Central Bank maintains repo rate at 4.5%, optimistic of economy picking up

The key repo rate is the maximum rate at which commercial banks invest their money at the central bank.

By

Collins Mwai

Published : August 13, 2020

The Central Bank has maintained the Key Repo Rate at 4.5 per cent to encourage continued lending by

banks to the private sector and individuals.

This followed the quarterly Monetary Policy Committee (MPC) meeting, held on Wednesday, August 12 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 Central Bank in April revised downwards its Key Repo rate from 5 per cent to 4.5 per cent with an aim to spur lending to the private sector to support economic recovery following the pandemic.

By leaving it relatively low, it leads banks to consider lending to the market which will consequently drive economic recovery. Increased supply and appetite to lend among banks could consequently lead to a reduction in rates.

The central bank in its statement signed by Governor John Rwangombwa expressed optimism that the Rwandan economy will pick up in the second half as evidenced by the Composite Index of Economic Activities which showed increased activity in the local economy.

This, the bank noted, is driven by the continued reopening of various sectors of the economy.

The regulator also noted that the foreign exchange market is expected to remain stable with reserves covering up to 6.3 months of imports as at the end of July 2020. The Franc depreciated by 2.3 per cent in the first half of the year.

According to the Central Bank, the accommodative monetary policy is driving a reduction of interest rates with rates dropping to 16.14 per cent in the first half of the year from 16.64 per cent in the same period last year.