KIGALI, May 4 : Rwanda’s central bank raised its benchmark repo rate for the first time since November to head off risks to the inflation outlook in the east African economy.
National Bank of Rwanda Governor Claver Gatete said although regional inflationary pressures were declining they remained high, while domestic food production had been hit by adverse weather conditions.
Rwanda’s inflation rate in urban areas is far lower than headline rates in other countries in the region such as Kenya and Uganda, but it has been creeping higher in recent months.
The urban inflation rate, the measure watched closely by the east Africa country’s central bank, rose steadily during 2011 to hit a peak of 8.34 percent in December. It fell off in January but has since resumed an upwards trend.
Rising food prices drove the year-on-year inflation rate in urban areas to 8.18 percent in March. The inflation rate for Rwanda as a whole, a measure with a higher weighting for food prices, hit 12.08 percent during the month.
Gatete said other risks facing the Rwandan economy included the persistent debt crisis in Europe, high fuel prices, lower production of key exports, and high global food costs.
“The MPC (Monetary Policy Committee) found it necessary to take preventive measures to mitigate the effects of the identified risks on inflation,” Gatete told a news conference to announce the 50 basis point rate increase.
He said agricultural output in the October to February season had not been as good as expected, but the onset of rains in the second quarter of 2012 had improved prospects for economic growth this year.
“This (repo rate) increase is going to help economic growth ... by not allowing inflation to destroy the good progress we are making,” he said.
The Rwandan economy grew 8.6 percent last year after 7.2 percent expansion in 2010.
Rwanda raises repo rate to 7.5 pct on inflation risks
