NBE’s Transition to Interest Rate-Based Monetary Policy Framework

Following a regular Monetary Policy Committee meeting in July 2026, the National Bank of Ethiopia (NBE) officially announced its successful transition from a money-focused regime to an interest rate-based monetary policy framework. This key policy shift represents the complete execution of Action Plan #1 outlined in the central bank's Strategic Plan spanning 2023 to 2026. Along with this framework transition, the central bank also declared the full implementation of indirect monetary instruments. An analysis published by Capital Ethiopia addresses this policy evolution while highlighting potential pitfalls and limitations associated with the new framework. The move marks a significant structural change in how monetary policy and liquidity are managed within the Ethiopian banking sector and broader economy. Central bank officials view this transition as a milestone step toward modernizing macroeconomic management in the country.