The central bank maintains interest rates to curb persistent inflation amid rising energy costs and global price volatility
By Staff Writer
(Nairobi, Kenya) — National Bank of Ethiopia (NBE) Governor Dr. Eyob Tekalign announced that the central bank’s Monetary Policy Committee has decided to keep its benchmark policy interest rate at 16 percent, as national inflation recorded in September 2026 remained above the targeted single-digit threshold.
Following the committee’s eighth regular monetary policy meeting, Dr. Eyob reported in a video address that annual headline inflation stood at 14.9 percent in September. Although supply-side pressures have eased slightly, the central bank projects overall inflation will stay in double digits over the six-month forecast horizon, driven largely by Middle East geopolitical tensions and international energy price volatility.
Central bank data show that food inflation dropped slightly to 14.8 percent from 15.1 percent in June 2026, primarily following price adjustments in bread, cereal products, vegetables, pulses, and meat. Conversely, non-food inflation accelerated from 12.2 percent to 15.1 percent over the same period, driven mainly by rising energy tariffs, fuel costs, and transportation expenditures.
Despite persistent inflationary headwinds, domestic economic performance demonstrated resilience. The central bank highlighted gains across key industrial sub-sectors, including cement production, electricity generation, and steel manufacturing, alongside strong activity in the service sector supported by increased tourist arrivals, air transport expansion, and gold export performance.
On the monetary front, base money grew by 87.2 percent annually at the end of September 2026, up from 72.6 percent in the corresponding period last year. Central bank gold purchases expanded foreign exchange reserves and injected Birr liquidity into the banking sector, driving this growth. Broad money supply grew by 40.2 percent annually. Yields on short-term government Treasury bills and interbank money market rates continued to fall, reflecting substantial surplus liquidity within commercial banks.
To safeguard macroeconomic stability and steer inflation toward the medium-term single-digit target, the Monetary Policy Committee submitted three policy directives to the Board: maintaining the 16 percent policy interest rate with its plus-or-minus 3 percentage point corridor, enforcing targeted reserve requirements on commercial banks based on individual credit-to-deposit ratios, and strengthening indirect monetary operations to absorb excess liquidity through bank auction instruments.
The Monetary Policy Committee is scheduled to convene for its next regular review session at the end of January 2027.
__
Join our Telegram Channel : t.me/borkena
Like borkena on Facebook
Join the conversation. Follow us on X (Formerly Twitter) @zborkena to get the latest Ethiopian News updates regularly. Subscribe to YouTube channel To share information or for submission, send e-mail to info@borkena.com
To Support Borkena : https://borkena.com/subscribe-borkena/ – one time support or small monthly options available. Inquire information about it : info@borkena.com