This paper tries to identify the determinants of Inflation in general the causes of lowrn . inflation in particular in Ethiopia with a time series data covering the period 1962 torn1997 The analytic technique used involves estimations of a model that incorporatesrnboth monetarist and structuralist variables of inflation. The findings of the studyrnsuggests that, expectation of inflation, real income, per capita food production andrnmoney supply are found to be significant with their theoretically postulated sign.rnout of the variables included in the model, expectation of inflation and real incomernhave substantial impact on the inflationGlY process of the country. Money supply isrnthe next important variable, though its coefficient does not add up to unity as itrnargued by monetarist.rnThe study further allempted to look at the relation between inflation and degree ofrnmonetization of the economy (which could roughly be measured by broad moneyrnover GDP) . According to the investigation of the study, the degree of monetizationrnhas no any role to play in the inflation spiral of the country since the economy is notrnwell monetized Rather it more likely appear that the extent of degree of monetizationrnof the economy has partly contributed to the prevalent of low inflation in the country.rnif the government has a low inflation target it should adopt a policy that can avoid thernstructural rigidities prevailing in the economy.