Rwanda’s central bank raised its benchmark interest rate by 50 basis points to 8.75% on Thursday. The move pushes borrowing costs to their highest level since 2009 in a bid to tame persistent inflation.
The decision was announced by the Monetary Policy Committee following its August 26 meeting. Policymakers highlighted rapid acceleration in domestic price pressures as the primary driver behind the continued monetary tightening.
Headline consumer inflation climbed sharply to 14.5% year-on-year in July, accelerating from 13.2% in the second quarter and 9.1% in the first quarter. The current figure sits well above the central bank’s target band.
The current rate adjustment represents the third consecutive rate hike by the central bank. The tightening cycle has added a cumulative 175 basis points to the Central Bank Rate since late 2025.
Surging costs for essential goods continue to fuel overall inflation across the East Asian nation’s trade channels. Energy prices jumped 45.7% in July, while core inflation reached 12.3% and fresh food prices rose 7.3%.
External shocks and climate risks threaten to prolong inflationary conditions. Ongoing Middle East tensions and potential crop disruptions from El Niño patterns continue to put upward pressure on imported fuel and food prices.
Despite aggressive tightening, domestic economic performance remains robust. Gross domestic product grew 10% year-on-year in the first quarter, while second-quarter merchandise exports expanded by 51%, providing space for further policy intervention.
The central bank projects inflation to average 13.1% over full-year 2026. Officials anticipate price growth will remain above the target range before gradually cooling toward 7.9% in the second half of 2027.
