The National Bank of Ethiopia (NBE) on Tuesday said its plansto reduce the country's inflation from 40 percent to single digits ineight months.
Map of Ethiopia
NBE said its targets would be achieved during the 2011/2012 fiscal year.
According to the central bank, various measures were being undertaken as part of the move to lower the inflation rate.
They include the reduction of foreign currency reserves, lowering money supply and encouraging savings.
On Monday, the Ethiopian Central Statistics Agency (ECSA) said theHorn of Africa country's inflation rate had slowed down to 39.8 percentyear-on-year in October from 40.1 percent the previous month.
It attributed the decrease to slower price increases for non-food items.
The World Bank and the International Monetary Fund have predictedthat Ethiopia will not achieve its economic growth target of 11 percentthis year due to runaway inflation.
The two institutions have forecast the economy to grow by seven percent instead.
Many Ethiopians, especially in the capital, Addis Ababa, have complained about soaring prices of basic commodities and rentals.
"Prices are being increased every day," said Alemu Mekuria, a 39 year old Addis Ababa resident.
"Now, I am just trying to stock some basic commodities for my family as we fear that it will get worse."
Like Mekuria, many of the residents of Addis Ababa, home to aroundfive million people, have complained about the high cost of living.
"The landlord increases the rent every three months," said Mesfin Bogale another Addis resident.
"We are struggling to live on my monthly income."
Housing and food have contributed to the rising inflation for about two years, according to the ECSA.