Home

NBE Maintains Tight Monetary Stance to Fight Inflation and Support Market Reforms

Addis Ababa, Ethiopia – June 30, 2025 — The National Bank of Ethiopia (NBE), through its Monetary Policy Committee (MPC), has reaffirmed its commitment to controlling inflation and maintaining macroeconomic stability in its third meeting held today.

Despite notable progress in reducing inflation—now at 14.4% as of May 2025, down from over 25% in 2024—the MPC emphasized that persistent inflationary pressure remains a challenge. Food inflation declined significantly to 12.1%, while non-food inflation stands at 17.8%. Month-on-month inflation slowed to just 0.2% in May, signaling early signs of price stability.

Key Decisions and Policy Highlights

National Bank Rate Maintained at 15%
The central bank’s benchmark interest rate remains unchanged, as part of a continued tight monetary policy to bring inflation into the single-digit range.
Credit Growth Cap Extended at 18%
The MPC extended the cap on commercial bank credit growth until the next meeting in September 2025 to prevent excessive liquidity from fueling inflation.
Directive Repealed on Mandatory Treasury Bond Purchases
NBE repealed the 2022 directive requiring commercial banks to buy Treasury Bonds, citing the government’s improved ability to finance its budget through external loans and market-based instruments.
Readiness to Use Market-Based Tools
While the credit growth cap may be revised in September, the MPC assured that tools such as open market operations, FX interventions, and reserve requirement adjustments are available to manage liquidity.

Strong Economic Activity and External Performance

The central bank reported robust growth across multiple sectors, including agriculture, manufacturing, air transport, and tourism. Export earnings, particularly from coffee and gold, have surged. Combined with lower import costs and increased remittances, Ethiopia has seen a dramatic improvement in its balance of payments and a threefold rise in FX reserves.

Banking Sector Remains Sound

Despite liquidity pressures in some banks due to high loan-to-deposit ratios, the overall banking sector remains stable with low non-performing loans (NPLs) and healthy capital levels. The introduction of the inter-bank money market and Standing Lending Facility has helped ease short-term liquidity strains.

Next MPC Meeting

The MPC’s next meeting is scheduled for the end of September 2025 but may be convened earlier if economic conditions warrant it.

Share this post:

Share on Facebook Share on Telegram Share on LinkedIn

NBE Maintains Tight Monetary Stance to Fight Inflation and Support Market Reforms

Related Posts