This paper examines term structure of future changes in inflation in Rwanda, using monthly Treasury bill rates spreads. Applying the dynamic vector autoregressive model, the results shows that the slope of the term structure is a good predictor of expected inflation and the yield curve provides some information on changes in inflation over periods. Confirming previous empirical findings in other countries. The implication from the findings suggest that monetary authorise should also uses the term structure of interest rate as an option of assessing inflation dynamics in Rwanda. This study relatively uses short period over which the analysis is done (TBR1t minus TBRt-1). The further study should examine the relationship between term structure and expected inflation using a broader spectrum of government securities as a longer history of data becomes available.
