Ethiopia’s annual headline inflation slowed to 9.7% in February 2026, according to the latest Consumer Price Index data released by the Ethiopian Statistical Service. The figure marks a slight improvement from 9.8% in January and a significant decline from 15% in February 2025, extending a disinflation trend that began strengthening in late 2025.
The moderation reflects the combined impact of tighter monetary policy, exchange-rate reforms, targeted subsidies and efforts to improve supply chains for essential goods.
Prime Minister Abiy Ahmed has previously attributed the improvement to policy measures including income adjustments for vulnerable households and expanded public services such as electricity and water access, which authorities say have helped bring inflation back into single digits for the first time in several years.
Food prices remain the main pressure point
Despite the broader easing, food inflation remains elevated. Prices for food and non-alcoholic beverages rose 10.8% year-on-year, slightly higher than the 10.4% recorded in January.
The increases were driven by higher prices for vegetables, meat, dairy products, eggs, fruits, cooking oil and sugar. Food prices in Ethiopia remain highly sensitive to weather conditions, input availability such as fertilizer and seeds, and transport disruptions across the region.
Non-food inflation coolsInflation outside the food sector eased more noticeably. Non-food inflation fell to 8.1% in February from 9% in January, providing some relief for households.
Within this category:
- Transport costs rose 13.3%, reflecting fuel price volatility and regional logistics challenges.
- Household goods increased 10.6%.
- Restaurants and hotels rose 12.4%.
- Miscellaneous goods and services climbed 17%.
- Communication prices increased 10.4%, while alcohol and tobacco rose 7.9%.
On a monthly basis, consumer prices increased 0.4% in February, down from 0.7% in January, indicating easing short-term inflation pressures.
Currency stability supporting disinflation
The Ethiopian birr has remained relatively stable in recent weeks, trading around 155 ETB per US dollar in early March, following reforms that introduced greater exchange-rate flexibility and helped narrow the gap between official and parallel markets.
Currency stabilisation has helped ease import distortions and reduce pressure on consumer prices.
Progress, but risks remain
Ethiopia’s progress is notable given the prolonged period of double-digit inflation that has weighed on household purchasing power and complicated investment planning.
However, underlying pressures remain. The 12-month moving average inflation rate stood at about 12.3% in February, suggesting that the economy is still adjusting from earlier price shocks.
Analysts warn that food inflation remains the main vulnerability, reflecting structural challenges such as erratic rainfall, limited irrigation infrastructure and the economy’s heavy reliance on rain-fed agriculture.
Regional geopolitical tensions and global commodity price volatility could also reverse recent gains if supply chains tighten.
Outlook
Sustaining the disinflation trend will likely depend on continued policy discipline, improvements in agricultural productivity and investments in rural infrastructure.
For policymakers and investors, the key test will be whether Ethiopia can maintain macroeconomic stabilisation while translating lower inflation into stronger growth and improved living standards for its population of more than 120 million people.
