The Ethiopian statistics agency announced that the annual inflation rate fell to 40.1% in September. This is a decrease from the 40.6% inflation recorded last month according to the statement by the agency.

The year on year inflation rate fell due to the drop in the prices of fruits and vegetables. The price index of fruits and vegetables decreased by 3.4% explained the report.

The cost of cereals, however, is still rising according to official reports released on Tuesday. The total index for cereals in September has risen by 61.9 percent in comparison to the same month last year. The increase in cereal prices has significantly contributed to the increase in the price index of Food the statistics office explained in its statement. Food prices make up 57 percent of the consumer price index.

Inflation accelerated from 38.1 percent in June, according to the agency. Food prices increased by 47.4 percent in July after rising 45.3 percent in the previous month, while the cost of non-food items fell from 27.9 percent to 27.8 percent, it said.

The international Monetary Fund had predicted on 31 May 2011 that inflation might undermine economic growth in Ethiopia. IMF had said that the economy would fall from 7.5 percent this year to 6 percent in the 2011/2012 fiscal year and that the country's monetary policy was pushing up inflation which, combined with restrictions on bank lending, would in turn bring about a slower economic growth.

SOURCE: Bloomberg/Reuters