Energy prices, food supply constraints, and weather shocks push Rwanda back above its inflation ceiling
Rwanda’s headline inflation reached 8.9 percent in January 2026, breaching the National Bank of Rwanda’s upper target band of 8 percent. On February 20, 2026, the NBR responded by raising its benchmark policy rate by 50 basis points to 7.25 percent. It is the first breach of the target ceiling since the post-COVID tightening cycle, and it comes as food costs, energy prices, and weather-related supply disruptions converge.
“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.” Said during the long form podcast appearance
Speaking at a press briefing following meetings of the Monetary Policy Committee and the Financial Stability Committee, National Bank of Rwanda Governor Soraya Hakuziyaremye confirmed the rate hike and outlined the drivers. Higher core inflation, energy costs, and fresh food prices linked to supply constraints and weather were cited as the primary pressures.
In a separate appearance on the Long Form Podcast, the Governor explained the mechanics behind such a decision plainly. “When inflation is above 8 percent, our first tool is to say, let’s increase the central bank rate,” she said. “The central bank rate is the rate at which we lend to the banking sector. And generally it drives what they call the interbank rate, because banks will lend to each other at short terms for seven days. And then it drives also if everything was optimal up to your lending rate.”
Rwanda’s NBR targets inflation at approximately 5 percent annually, operating within a band of 2 to 8 percent. The logic: inflation at that level is low enough to preserve household purchasing power while allowing the economy to grow and create jobs. Above 8 percent, the central bank acts. January’s 8.9 percent figure was the trigger.
The broader economic picture remains strong. Rwanda’s economy expanded at an average of 8.7 percent across the first three quarters of 2025. Exports rose 14.1 percent for the full year, driven by coffee, minerals, and non-traditional goods including processed cooking oil and wheat flour. The NBR says the financial sector remains well-capitalized with non-performing loans at 2.5 percent.
The NBR projects inflation will remain slightly above 8 percent through the first half of 2026 before easing back toward the target band by year-end, assuming improved domestic food supply and moderating global price pressures. That assumption carries risk: weather patterns remain unpredictable and global energy markets are far from settled. If the trajectory does not improve by mid-year, further rate action cannot be ruled out.
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