The National Bank of Ethiopia (NBE) announced on Tuesday, November 3, 2026, that it will maintain its tight monetary policy stance and keep its key policy interest rate unchanged at 16 percent, with the standing facility corridor remaining at ±3 percentage points.
The decision was reached during the Monetary Policy Committee’s (MPC) eighth regular meeting, where members evaluated three key policy proposals against the backdrop of mildly loose monetary and financial conditions.
According to the central bank's projections, headline inflation is expected to moderate over the next six months but will remain in double-digit territory. To curb lingering inflationary pressures, the NBE stressed the necessity of sustaining a restrictive monetary policy posture.
To enforce this stance, the central bank confirmed it will deploy the full range of its indirect monetary policy instruments. Notably, the NBE plans to utilize open market operations and auction instruments to mop up excess liquidity from the banking sector as needed.
Recent price metrics present a mixed picture. Food inflation ticked down slightly to 14.8 percent from 15.1 percent recorded in June 2026, driven primarily by cost increases in bread, cereals, vegetables, pulses, and coffee.
Conversely, non-food inflation climbed from 12.2 percent to 15.1 percent, largely fueled by hikes in electricity tariffs, kerosene, and firewood prices. The NBE attributed non-food inflationary pressures primarily to supply-side disruptions linked to ongoing conflict in the Middle East.
On the banking front, despite the lifting of previous credit growth caps and strong deposit mobilization by commercial banks, new lending growth remained flat compared to total deposits and loan repayments, holding near levels recorded in the corresponding period of the previous quarter.
Meanwhile, average yields on Treasury bills and interbank rates for 7-day transactions have declined since May 2026. Central bank officials attributed this trend largely to a sharp rise in excess reserve balances held by commercial banks at the NBE.
In addition to standard reserve requirements, the NBE outlined plans to apply bank-specific reserve adjustments based on individual loan-to-deposit ratios if credit expansion threatens to generate further inflationary strain.
