The National Bank of Ethiopia (NBE) has reaffirmed its commitment to price stability and sustainable economic growth following the Monetary Policy Committee’s (MPC) fifth meeting on December 22, 2025. In a press release issued today, the NBE outlined recent economic developments, including easing inflation trends and robust GDP growth, while endorsing measures to tighten monetary controls amid rapid monetary expansion.
This latest Ethiopia monetary policy update highlights the NBE’s tight stance, which has driven disinflation and supported key sectors like agriculture and mining. As Ethiopia’s economy continues to navigate global uncertainties, the MPC’s decisions aim to achieve single-digit inflation while fostering balanced growth.
Key Highlights from the MPC Review
The committee assessed major economic indicators, noting positive trends across inflation, growth, and external sectors. Here’s a breakdown of the key developments:
- Inflation Trends: November 2025 headline inflation stood at 10.9 percent, continuing a downward trajectory. Non-food inflation eased to 10.6 percent, with substantial price drops in administered items. Month-on-month deflation at 1.4 percent indicates easing pressures, attributed to improved agricultural production and the NBE’s monetary policy.
- Economic Growth and Activity: Real GDP grew by 8.4 percent in FY 2024/25, up from 7.5 percent the previous year. Strong contributions came from mining (3.7 percent growth) and agriculture (2.3 percent). The NBE’s Composite Indicators of Economic Activity (CIEA) captured this momentum, though challenges persist in areas like oilseed exports and raw material imports.
- Monetary Developments: Broad money expanded by 38.8 percent year-on-year in November 2025, with base money at 67.3 percent. Reserve money growth was driven by foreign exchange accumulations, reaching the highest levels in recent years.
- Interest Rates and Banking Sector: Treasury Bill yields averaged 16.2 percent, up from 14.3 percent last year. The banking sector remains sound with low non-performing loans (NPLs), supported by high loan-to-deposit ratios and the introduction of an inter-bank money market.
- Fiscal and External Sectors: Fiscal policy aligned with NBE goals, refraining from central bank borrowing. Ethiopia’s balance of payments recorded a surplus, fueled by strong gold and coffee exports, leading to record-high international reserves.
- Global Environment: Global growth is projected to slow to 3.2 percent in 2025, with inflation declining to 4.2 percent amid trade barriers and uncertainties.
MPC Recommendations and Approved Measures
To sustain disinflation and manage monetary expansion, the MPC recommended several policy actions, which the NBE Board approved. These steps are designed to anchor inflation expectations and ensure orderly credit growth in Ethiopia’s financial system:
- National Bank Rate: Maintained at 15 percent, with unchanged rates for Standing Deposit and Lending Facilities.
- Credit Cap Policy: Capped at 24 percent year-on-year expansion until the next MPC meeting in 2025/26, serving as a transmission mechanism for liquidity management.
- Reserve Requirement: Increased to 10 percent over six months from the current 5 percent, starting from three to six times the daily average.
- Price-Based Monetary Framework: Adopted since July 2024, this framework introduces market-driven policy rates to enhance price stability, including removing the current minimum saving rate.
The committee emphasized that these measures will help avoid unintended expansionary effects while supporting Ethiopia’s economic reforms. The next MPC meeting is scheduled for the end of March 2026 or earlier if needed.
For the full NBE press release on monetary policy, visit nbe.gov.et. Stay updated on Ethiopia’s financial news, including inflation rates and GDP growth, by following StockMarket.et.
