Ethiopia's central bank plans to keep interest rates high for the rest of the year to manage transitory inflation caused by recent sweeping currency reforms, National Bank of Ethiopia (NBE) Governor, Mamo Mihretu, told the US media.
The bank, which adopted an interest rate-based monetary policy framework in July, has seen inflation fall to 17.5% from 29% a year ago. Despite the progress, further price increases are expected, particularly in food prices, the governor pointed out.
"We expect inflation pass-through to be limited, temporary and manageable," he said.
The government is providing temporary subsidies for essential goods to cushion the impact on the poorest citizens, but these will be phased out as the economy adjusts to the reforms, according to Mihretu.
Ethiopia is reportedly negotiating simultaneously with lenders and bondholders to reduce its debt burden, with an agreement expected by early next year.