Consumer Price Inflation Hit 13.9% in June

Ethiopia’s annual consumer price inflation rose to 13.9% in June, moving further away from the central bank’s preferred single-digit target, the Fed’s primary inflation gauge shows. The Consumer Price Index (CPI), a broad measure of costs for goods and services across the economy, showed a 0.9% increase for the month, putting the annual rate at 13.9% , the Ethiopian Statistics Service (ESS) reported on Monday. The 12-month level for the headline inflation was the highest since June 2025, and was 0.5 percentage points above from the May Inflation reading. The latest CPI report comes amid uncertain inflation outlook and higher fuel prices, which feeds into the cost of goods, foods and services. – Non-food inflation Hits 8-Month High – A 14.3% jump in transportation service costs was among the major contributors to the rising non-food inflation which saw a 12.2% annual increase and rose 1.0% on a monthly basis, per the ESS report. The annual rate was the highest since October 2025. The uptick was driven by rising costs across consumer goods and service components of the non-food index. The CPI’s second highest weighting component – consisting of Housing, Water, Electricity, Gas, and other fuels – accelerated 9.5% after raising 1.0% for the month. Alcoholic beverages and tobacco prices rose 14.5% from a year ago and were 0.6% up for the month while the Cost of hotel and restaurant services showed a 12.0% annual surge after accelerating 3.3% for the month. Routine house maintenance and furnishings costs climbed 13.0% over the past year and were 0.7% up on a monthly basis while clothing and footwear prices jumped 13.0% from a year ago despite a 0.4% monthly gain. Elsewhere, the cost of communication services rose 8.9%, health jumped 11%, education surged 17.3%, and miscellaneous goods and services climbed 17.9% on an annual basis, the statistics agency reported. – Food Inflation Climbs 15% Rate – Food inflation also accelerated 15.1% from a year ago after a 0.9% increase for the month, according to the ESS’ monthly inflation report. The annual gain was the highest since January 2025. [Source ESS] Price increases were observed across all major five categories of the food CPI. Bread and cereals, which make up the component with highest CPI weighting, accelerated 7.0% from a year ago and were 0.9% up for the month. Vegetables posted the biggest monthly gain in the food index, with a 1.2% rise, and posted a 12.8% increase from a year ago while the uptick in beverage and coffee prices remained the biggest contributor on an annual basis, with a 37.6% surge, though the rate was flat for the month. Meat prices also showed a 19.2% surge from a year ago but just 0.5% up for the month. Other food products saw 17.1% annual and 0.1% monthly increases. – Central Bank’s Response – The latest inflation report comes a week after the National Bank of Ethiopia raised its key interest rate by full point and lifted the three-year long credit growth cap imposed on commercial banks. The 1.0 percentage point hike has brought the NBE key interest rate to 16%, while the existing plus or minus three percentage point band kept unchanged. This is the first time the Bank used the policy instrument since it began moving to the new interest-rate based monetary policy regime in July 2023, setting the initial policy interest rate at 15%. The policy tightening – backed by an eight-member Monetary Policy Committee (MPC) – comes at a time when the country is struggling with inflation, which has started to creep up following the Middle East conflict. – Higher Inflation to Persist – A statement – issued by the National Bank after the seventh MPC meeting – highlighted inflation easing to single digit in December 2025 after a long period of high rates. But the drop, attributed to NBE’s sustained tight monetary policy stance and fiscal discipline, was short-lived. Inflation ran above the Centeral Bank’s single digit target again in May, increasing 10.7% from a 9.4% in March. The rate has since continued to tick higher with food and non-food price rises driven by increasing transportation fuel costs due to supply disruptions linked to the conflict in the Middle East. Policymakers now expect higher inflation to persist, saying it “will likely remain in the double-digits over” the next six months before moderating by Dec 2026.  They also insisted on maintaining the NBE’s tight monetary policy stance to ward off the renewed inflationary pressures. “The NBE’s tight monetary policy stance has been an essential policy direction given the inflationary pressure from international oil price shocks,” the Monetary Policy Committee stated, while proposing multiple actions for the central bank to take to achieve its goal. New Monetary Policy Actions In the summary of its decisions, the Central Bank said the restrictions on how much commercial banks can lend  was removed after it was introduced as a temporary measure nearly three years ago to contain high inflation driven by excessive loan expansion by the banking sector . The move, according to regulators, “is a result of a successful transition to an interest-based policy framework with full implementation of indirect monetary policy instruments. It does not change NBE monetary policy stance”. The Central Bank signaled its policy stance by hiking its key interest rate by a full point as “a counter tightening measure” for the removal of the credit cap. The Bank says it will also introduce targeted additional reserve requirements for commercial banks whose lending expansion could contribute to inflationary pressures. In addition, the NBE has brought its foreign exchange commission rate down by one percentage point to 1.5% in an effort “to reduce import-related costs, contain inflationary pass-through, and to promote a more efficient FX market”. It has also reduced the FX surrender requirement on goods export from 50% to 30% “to enhance export competitiveness and build market confidence, thereby deepening the FX market and improving price discovery”.