This comes as the institution transitions to an interest-based system, according to Mered Fikireyohannes, Founder and Chief Executive Officer of Pragma Investment Advisory.

The National Bank of Ethiopia kept its benchmark interest rate unchanged at 15% after a policy review, while modestly raising the credit growth cap from 18% to 24%. Fikireyohannes said the decision underscores the bank’s goal of bringing inflation down to single digits by June 2026, even as headline inflation has eased to 13.6%.

Many in the market had expected the credit cap to be removed, but the Monetary Policy Committee instead opted for a gradual approach, highlighting the risks of inflationary pressures and currency depreciation if credit expands too quickly.

Fikireyohannes say the bank could resort to additional measures, including raising the reserve requirement from 7% or increasing the policy rate, if inflation does not ease further. The government’s halt on monetary financing since July 2024 has already slowed liquidity, dampened business activity and pushed down property prices, but is seen as key to stabilising the economy under ongoing International Monetary Fund backed reforms.

–ChannelAfrica–