Current Trends of Inflation in Ethiopia: The case of food prices

One of the prime objectives of macroeconomic policy both in developed and developing countries are to achieve economic stability and ensure sustainable economic growth simultaneously with price stability. Ethiopia has experienced a historically unprecedented increase in inflation, mainly driven by cereal price inflation, which is among the highest in Sub-Saharan Africa. This study, therefore, seeks to identify the current rate, causes and impacts of high rates of inflation in the country by giving particular emphasis on food prices. As high and persistent inflation poses uncertainties in the economy and lead to slowdown of economic growth by discouraging domestic as well as foreign investment most importantly affecting the consumption pattern and saving by reducing real income. Thus, factors contributing for this inflationary pressure should be properly identified and needs to be tackled. In order to achieve these research objectives, inflation related data from Ethiopian statistical authority and other credible sources were collected and analysed. The finding of the study indicated that the purchasing power of Ethiopian Birr1 deteriorated dramatically in the past three decades and identified key historical occurrences that contributed for this deterioration. Moreover, the study recommended to adopt various monetary and fiscal policy instruments to tackle the impacts of inflation.