Rwanda Central Bank maintains key repo rate at 4.5% to encourage lending

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The National Bank of Rwanda (BNR) has maintained its key repo rate at 4.5 per cent to encourage continued lending to the private sector by banks to support economic recovery following the Covid-19 pandemic.

This followed the quarterly Central Bank’s Monetary Policy Committee (MPC) meeting to review recent economic developments globally and nationally as well as potential interventions.

The key repo rate is the maximum rate at which commercial banks invest their money at the central bank. The rate was first reduced in April last year from 5 per cent, a move aimed at increasing capital flow in the market.

The committee noted that the pandemic had led the economy to contract by 4.1 per cent in the first three quarters of 2020 compared to a growth of 8.3 per cent in the corresponding period in 2019.

However, in the second half of the year, there were signs of recovery driven by specific tailor-made interventions.

“This domestic economic recovery is expected to continue in 2021, supported by policy interventions to revive business activities, despite the uncertainty around Covid-19 and its containment measures. The roll-out of the Covid-19 vaccine globally and in the country will also enhance private-sector optimism, hence stimulating the recovery in economic activities,” the committee noted.

Headline inflation is expected to remain relatively low is projected to evolve around the lower bound of 2.0 per cent owing to subdued inflationary pressures. In 2020 headline inflation dropped to 5.0 per cent in 2020 quarter 4 from 9.0 percent recorded in 2020 quarter 3.

The decline followed a downward revision of public transport fares in October 2020, and a deceleration in prices of fresh food products reflecting favorable agricultural production in season A.