The National Bank of Rwanda has raised the Central Bank Rate (CBR) by 100 basis points to 8.25 percent, citing worsening inflationary pressures and growing risks to the country’s economic outlook.
The decision was announced on Thursday, May 21, after the Monetary Policy Committee meeting held on May 20, 2026, where policymakers reviewed recent developments in both the domestic and global economy.
According to the central bank, headline inflation climbed to 9.1 percent in the first quarter of 2026, up from 7.4 percent in the final quarter of 2025.
Inflation accelerated even further in April, reaching 13 percent from 9.2 percent in March, moving well above Rwanda’s target inflation range of between 2 and 8 percent.
The bank attributed the sharp rise in prices to escalating energy costs, expensive transport charges linked to global shipping disruptions, and weaker agricultural production that pushed up food prices.
“The MPC has decided to increase the CBR to 8.25 percent,” Governor Soraya M. Hakuziyaremye. “The Committee considers this level appropriate to help steer headline inflation back toward 5 percent over the medium term.”
The central bank revised its average inflation forecast for 2026 upward to 13.9 percent from the earlier projection of 9.4 percent made in February.
Authorities said the worsening outlook was partly triggered by the impact of the Middle East conflict, particularly disruptions affecting fuel and gas supplies and the rerouting of shipping traffic following the closure of the Strait of Hormuz, one of the world’s most strategic oil transit routes.
Energy inflation surged to 21.1 percent during the first quarter of 2026 from 12.4 percent previously, driven mainly by higher charcoal and fuel prices.
Fresh food inflation also rose sharply to 5.2 percent from 1.4 percent due to increased prices of vegetables and other agricultural products.
The bank further noted that core inflation remained elevated because of rising costs in housing, hotels, restaurants, health services, electricity tariffs and education-related expenses.
Despite the inflationary pressures, Rwanda’s economy continued to demonstrate resilience.
The economy expanded by 9.4 percent in 2025, while the Composite Index of Economic Activities rose by 16.5 percent in the first quarter of 2026, indicating sustained growth in domestic demand and business activity.
Rwanda also registered significant improvements in external trade performance.
Merchandise exports increased by 63.2 percent in the first quarter of 2026 compared to the same period last year, driven by stronger coffee and mineral exports alongside favorable global commodity prices.
Non-traditional exports grew by 64.8 percent, largely supported by processed cooking oil and wheat flour exports, while re-exports rose by 48.8 percent due to improving cross-border trade with neighboring countries.
Meanwhile, imports rose by a modest 5.6 percent, mainly because of increased demand for food products, construction materials and medical equipment.
As a result, Rwanda’s trade deficit narrowed by 23.2 percent year-on-year.
The central bank also reported relative stability in the Rwandan franc, which depreciated by only 0.51 percent against the US dollar in the first quarter of 2026 compared to 2.31 percent depreciation recorded during the same period last year.
The improved exchange rate performance was attributed to stronger exports, a narrowing trade deficit and reforms in the domestic foreign exchange market.
Financial sector indicators showed mixed trends.
The interbank rate rose to 7.13 percent, moving closer to the Central Bank Rate following an earlier policy tightening in February.
However, commercial bank deposit rates declined slightly to 9.15 percent while lending rates eased to 15.67 percent due to increased issuance of large long-term corporate loans at lower rates.
Looking ahead, the central bank warned that inflation risks remain heavily tilted to the upside, especially if agricultural production weakens further or if the Middle East conflict prolongs disruptions in energy and shipping markets.
Food inflation is expected to remain elevated during the first half of 2026 before easing as agricultural supply improves, while energy-related inflationary pressures are projected to persist in the coming months.
Governor Hakuziyaremye said the bank would continue closely monitoring economic conditions to ensure inflation returns toward the medium-term target of 5 percent.
