Rwanda’s urban inflation (the headline index for monetary policy purposes) quickened to 1.9% y/y in July from 1.4% y/y the month before mainly due to higher food and education prices, the National Institute of Statistics of Rwanda said. On a monthly basis, the country’s urban inflation stood at 0.3% last month compared with a deflation of 0.5% in June. The average annual inflation for the 12 months to end-July was 3.3%.

The prices of food and non-alcoholic beverages, which have the biggest weight of 28% in the consumer basket, rose 2.4% y/y last month and were the biggest contributor to the headline inflation rate (contributing 0.9pps). Education costs grew 7.1% y/y  and contributed 0.3pps. The biggest negative contribution (-0.4pps) came from a 2.9% y/y fall in transport costs.

Core inflation rate, which excludes the more volatile prices of fresh food and energy, accelerated to 2.3% y/y from 2.0% y/y in June. The annual average core inflation rate stood at 3.2%.

Rwanda’s rural inflation slowed to 4.5% last month from 6.1% in June. The overall Rwanda CPI thus decelerated to 3.5% y/y from 4.5% y/y.

At its latest monetary policy meeting held on June 25, Rwanda’s central bank lowered its Key Repo Rate by 50bps to 6.5% to keep spurring the country’s economic recovery. It observed that inflation remains low and stable and forecast it at around 3% y/y in Q3 2014. Among risks for inflation, the bank noted potential agricultural production problems and geopolitical problems that might boost oil prices.