Ethiopia’s annual inflation rate edged down to 15.1% in August from 15.3% in July, the first slowdown after four consecutive monthly increases, but prices are still rising faster than a year ago as a rebound that began in the spring shows little sign of fading, data from the Ethiopian Statistical Service (ESS) showed.

The August reading compares with 13.6% in the same month of EFY2017 and is well above the 9.4% trough recorded in March, when inflation had spent four straight months in single digits.

On a monthly basis, consumer prices rose 0.9% in August, a marked deceleration from July’s 2.6% jump and slightly below the 1.1% recorded in August last year.

Non-food overtakes food

The composition of inflation shifted in August. Non-food inflation accelerated to 15.4% from 14.8% in July, overtaking food inflation for the first time since November. Food and non-alcoholic beverages inflation, by contrast, cooled to 14.9% from 15.7%.

The turnaround in non-food prices has been the defining feature of the second half of the year. Non-food inflation more than doubled from a low of 7.0% in March, reflecting the pass-through of higher fuel and imported input costs.

Among non-food items, education costs rose 25.3% year-on-year, the steepest increase in the category, followed by miscellaneous goods and services at 19.3% and alcoholic beverages and tobacco at 18.8%. Furnishings and household equipment climbed 16.7%, transport 15.6%, and clothing and footwear 14.7%. Housing, water, electricity, gas and other fuels, the heaviest-weighted non-food group at 16.8% of the CPI basket, rose 13.7%.

On a month-on-month basis, communication prices fell 2.7% and restaurants and hotels slipped 0.6%, while alcoholic beverages and tobacco and household furnishings each rose 2.0%.

Sugar and coffee lead food prices

Within the food basket, sugar, jam, honey and chocolate posted the sharpest annual increase at 38.3%, followed by non-alcoholic beverages and coffee at 29.2% and meat at 22.6%. Fruit rose 19.1%, oils and fats 18.8%, and milk, cheese and eggs 18.7%.

Food inflation was held in check by bread and cereals, the single largest item in the CPI basket at a 17.1% weight, which rose a comparatively modest 8.1%. Vegetables, the second-largest food item, increased 12.1%.

Full-year average at multi-year low

Despite the late-year surge, the average annual general inflation rate for EFY2018 fell to 11.7% from 16.0% in EFY2017, according to the ESS. That is the lowest annual average since EFY2009, when inflation stood at 7.0%, and marks a steep decline from peaks above 30% in EFY2014 and EFY2015.

Average food inflation eased to 12.0% from 16.2%, while average non-food inflation fell to 11.3% from 15.8%. The ESS attributed the easing in non-food prices to tight monetary policy aimed at curbing bank credit.

The 12-month moving average inflation rate, which smooths out monthly volatility, stood at 12.0% in August, down from 15.3% a year earlier. However, the measure has now risen for two consecutive months after bottoming out at 11.7% between April and June, signalling that the recent pickup is starting to filter into the longer-term trend.

Policy test for the central bank

The figures pose a challenge for the National Bank of Ethiopia (NBE), which earlier in the year had welcomed the return to single-digit inflation from December 2025 as meeting its policy objective, crediting its tight monetary stance in place since August 2023.

At its July meeting, the NBE’s Monetary Policy Committee acknowledged that headline inflation had returned to double digits from April following fuel supply disruptions linked to the Middle East conflict. The committee projected that inflation would moderate by December 2026 but was likely to stay in double digits over its six-month forecast horizon.

August’s softer monthly print offers some early support for that outlook, though annual inflation remains roughly five percentage points above the levels seen in the first quarter of the calendar year.

CPI overhaul underway

The ESS also said it is broadening the market coverage of its price survey from 120 to 200 markets, bringing in the newly formed regional states of Sidama, South Ethiopia, South West Ethiopia and Central Ethiopia. The 120 original markets were selected about 25 years ago and had drawn criticism for becoming less representative.

A one-year pilot across the 80 new markets showed negligible differences in CPI results compared with the original sample, the agency said. The expansion is a step toward a planned rebasing of the CPI, which will use expenditure weights from the EFY2017 National Integrated Household Survey.