Rwanda’s central bank has raised its key interest rate to 8.75 percent, its highest level since 2009, as policymakers step up efforts to contain a sharp rise in inflation and prevent price pressures from becoming entrenched.
The Monetary Policy Committee increased the Central Bank Rate by 50 basis points from 8.25 percent, marking the third consecutive rate hike and taking the total increase since November 2025 to 175 basis points.
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The move underscores the National Bank of Rwanda’s increasingly hawkish stance as inflation continues to climb well above the bank’s target range.
Consumer price growth accelerated from 9.1 percent in the first quarter of 2026 to 13.2 percent in the second quarter, before reaching 14.5 percent in July. The central bank expects inflation to average 13.1 percent this year, although that is lower than its previous forecast of 13.9 percent.
The MPC said the latest increase was necessary to anchor inflation expectations and limit the risk that temporary price shocks would spread through the wider economy.
The bank also warned that several factors could keep inflation elevated. The emergence of an El Niño weather pattern could push up food prices at home and abroad, while continued conflict in the Middle East could keep global commodity prices higher for longer.
The central bank expects inflation to gradually return to its target range in the second half of 2027.
Strong growth adds to policy dilemma
The rate increase comes despite strong economic activity, leaving policymakers facing the difficult task of controlling inflation without putting too much pressure on growth.
Rwanda’s economy grew 10.0 percent year on year in the first quarter of 2026, supported by broad based expansion across sectors. Activity remained strong in the second quarter, with the Composite Index of Economic Activities rising 10.9 percent from a year earlier.
External trade also strengthened during the period. Merchandise exports rose 51.0 percent in the second quarter, largely driven by higher mineral exports as international prices remained favourable.
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Non-traditional exports increased 39.4 percent, supported by products including processed cooking oil, cement and wheat flour. Re exports also rose 26.0 percent as regional demand strengthened.
Imports grew more slowly, but still increased 28.0 percent, reflecting higher demand for essential food products such as crude cooking oil and rice, as well as construction materials, medical equipment and information technology equipment.
The stronger import bill widened Rwanda’s trade deficit by 13.8 percent to $821.9 million from $722.3 million a year earlier.
The Rwandan franc, however, has remained relatively stable despite pressure from higher global prices and external shocks. The currency weakened 0.87 percent against the US dollar in the first half of 2026, compared with a 2.96 percent depreciation during the same period in 2025.
Inflation remains the main concern
The central bank’s latest decision reflects a growing focus on preventing high inflation from becoming persistent.
“Monetary policy will continue to focus on anchoring inflation expectations and containing second-round effects,” the MPC said, stressing the need to guide inflation back towards the target range.
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For households and businesses, higher interest rates could make borrowing more expensive, while helping to reduce demand and ease pressure on prices over time.
The policy challenge will be particularly delicate if food and commodity prices remain high while economic growth continues to run at a strong pace.
For now, the National Bank of Rwanda has made its priority clear: restoring price stability while preserving the conditions for sustainable economic growth.
The path of food prices, global commodities, the exchange rate and domestic demand will determine how long the tightening cycle lasts, with inflation expected to remain a key test for Rwanda’s monetary policy throug
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