The National Bank of Rwanda has pushed its benchmark lending rate to 8.25%, hiking it by a full percentage point on Thursday, its second consecutive increase as headline inflation surged to 13% year-on-year in April, more than four points above the upper limit of the bank’s target band.
The 100-basis-point move follows a 50-basis-point hike in February, when the Central Bank Rate was lifted to 7.25% after inflation first broke out of the 2%-to-8% target range. The back-to-back tightening signals that policymakers are running out of patience with price pressures that have proved stickier than initially forecast.
Governor Soraya Hakuziyaremye, speaking at a press conference in Kigali, said inflation was expected to remain above the target range until the second quarter of 2027 before gradually declining, a timeline far longer than the end-of-2026 return the BNR projected just three months ago.
That revision reflects two compounding shocks: domestic food supply disruptions worsened by weather, and the ripple effects of the Iran war on global energy costs, both of which Hakuziyaremye cited explicitly as drivers of sustained price pressure.
The central bank now projects average headline inflation of 13.9% for all of 2026, up sharply from the 9.4% forecast it issued in February. That kind of upward revision in a single quarter is rare for the BNR and underscores how quickly the inflation picture has deteriorated.
Rwanda’s monetary credibility has been one of its quiet economic assets, the BNR has historically kept inflation closer to target than most peers in the region. A prolonged breach above 13%, in a country where food and energy make up a significant share of household spending, translates directly into real income pressure on ordinary Rwandans, particularly urban households and small businesses dependent on credit.
The rate hike raises the cost of borrowing for banks, corporates, and consumers alike. For a country that has banked heavily on private sector investment and a construction-driven services economy to sustain above-7% growth, tighter credit conditions are a meaningful trade-off, even if the alternative, letting inflation run unchecked, would be worse.
Across sub-Saharan Africa, inflation averaged 13.1% in 2025, though much of that was concentrated in countries facing currency crises and volatile food markets. Rwanda now finds itself, at least temporarily, in that elevated inflation bracket, an uncomfortable position for an economy that has marketed itself on stability and governance.
Despite the turbulent global backdrop, the BNR said Rwanda’s domestic economy remains resilient, real GDP grew 9.4% in 2025, and the economic activity index shows demand continued expanding in the first quarter of 2026.
That growth buffer gives the central bank room to tighten without triggering a contraction, but it is not unlimited.
The Monetary Policy Committee will meet again in approximately three months. With inflation now projected to stay above target until mid-2027, a third consecutive hike cannot be ruled out, especially if global energy prices stay elevated or the domestic food supply situation does not improve before the next harvest cycle.
The BNR has signaled it will act on data, not calendars. That means every inflation print between now and August will be watched closely.
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