangombwa noted that the central bank has held the benchmark rate steady since June 2014, when it cut the repo rate by 50 basis points.

Rwangombwa also told a news conference that he expected inflation to be in the range of 3.3 percent to 4.6 percent by the year end. He had previously forecast that inflation would not exceed 3.5 percent by the end of 2015.

Rwanda’s urban inflation rate, which the central bank watches for monetary policy purposes, rose to 3.0 percent year-on-year in August from 2.3 percent a month before.

Investors have praised Rwanda’s economic fundamentals, which have included low debt and inflation.

Rwangombwa said credit to the private sector expanded by 26.6 percent year-on-year in August compared with growth of 15.5 percent in the same month last year.

“So with that, and based on the slight pressures we see on the exchange rate and the unknown outcomes from agriculture, there are expected pressures on the inflation rates. So because of that we were not able to reduce the key repo rate,” he said.

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Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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