KIGALI, Feb. 19 (Xinhua) -- The National Bank of Rwanda (BNR) has increased its benchmark central bank rate by 50 basis points to 7.25 percent, as policymakers move to contain rising inflation while safeguarding financial stability, the bank's governor said Thursday.
"The decision to raise the policy rate is aimed at limiting second-round effects of recent price increases and supporting a timely return of inflation to the target range," Soraya Hakuziyaremye told reporters following meetings of the Monetary Policy Committee and Financial Stability Committee.
According to a statement released by the BNR, headline inflation rose to 7.4 percent in the fourth quarter of 2025 and further accelerated to 8.9 percent in January 2026, exceeding the bank's target band of 2 to 8 percent.
The increase was largely driven by higher core and energy prices, alongside renewed pressure from fresh food costs linked to supply constraints and weather-related challenges.
The central bank expects inflation to remain slightly above 8 percent in the first half of 2026 before gradually easing toward the target band by the end of the year, assuming improved domestic food supply and moderating global inflation.
Despite inflation pressures, Rwanda's economy continues to show strong momentum. The central bank indicated that economic activity expanded by an average of 8.7 percent during the first three quarters of 2025, supported by robust domestic demand.
Exports also performed strongly, rising 14.1 percent in 2025, driven by higher volumes and favorable prices for coffee and minerals, as well as growth in non-traditional exports such as processed cooking oil and wheat flour. However, imports grew by 6.9 percent, widening the trade deficit due to sustained domestic demand for food, construction materials, and capital goods.
The Rwandan franc showed signs of stabilization, depreciating by 4.4 percent against the U.S. dollar in 2025, a slower pace than the previous year, supported by improved tourism earnings, remittance inflows, and foreign exchange market reforms.
Total financial sector assets grew 23.7 percent to 15.9 trillion Rwandan francs (about 10.9 billion U.S. dollars) by the end of 2025, while credit to the private sector continued to expand, particularly in manufacturing, construction, and trade. Asset quality remained sound, with non-performing loans at 2.5 percent, below the regulatory benchmark.
"The financial sector remains strong, supported by adequate capital and liquidity buffers, which position institutions to absorb shocks and continue supporting economic growth," Hakuziyaremye said.
The central bank said that while the outlook remains positive, risks persist, including global geopolitical tensions, potential imported inflation, and weather-related shocks that could affect agricultural output and price stability. ■