· Dawan Africa · Abdullahi Salad
Ethiopia Holds Policy Rate at 16% as Inflation Stays Above Target
Topics:EconomyLaw and policy
Summary of the Dawan Africa report
The National Bank of Ethiopia keeps its policy rate at 16% after its eighth Monetary Policy Committee meeting. Inflation was 14.9% in September 2026, above the bank's goal of less than 10%. Non-food inflation rose to 15.1%, pushed by electricity tariffs and kerosene. The bank expects inflation to stay high for the next six months.
Key points
- The National Bank of Ethiopia kept its policy rate at 16% and its interest rate corridor at plus or minus 3 percentage points.
- Inflation was 14.9% in September 2026, and the bank expects it to stay high over the next six months.
- Non-food inflation rose to 15.1% from 12.2%, with electricity tariffs and kerosene named as causes.
- The bank set the 16% rate in July 2026, when it also removed the cap on bank credit growth.
Real.et analysis
Dawan Africa reports that the National Bank of Ethiopia keeps its policy rate at 16%. The decision follows the eighth meeting of the Monetary Policy Committee. Inflation was 14.9% in September 2026. The bank wants inflation below 10% in the medium term. It expects inflation to stay high for the next six months. Food inflation eased to 14.8% in September. Non-food inflation rose to 15.1%, from 12.2%. The bank names electricity tariffs and kerosene as causes of the non-food rise. It names bread and cereals, vegetables and pulses, and coffee beans on the food side.
What this means for residents
The policy rate is the main signal for the cost of money. A rate of 16% means that bank loans stay expensive. The bank raised the rate by one percentage point in July 2026. At the same time it removed the limit on how fast banks can grow their lending. So credit may be easier to get than before, but it is not cheap.
For households, the message is that prices may not slow down soon. The bank itself projects high inflation for six more months. If your salary is fixed, plan your budget on that basis. Rent, school fees and transport often change at the start of a year or a term. Ask about increases before you sign.
What this means for borrowers and savers
If you plan a home loan, the lending rate from your bank matters more than the policy rate. Ask the bank whether its rate is fixed or can change. Our mortgage guide explains the usual terms. If you save in birr, compare the deposit rate with inflation. A deposit rate below 14.9% loses buying power at the current rate of price growth.
Background
The bank says supply problems after the conflict in the Middle East are the main cause of inflation. It also reports that reserve money grew 87.2% in a year in the first quarter of the 2026/27 fiscal year, driven by gold purchases. It says the economy grows strongly, and names power generation, cement, steel, tourism and air travel. For the effect on food budgets, see our summary of the Capital Ethiopia report.