East African Business Week

KIGALI, RWANDA - The National Bank of Rwanda last Wednesday decided to maintain its lending rate in favour of economic recovery giving little attention to the rising inflation threatening to worsen the cost of living for many Rwandans.
The Bank's Monetary Policy Committee (MPC) decided to keep the key repo rate at 6% for the second time since November 2010. This is the lowest rate the bank has ever had.
The current rate will prevail throughout the next three months and is expected to give commercial banks enough room to raise sufficient funds and continue lending to the economy.
The National Bank of Rwanda (NBR) expects real interest rates to go down as the cost of raising funds stays down.
The Bank said previous reductions of key repo rate have lowered lending rates.
For instance, lending rates have gone down from 17.4% in the last quarter of 2010 to 16.4% in the first quarter of 2011.
While announcing the MPC decision, NBR Governor François Kanimba commented, "The current developments are not in favour of revising down the key repo rate. In the near future if the inflation pressure continues to grow, we are likely to envisage the key repo rate upwards."
Kanimba explained to the press that the bank's intention was to continue supporting the ongoing economic recovery.
He said the economy is expected to expand by 7% or more and this will need continuous expansion of the credit market.
At the same time, annual inflation is also expected to continue accelerating upwards and exceed economic growth.
Credit is expected to grow by 20% while annual inflation is expected to hit 8% or more and the two grew at a relatively equal speed in the past three months.
While credit expended by 4.7% between January and February, annual inflation expended from 0.2% in December 2010 to 4% in March 2011 and is expected to reach 6% end of June.