The National Bank of Ethiopia Launches New Monetary Policy Framework

The National Bank of Ethiopia announced a new monetary policy framework on July 9, 2024, placing an interest-rate signal at the centre of its efforts to contain inflation. The initial National Bank Rate was set at 15 percent.

How the framework works

Rather than prescribing every bank lending rate, the benchmark is intended to influence liquidity and borrowing conditions. Commercial lenders retain responsibility for pricing their loans; the existing 7 percent minimum savings rate was unchanged.

The auctions allow NBE to absorb surplus funds or supply liquidity when the system is short. Overnight facilities give banks another way to manage immediate cash needs.