Bank of Ethiopia Leaves Policy Rate at 16%

The National Bank of Ethiopia kept its key interest rate unchanged at 16% on November 3, 2026, maintaining a restrictive monetary stance to curb persistent inflationary pressures and restore price stability. Policymakers said that although headline inflation eased to 14.9% in September from its previous peak of 15.3% in July, it remains far above the Bank’s single-digit goal. The Bank highlighted persistent price pressures largely driven by supply-side factors, including higher energy costs and the impact of the Middle East conflict. Looking ahead, headline inflation is projected to resume a declining trend but remain in double digits over the next six months. Meanwhile, economic activity continued to show strong momentum in the first quarter of FY2026/27, supported by improvements in industrial production, electricity generation, tourism and exports.

The National Bank of Ethiopia raised its key interest rate by 1 pp to 16% on July 13th, 2026, marking the first adjustment since the benchmark was introduced at 15% in mid-2024, aiming to curb price pressures. Inflation accelerated to a ten-month high of 13.4% in May after falling into single digits in December 2025 for the first time in almost a decade, amid the US–Iran conflict. The central bank expects inflation to fall by the end of 2026 but acknowledged that prices are likely to remain elevated in the near term. It also scrapped the 24% credit growth ceiling hat had restricted bank lending since August 2023, when inflation was nearing 30%. Full removal of the cap had been repeatedly delayed until alternative policy tools were in place. A targeted safeguard was introduced alongside the cap's removal to prevent excessive lending. The NBE also reduced banks' foreign exchange transaction commission to 1.5% from 2.5% and eased exporters' surrender requirement to 30% from 50%.

The National Bank of Ethiopia kept its key interest rate unchanged at 15% during its March 2026 meeting, emphasizing that a tight monetary policy is required as the Middle East conflict has raised upside risks to the inflation outlook. The Committee noted that inflation stood at 9.7% in February, continuing its downward trend and remaining within the single-digit target since December 2025. However, persistent geopolitical tensions continue to push oil prices up, impacting both global and domestic markets. The government has used significant foreign currency reserves to secure fuel imports and has reintroduced subsidies to ease the impact on consumers.