Rwanda central bank holds key rate despite pickup in inflation

By Philbert Girinema

KIGALI (Reuters) -Rwanda's central bank kept its key interest rate unchanged at 6.5% for the second monetary policy meeting in a row, saying that despite a recent pickup in inflation it expected it to remain within its target band.

Annual inflation rose to 7.4% in January, approaching the top of the National Bank of Rwanda's 2%-8% target range.

The rise in inflation in recent months was caused by unfavourable weather conditions that meant a delay in the harvest, compared to a bumper harvest a year earlier, Governor John Rwangombwa told a press conference.

The bank has raised its average inflation forecast for 2025 to around 6.5%, up from 5.8%, and sees it at 4.1% in the following year.

"Though there are slight pressures on inflation, (it) remains within the band, and we are confident that at this rate, 6.5%, we'll be able to maintain inflation within the policy band," Rwangombwa said.

"The risk we always highlight is these projections are based on normal weather conditions and normal agriculture performance. But also we see geopolitical tensions, globally, in the region, so this doesn't take into consideration any effect from these tensions."

The East African country's economy was likely to have grown last year more than the 8.3% projected in November, the bank's chief economist Thierry Kalisa told reporters.

This year's growth was projected at 7% in November, but the bank is currently revising that forecast, Kalisa said.

(Reporting by Philbert Girinema; Writing by Hereward Holland; Editing by Alexander Winning and Ros Russell)