By Staff Writer

ADDIS ABABA — Ethiopia’s central bank says inflation is beginning to ease after years of steep price increases, offering a measure of relief to households while underscoring the fragile state of the country’s broader economy.

In its latest monetary update, the National Bank of Ethiopia reported that consumer price growth has slowed, driven in part by improved food supply and tighter financial conditions. Food prices, long the main driver of inflation, have shown signs of moderation, while non-food inflation has remained relatively stable.

The shift reflects a deliberate policy turn by the central bank, which has moved to restrict the growth of money and credit in an effort to tame inflation that had surged to some of the highest levels in sub-Saharan Africa in recent years.

“We are beginning to see the early results of sustained monetary tightening,” the bank indicated in its report, pointing to controlled expansion in both broad money and base money.

Even as inflation cools, policymakers face a difficult balancing act: stabilizing prices without choking off economic growth.

The central bank said economic activity has held up, supported by agriculture and services, though at a more measured pace. Lending to the private sector continues, but under tighter conditions as banks adjust to reduced liquidity and more cautious regulatory oversight.

Financial institutions are increasingly turning to interbank markets and central bank facilities to manage short-term funding needs, a sign of both resilience and constraint within the banking system.

Beyond domestic policy, Ethiopia’s economic outlook remains shaped by pressures from abroad.

The country continues to grapple with a shortage of foreign currency, a persistent challenge that has constrained imports and weighed on businesses. The balance of payments remains under strain, reflecting a gap between export earnings and demand for foreign goods and services.

While some gains have been recorded in remittances and selected exports, economists say structural issues, including limited export diversification, continue to expose the economy to external shocks.

The central bank struck a cautiously optimistic tone, emphasizing its commitment to maintaining price stability while supporting sustainable growth.

But it also warned that risks remain. Global economic uncertainty, exchange-rate pressures and domestic supply constraints could yet complicate the path forward.

For many Ethiopians, the question is whether the recent slowdown in price increases will translate into meaningful relief in daily life, or prove to be only a temporary pause in a longer struggle with rising costs.