The National Bank of Ethiopia held its benchmark National Bank Rate at 15.00% at its September 2025 monetary policy review, maintaining the tight stance it has carried through the current tightening cycle. At the same meeting, the regulator raised the credit growth target for the 2025/26 fiscal year from 18% to 24%, a move it said was designed to support expanded economic activity without relaxing its broader inflation-fighting posture. The dual decision was published in a statement from the NBE following the conclusion of the review.
The decision to hold rates firm whilst simultaneously widening the credit envelope reflects the difficult balancing act facing the NBE as it attempts to bring inflation under control while sustaining the lending flows that Ethiopia's fast-growing but capital-constrained private sector depends upon. The bank said the revised credit target would be applied across commercial banks operating in the country and would take effect for the full fiscal year through to the end of June 2026.
TIGHT STANCE MAINTAINED AMID GROWTH PRESSURE
By holding the National Bank Rate at 15.00%, the NBE signalled that it does not yet feel conditions warrant an easing of monetary conditions. Elevated borrowing costs have weighed on certain segments of the domestic economy, particularly smaller firms with limited access to capital markets, yet the central bank has been clear that the priority remains restoring price stability across the Ethiopian economy. Officials have consistently emphasised that premature easing could reverse the progress made in reducing inflationary pressures over the preceding months.
The maintained rate also underscores the NBE's commitment to its broader reform agenda, which has included liberalising the foreign exchange market and tightening supervision of the banking sector. Creditors and international development partners have watched the reform trajectory closely as Ethiopia continues to manage a complex economic transition, and the central bank's decision to hold rates sends a message that monetary discipline remains the central pillar of its macroeconomic strategy.
Banks operating under the NBE's oversight have had to navigate the challenge of deploying capital profitably in a high-rate environment. Some institutions had been approaching the ceiling set by the previous 18% credit growth target mid-year, and the revised figure provides greater operational headroom without requiring the NBE to adjust its policy rate.
CREDIT TARGET RAISED TO DRIVE PRODUCTIVE LENDING
Raising the credit growth target to 24% sends a clear directive to commercial banks to expand their loan books faster than was envisaged at the start of the fiscal year. The NBE said the revised target was intended to channel credit into productive sectors including infrastructure, agriculture, and manufacturing—areas the government has identified as priorities for long-term growth. The central bank argued that well-directed credit expansion into supply-enhancing sectors would, over time, help moderate rather than intensify inflationary pressures.
The combination of a firm policy rate and an expanded credit target is an unusual configuration that will require commercial banks to manage their portfolios carefully. Institutions must increase lending in absolute terms to meet the new directive whilst simultaneously contending with funding costs that remain elevated at the policy rate. Analysts will monitor whether banks move swiftly to utilise the additional allowance or adopt a cautious approach in light of the high-rate environment. The NBE's next policy review is expected to take place in the first quarter of the new fiscal year.