Inflationary pressures were said to remain high due to global supply challenges as well as lower domestic agricultural output.
Furthermore, the Central Bank of Rwanda indicated that the easing of COVID-19 measures among others to support the economy, sped up demand for commodities. In particular, the prices of oil, gas, and food were pointed out to have increased.
Inflation rate has been rising for the last 7 months since January 2022 as the following data shows:
January 2022 – 1.3%
February 2022 – 4.2%
March 2022 – 5.6%
April 2022 – 10.5%
May 2022 – 14.8%
June 2022 – 16.1%
July 2022 – 19.6%
The war between Russia and Ukraine, which the bank said were major producers and exporters of oil, gas, fertilizers, metals, cereals, and sunflower-seed oils, intensified the trend of increasing prices.
Domestically, the bank pointed to climate constraints and increase in rise of inputs which contributed to shortage of food across Rwanda, and the rise in prices.
Annual inflation is expected to average 12.1% for 2022, with the bank indicating it was increasing the benchmark lending rate by 100 basis points from 5% to 6%, in order to reduce inflationary pressures and preserve purchasing power of consumers.
With this intervention and others, the bank predicts that inflation will reduce to the 5% target range in the second half of 2023.