The National Bank of Ethiopia has maintained its benchmark interest rate at 16% following its eighth regular meeting on November 3, 2026. This decision aims to keep borrowing costs high as the country struggles with inflation rates significantly above the central bank's single-digit target. The Monetary Policy Committee recommended maintaining the National Bank Rate at 16%, which was subsequently approved by the Board.
Ethiopia's annual headline inflation stood at 14.9% in September 2026, slightly down from 15.3% in July 2026, according to data from the Ethiopian Statistical Service. Despite this modest easing, price growth remains far above the National Bank of Ethiopia's medium-term goal. Food and non-alcoholic beverages inflation was 14.8% in September, while non-food inflation reached 15.1% during the same period.
The National Bank of Ethiopia's decision to hold the interest rate is driven by concerns over persistent inflationary pressures. These pressures are affecting operating costs across various sectors, including transport, manufacturing, and services. The Monetary Policy Committee noted that recent monetary and financial conditions indicate moderate looseness and that a double-digit short-term inflation forecast supports maintaining a tight monetary policy stance.
The interest-rate corridor has been kept unchanged at plus or minus 300 basis points around the 16% National Bank Rate. This move provides a stable operating framework for lenders, allowing for active liquidity management by the central bank. The upper and lower bands of the corridor remain wide enough to support this management.
For investors and businesses, the unchanged interest rate of 16% means that borrowing costs will remain high. This presents a significant nominal funding hurdle for banks and corporates. Credit pricing will continue to be sensitive to liquidity conditions and inflation expectations. Companies, particularly, will need to be cautious about non-food inflation, which poses a near-term risk to their operations.
The decision also highlights the importance of monitoring money supply dynamics, as faster liquidity expansion could hinder progress towards the National Bank of Ethiopia's single-digit inflation goal. Additionally, Ethiopia's external trade environment is evolving, with a recent high-level trade mission between the UAE and Ethiopia taking place from October 19 to 22, 2026, aimed at enhancing bilateral trade.
Bilateral trade between Ethiopia and the UAE totaled $5.6 billion between 2021 and 2025, with Ethiopian imports from the UAE amounting to $4.4 billion and exports to the UAE standing at $1.2 billion. The National Bank of Ethiopia's cautious approach to interest rates reflects its commitment to achieving price stability and managing the country's economic challenges effectively.
Key points
- The National Bank of Ethiopia maintains its benchmark interest rate at 16% to combat high inflation.
- Annual headline inflation in Ethiopia was 14.9% in September 2026.
- The interest-rate corridor remains at plus or minus 300 basis points around the 16% National Bank Rate.
