Rwanda's central bank hiked its key lending rate by 50 basis points to 7.25% on Thursday after inflation rose beyond its target band.

Inflation accelerated to 8.9% year on year in January from 8.0% in December. The central bank aims to keep inflation in a range of 2% to 8%.

"The decision ... is a measured step we are taking to bring inflation back within the target band ... which is a necessary condition to sustain our economic growth," Governor Soraya Hakuziyaremye told a press conference.

"The MPC (Monetary Policy Committee) will continue to monitor inflation and economic developments and stands ready to adjust the policy if inflation pressures intensify beyond our projections."

Hakuziyaremye said risks to the inflation outlook included lower agricultural output, persistent energy-related cost pressures and global and regional geopolitical tensions.

Based on the National Bank of Rwanda's current forecasts, inflation will remain slightly above 8% in the first half of this year before returning towards the target band by the end of 2026.

The East African country's economy has been growing strongly, and its finance ministry projects annual growth will stay above 7% through to 2028.