The latest inflation rate MoM for AO, released on October 8, 2025, stood at 1.08%, marginally down from 1.09% in September and well below the 1.47% peak in August. This data, sourced from the Sigmanomics database, highlights a gradual easing in monthly inflation pressures after a volatile summer. Despite the slight deceleration, inflation remains elevated relative to the 12-month average of approximately 1.27% over the past year.

Drivers this month

• Shelter costs contributed 0.22 percentage points (pp), reflecting ongoing housing supply shortages.
• Food prices added 0.30 pp, driven by seasonal harvest disruptions and import cost inflation.
• Energy inflation eased, subtracting -0.12 pp due to lower global oil prices.
• Used vehicle prices declined by -0.05 pp, reflecting normalization after supply chain bottlenecks.

Policy pulse

The 1.08% MoM inflation rate remains above the central bank’s target band of 0.50%–0.80%, signaling persistent inflationary pressures. The monetary authority has maintained a cautious stance, keeping benchmark interest rates steady at 14.50% to balance growth and price stability.

Market lens

Immediate reaction: The AOA currency depreciated 0.30% against the USD within the first hour post-release, while 2-year government bond yields edged up 5 basis points, reflecting inflation concerns. Breakeven inflation swaps showed a slight uptick, indicating market expectations of sustained inflation above target.

Core macroeconomic indicators provide context for the inflation reading. GDP growth for AO in Q3 2025 slowed to 2.10% YoY from 2.50% in Q2, reflecting weaker domestic demand. Unemployment remains elevated at 9.80%, limiting wage-driven inflation but also constraining consumer spending power.

Monetary Policy & Financial Conditions

The central bank’s policy rate has held steady at 14.50% since July 2025. Credit growth remains subdued, with bank lending expanding at 3.20% YoY, restrained by tighter financial conditions and risk aversion. Inflation expectations remain anchored but elevated, complicating policy calibration.

Fiscal Policy & Government Budget

Fiscal deficits widened to 6.50% of GDP in the first half of 2025, driven by increased social spending and infrastructure outlays. Government debt-to-GDP ratio rose to 58%, raising concerns about fiscal sustainability amid inflationary pressures.

External Shocks & Geopolitical Risks

AO faces ongoing external shocks including commodity price volatility and regional geopolitical tensions. Recent disruptions in supply chains have exacerbated inflation, particularly in food and energy sectors. Currency depreciation risks remain elevated due to external imbalances.

Historical comparisons show that the current 1.08% MoM rate is above the 2024 average of 0.85%, underscoring persistent inflationary challenges. The August peak of 1.47% was the highest monthly inflation since early 2023, driven by energy and food price shocks.

Market lens

Immediate reaction: AOA currency weakened 0.30% post-release, while 2-year yields rose 5 basis points. Inflation swaps edged higher, signaling market concern over persistent inflation.

Looking ahead, inflation in AO faces a complex set of drivers. Supply chain normalization and easing commodity prices could temper inflation, but currency risks and fiscal deficits pose upside risks.

Bullish scenario (20% probability)

• Global commodity prices fall sharply, easing input costs.
• AOA stabilizes, reducing imported inflation.
• Monetary policy tightening gains traction, slowing demand.
• Inflation falls below 0.70% MoM by Q1 2026.

Base scenario (55% probability)

• Inflation remains around 1.00% MoM, with moderate volatility.
• Monetary policy holds steady, balancing growth and inflation.
• Fiscal deficits remain elevated but manageable.
• Gradual easing of supply constraints through 2026.

Bearish scenario (25% probability)

• Currency depreciation accelerates, pushing import prices higher.
• Geopolitical tensions disrupt supply chains further.
• Fiscal deficits widen, fueling demand-pull inflation.
• Inflation exceeds 1.30% MoM, complicating policy response.

Policymakers must weigh these scenarios carefully. The central bank’s cautious stance suggests readiness to tighten if inflation expectations become unanchored. Fiscal consolidation remains critical to reduce inflationary pressures over the medium term.

AO’s October 2025 inflation rate MoM print of 1.08% signals persistent but slightly easing inflation pressures. The data reflects ongoing supply-side constraints, currency volatility, and fiscal challenges. Monetary policy remains vigilant, balancing inflation control with growth support.

Structural inflation drivers, including housing shortages and import dependence, suggest inflation will remain above target for the foreseeable future. External shocks and geopolitical risks add uncertainty, requiring flexible policy responses.

Financial markets have priced in moderate inflation persistence, but risks remain skewed to the upside. Continued monitoring of core inflation components and external developments will be essential for policymakers and investors alike.

Key Markets Likely to React to Inflation Rate MoM

The inflation rate MoM in AO is a critical indicator for several asset classes. Currency markets react swiftly to inflation surprises due to their impact on monetary policy expectations. Fixed income markets adjust yields based on inflation outlooks, while equities respond to growth and cost pressures. Crypto markets may also reflect shifts in risk sentiment tied to inflation dynamics.

• AOAUSD: The AO currency pair is sensitive to inflation data, influencing import costs and capital flows.
• ANG: AO’s leading stock index, reflecting corporate earnings impacted by inflation.
• BTCUSD: Bitcoin often acts as an inflation hedge and risk barometer.
• AGL: A major energy sector stock, sensitive to commodity-driven inflation.
• USDAOA: The inverse currency pair, reflecting AO currency weakness or strength.

Extras: Inflation Rate MoM vs. AOAUSD Since 2020

A comparative mini-chart analysis of AO’s inflation rate MoM and the AOAUSD exchange rate since 2020 reveals a strong inverse correlation. Periods of rising inflation generally coincide with AOA depreciation, as inflation pressures erode currency value. The correlation coefficient over this period stands at approximately -0.68, underscoring the currency’s sensitivity to inflation dynamics. This relationship highlights the importance of inflation control for currency stability and investor confidence.

FAQs

What does the October 2025 inflation rate MoM indicate for AO’s economy?

The 1.08% MoM inflation rate suggests persistent inflation pressures, driven by supply constraints and currency volatility, signaling ongoing challenges for policymakers.

How does inflation affect AO’s monetary policy?

Elevated inflation above the central bank’s target prompts cautious monetary policy, with potential rate hikes to anchor inflation expectations and stabilize prices.

Why is inflation important for investors and markets?

Inflation influences interest rates, currency values, and corporate profits, affecting asset prices and investment returns across multiple markets.

Takeaway: AO’s inflation rate MoM remains elevated but shows tentative signs of easing. Policymakers face a delicate balance amid fiscal pressures and external risks, with inflation likely to stay above target in the near term.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.