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Rwanda May Hold Rate to Balance Economic Growth and Inflation

Aug. 7 (Bloomberg) -- Rwanda may leave its key lending rate unchanged at a policy meeting scheduled for next month in order to balance spurring economic growth with containing inflation, central bank Governor John Rwangombwa said.

“The liquidity in the banking sector is within the desired level consistent with the financial needs of the economy and the monetary inflationary pressures are limited,” Rwangombwa said yesterday in an interview in the capital, Kigali.

Rwanda’s monetary policy makers in June cut the key lending rate by 50 basis points, or half a percentage point, to 7 percent to support the economy. Growth is forecast by the government to slow to 7.5 percent this year from 8 percent in 2012. The rate of inflation may increase in July and August before falling to below 7.5 percent by the end of December, Rwangombwa said. Consumer prices rose to 3.7 percent in June.

In May, the country raised $400 million in a debut sale of Eurobonds to finance construction of infrastructure. The sale has helped boost foreign-currency reserves, supporting the franc. The currency may appreciate against the dollar this month and next, Rwangombwa said.

“We expect the currency to gain in August and September,” he said.

The franc declined 1 percent to 648.3 per dollar by 2:47 p.m. in Kigali, bringing it losses since the start of the year to 2.7 percent.

Rwanda is rated B with a stable outlook by both Standard Poor’s and Fitch Ratings, five levels below investment grade.

To contact the reporter on this story: Saul Butera in Nairobi at sbutera2@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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