East African Business Week

KIGALI, RWANDA - Pressure from the rising inflation has pushed Rwanda's Central Bank to raise its benchmark interest rate to 6.5% to ease further price surges throughout October to December.
The National Bank of Rwanda had kept its Key Repo Rate (KRR), -a benchmark interest rate at which it lends to the commercial banks- at 6% since November 2010 to stimulate credit growth in  the economy.
Keeping KRR unchanged for so long was based on friendly 7.5% year-on -year inflation rate that had been targeted by end of this year.
Meanwhile, the inflation rate surged more than expected to 7.52% end of August from 0.23% in December 2010, and is expected to settle at 8.2% end of the year.
With increased cash in the banking system and positive economic growth, the Bank decided to raise its rate to curb credit growth, which could weaken expenditure.
Announcing the decision in Kigali recently, National Bank governor Ambassador Claver Gatete termed the move as 'striking a balance' between inflation and the economy.
"Here there is a trade-off; you want the economy to grow but you don't want the inflation also to rise very high so you have to strike a balance," Gatete said.
The economy, Gatete said, has been growing impressively since beginning of 2011 driven by the credit growth, which rose by 20.9% against the annual target of 19.2%.
As a result economic growth has accelerated upwards and is expected to settle at 8.8% against 7% that had been projected at the beginning of the year.
Vice Governor Monique Nsanzagabanwa said the decision would not affect consumers directly but it would do so indirectly since producers would be affected.
Gatete said despite rising inflation, Rwanda's national currency Franc Rwandais (FRW) was doing well and the country has 6.4 months worth of imports.
Meanwhile,  Rwanda's Central Bank says the country's national currency Franc Rwandais (FRW) has appreciated by 0.9% against US Dollar and depreciated by 4.1% against the EUR and 2.1% against British Pound between December 2010 and September 2011.
Against East African currencies, FRW appreciated considerably by 14.0%, 15.1% and 9.5% versus Kenyan, Uganda and Tanzania shillings respectively, while depreciating by 2.4% vis-à-vis Burundi franc.