The National Bank of Ethiopia (NBE) has maintained its 15.0% benchmark interest rate during its second Monetary Policy Committee (MPC) meeting, aiming to control inflation and manage exchange rate expectations.
At its inaugural session in December 2024, the committee decided to maintain the rate for similar reasons, as headline inflation stood at 16.9% at the time. The MPC highlighted that the continuation of a tight monetary policy, coupled with improved agricultural output, has contributed to easing inflation, which declined to 15.0% in February 2025.
Since Ethiopia is still transitioning to an interest rate-based monetary policy framework, the MPC also retained the 18.0% cap on annual credit growth. The NBE emphasized that the decline in inflation to 15.0% in February represents significant progress since the last meeting in December 2024.
“While the ongoing reduction in inflation is promising, the committee acknowledged that inflation remains above the medium-term objective of achieving single-digit levels,” the NBE stated in an official release.
Inflation has long posed a challenge for Ethiopia. In 2024, the government initiated wide-ranging macroeconomic reforms, including adopting a more flexible exchange rate regime. In July of the same year, the NBE set the key interest rate at 15.0% and introduced overnight lending and deposit facilities to assist banks in managing liquidity more efficiently.
Despite these measures, inflationary pressures are expected to persist. According to projections by the International Monetary Fund (IMF), Ethiopia’s inflation will likely remain high until the 2028/29 fiscal year. This prolonged inflationary period stems from structural economic challenges, dating back to the aftermath of the 2005 elections, which triggered a cycle of hyperinflation.
The Ethiopian government and the central bank remain committed to stabilizing the economy through disciplined monetary policy and structural reforms. The Committee noted that its future monetary policy decisions will be heavily dependent on inflation outturns and broader economic developments over the coming months. The Committee decided that its next meeting shall take place at the end of June 2025.
