Ethiopian inflation hits one-year high despite NBE rate hike
Ethiopia’s annual inflation accelerated to a one-year high of 13.9 percent in June, testing the central bank’s recent aggressive monetary tightening and signaling persistent price pressures for investors.
Annual consumer inflation in Ethiopia hit 13.9 percent in June, accelerating from 13.4 percent in May, the Ethiopian Statistical Service reported on Tuesday. This marks the highest rate in a year, indicating that a recent period of price moderation was short-lived. Prices rose 1.3 percent on a month-on-month basis, cooling slightly from the 1.7 percent growth seen in May.
Food costs remain the primary catalyst, with food inflation climbing to 15.1 percent as prices surged for cereals, bread, meat, and coffee. Non-food inflation also gained momentum, reaching 12.2 percent in June from 11.1 percent the prior month on the back of higher costs for clothing, household goods, and restaurants. While non-food price growth remains significantly below the 17.4 percent peak of June 2025, its steady rise from a March low of 7.0 percent signals broadening inflationary pressures.
The data follows a decisive shift by the National Bank of Ethiopia earlier this month. Policymakers raised the benchmark rate by 100 basis points to 16 percent and lifted a 14 percent credit growth cap on commercial banks.
The central bank attributed the price resurgence partly to geopolitical factors. “Inflation, which had eased following the macroeconomic reforms introduced in July 2024, began accelerating again from April, partly due to fuel supply disruptions linked to the conflict in the Middle East," the Monetary Policy Committee said in a statement. The NBE added that its recent tightening is designed to anchor expectations and steer inflation downward over the medium term.
For market participants, the figures highlight the limits of domestic monetary policy in a frontier economy facing external supply shocks. The re-acceleration of prices so soon after last summer's macroeconomic reforms and the latest rate hikes suggests real yields will remain under pressure. Investors will now focus on whether the removal of the lending cap can successfully restrict credit expansion, or if further rate increases are imminent to stabilize the currency.
