The National Bank of Ethiopia (NBE) has decided to maintain its tight monetary policy stance while introducing additional measures aimed at managing liquidity and supporting price stability.
The decision followed the fifth meeting of the NBE Monetary Policy Committee (MPC), held on December 22, 2025, in line with the Bank’s mandate under the NBE Establishment Proclamation No. 1359/2025. The Committee reviewed recent developments in inflation, economic growth, monetary conditions, fiscal performance, the external sector, and the global economic outlook before submitting its recommendations to the NBE Board.
The MPC noted that headline inflation declined to 10.9 percent in November 2025, continuing a downward trend. Food inflation fell to 10.6 percent, down from 18.5 percent a year earlier, while non-food inflation declined to 11.4 percent. Month-on-month deflation of 1.4 percent was recorded in November. The Committee attributed the easing of inflation to the continued tight monetary stance, improved agricultural output, and gradual adjustments in administered prices.
Economic growth remained strong, with real GDP growth reaching 9.2 percent in fiscal year 2024/25, supported by expansion in services, increased industrial output, particularly in mining and quarrying driven by gold production, and a gradual improvement in agriculture. High-frequency indicators also pointed to sustained economic activity, despite declines in some exports and imports of raw materials.
The Committee expressed concern over rapid monetary expansion, with broad money and reserve money growing by 38.8 percent and 67.3 percent year-on-year, respectively, by November 2025. Bank credit grew by 44.5 percent over the same period. While the banking sector was described as generally sound, some liquidity pressures persisted due to high loan-to-deposit ratios.
Based on its assessment, the Board decided to keep the National Bank Rate at 15 percent and maintain existing rates on the Standing Deposit and Lending Facilities. The credit growth cap of 24 percent year-on-year was also retained until the next MPC meeting. In addition, the reserve requirement ratio was raised to 10 percent on a monthly average basis, with banks given three to six months to comply. The Board also approved the removal of the minimum saving deposit rate, allowing rates to be determined through market negotiation.
Separately, the NBE issued a public advisory warning against the use of unlicensed money transfer agents and illegal Hawala networks. The Bank stated that both operators and recipients involved in unauthorized remittance activities may face regulatory action, including service disruptions. The NBE urged the public and the Ethiopian diaspora to use only licensed money transfer operators and to verify providers through the official list published on the Bank’s website.
The next MPC meeting is scheduled for the end of March 2026, or earlier if conditions require, the central bank said.
Source: National Bank of Ethiopia
