The National Bank of Rwanda (BNR) has raised its key interest rate by 50 basis points, from 8.25 per cent to 8.75 per cent, as it intensifies efforts to control inflation, which reached 14.5 per cent in July.
The Monetary Policy Committee approved the increase during its meeting on August 26 and announced the decision the following day.
It is BNR’s third rate increase in 2026. The Central Bank Rate rose by 50 basis points to 7.25 per cent in February and by another 100 basis points to 8.25 per cent in May. Together with the latest adjustment, the increases amount to two percentage points.
BNR said the latest decision is intended to bring inflation back within its target range of two to eight per cent and towards the medium-term objective of five per cent.
For households and businesses, the central bank said higher interest rates are intended to encourage saving and discourage unnecessary borrowing. Consumers and businesses are also being encouraged to make informed decisions concerning spending, borrowing and saving.
However, the previous policy increases have not yet produced a significant change in average retail interest rates.
The average deposit rate stood at 9.79 per cent during the second quarter of 2026, compared with 9.75 per cent during the same period last year. The average lending rate declined slightly from 15.96 per cent to 15.88 per cent.
Interest rates charged to individual borrowers increased, while corporate lending rates declined. BNR attributed the reduction for businesses mainly to a higher proportion of short-term loans and the relatively favourable terms offered to companies with stronger credit profiles.
The interbank rate, which reflects the cost at which financial institutions lend money to one another, rose from 6.30 per cent in the second quarter of 2025 to 7.73 per cent during the same period this year.
Inflation remains above target
Headline inflation increased from 9.1 per cent in the first quarter of 2026 to 13.2 per cent in the second quarter. It rose from 13.6 per cent in June to 14.5 per cent in July, placing it considerably above BNR’s target range.
Core inflation, which excludes some of the most volatile prices, increased from 9.3 per cent to 12.3 per cent, mainly because of higher transport, housing and food costs.
Fresh-food inflation rose from 5.2 per cent to 7.3 per cent, driven largely by increases in the prices of vegetables, including Irish potatoes and beans.
Energy inflation recorded the sharpest increase, rising from 21.1 per cent to 45.7 per cent because of higher prices for solid and liquid fuels and cooking gas.
Meat prices also came under pressure after supplies were temporarily restricted during the outbreak of Rift Valley Fever. BNR said the disruption has gradually been contained.
The central bank expects inflation to average 13.1 per cent in 2026, slightly below its earlier forecast of 13.9 per cent. It is projected to decline to 7.9 per cent in 2027 and return to the two-to-eight-per-cent target range during the second half of that year.
The outlook remains vulnerable to droughts and heavy rainfall associated with El Niño, which could affect domestic and international prices for products such as rice, cooking oil and sugar.
Continuing conflict in the Middle East could also keep global oil and other commodity prices elevated for longer than expected.
Economy maintains strong growth
Despite the inflationary pressure and global uncertainty, Rwanda’s economy expanded by 10 per cent year-on-year during the first quarter of 2026.
Economic activity remained strong in the second quarter, with the Composite Index of Economic Activities rising by 10.9 per cent compared with the same period last year.
Merchandise exports increased by 51 per cent during the second quarter, supported mainly by mineral exports and favourable international prices.
Non-traditional exports grew by 39.4 per cent, driven by products including processed cooking oil, cement and wheat flour. Re-exports increased by 26 per cent because of stronger regional demand.
Imports rose by 28 per cent following increased demand for essential food products, construction materials, medical equipment and information-technology equipment.
Consequently, Rwanda’s merchandise trade deficit widened by 13.8 per cent to $821.9 million, compared with $722.3 million during the corresponding period of 2025.
Rwandan franc records greater stability
The Rwandan franc depreciated by 0.87 per cent against the US dollar during the first half of 2026, considerably slower than the 2.96 per cent depreciation recorded during the same period last year.
It appreciated by 2.05 per cent against the euro, compared with a depreciation of 15.96 per cent during the first half of 2025.
Against the Chinese renminbi, the franc depreciated by 3.8 per cent, an improvement from the 4.88 per cent decline recorded during the corresponding period last year.
BNR attributed the greater stability to foreign-exchange reforms introduced in 2025, growing remittances, increased export earnings and foreign direct investment.
Rwanda’s foreign-exchange reserves were sufficient to cover 4.2 months of imports at the end of June, exceeding the benchmark of four months.
“The MPC will continue monitoring economic conditions and remains prepared to take appropriate measures to safeguard price stability,” the committee said.
RADIOTV10