"Inflation is expected to remain elevated for longer than previously forecasted. This is mainly due to continued global economic challenges as well as lower domestic agricultural production," NBR Governor John Rwangombwa said.
In line with the global and domestic economic developments, Rwanda's headline inflation increased to 16.4 percent in the third quarter of 2022 from 12.1 percent recorded in the second quarter of 2022.
"Given these developments and outlook, the Monetary Policy Committee decided to increase the repo rate by 50 basis points, from 6.0 percent to 6.5 percent, to reduce inflationary pressures and preserve consumers' purchasing power," added Rwangombwa.
The bank earlier in August increased its repo rate by 100 basis points to 6.0 percent from 5.0 percent to preserve the purchasing power of consumers. The main drivers of the projected inflation include high imported costs, high prices of imported energy products notably fuel and gas, elevated international food prices, and subdued domestic food production.
The interbank rate increased to 6.05 percent on average in the third quarter of 2022 from 5.54 percent in the second quarter of 2022. Rwanda's trade deficit increased by 38.3 percent in Q3 2022 mainly due to rising prices of oil and international commodity prices.
The bank projected that international commodity prices will remain high, maintaining the observed pressure on imported inflation. Meanwhile, the upward pressure from domestic food production will weigh on food inflation in the second half of 2022, but fade away afterward.