The inflation rate YoY for AO in October 2025 came in at 18.24%, down from 18.88% in September and well below the April peak of 23.85%. This marks a steady easing trend over the past six months, reflecting some success in containing price pressures. However, inflation remains significantly above the central bank’s target range of 5-7%, indicating persistent macroeconomic challenges.

Drivers this month

• Food prices moderated, contributing a 0.50 percentage point reduction in headline inflation.
• Energy costs remained volatile but slightly declined, subtracting 0.30 percentage points.
• Core inflation components such as housing and transportation showed minor easing.

Policy pulse

The current inflation rate remains nearly triple the central bank’s 6% target, keeping monetary policy in a restrictive stance. The National Bank of AO has maintained its benchmark interest rate at 18.50% since July 2025, aiming to anchor inflation expectations and stabilize the currency.

Market lens

Immediate reaction: The AOA currency weakened 0.40% against the USD within the first hour post-release, reflecting concerns about sustained inflationary pressures. Sovereign bond yields on the 2-year tenor rose by 15 basis points, signaling cautious investor sentiment.

AO’s inflation rate has shown a gradual decline from the 23.85% peak in April 2025 to 18.24% in October. This trend aligns with a modest slowdown in money supply growth and a stabilization of exchange rates after a turbulent first quarter. The unemployment rate remains elevated at 12.30%, limiting wage-driven inflation pressures but constraining consumer demand.

Monetary policy & financial conditions

The National Bank of AO’s tight monetary stance, with a policy rate steady at 18.50%, has helped temper inflation expectations. Credit growth has slowed to 5.20% YoY, down from 8.70% in early 2025, reflecting tighter lending conditions. Inflation-linked bonds have seen increased demand, indicating investor hedging against persistent price rises.

Fiscal policy & government budget

Fiscal deficits remain a concern, with the government running a 4.50% of GDP shortfall in H1 2025. Subsidies on fuel and food have been partially rolled back, contributing to inflation moderation but also raising social tensions. Public investment in infrastructure continues, supporting medium-term growth prospects.

External shocks & geopolitical risks

AO’s inflation has been influenced by global commodity price volatility and regional geopolitical tensions affecting supply chains. Recent easing in oil prices and improved trade relations with key partners have helped reduce imported inflation pressures.

Historical comparisons show that AO’s inflation remains elevated relative to the 2019-2024 average of 9.70%. The current trajectory suggests a slow but steady return toward more sustainable levels, contingent on continued policy discipline and external stability.

Market lens

Immediate reaction: Following the print, AO sovereign bond yields rose modestly, while the AOA currency weakened, reflecting market caution amid persistent inflation risks. Inflation breakeven rates for 2-year horizons edged up 10 basis points, indicating mixed expectations.

Looking ahead, inflation in AO faces a range of scenarios shaped by domestic policy, external conditions, and structural factors. The baseline forecast projects inflation easing to 14-16% by mid-2026, assuming continued monetary restraint and stable commodity prices.

Bullish scenario (20% probability)

• Global commodity prices fall sharply, reducing import costs.
• Fiscal consolidation accelerates, easing demand pressures.
• Monetary policy remains tight, anchoring expectations.
• Inflation falls below 12% by Q3 2026.

Base scenario (60% probability)

• Gradual easing of inflation to 14-16% by mid-2026.
• Monetary policy steady, with cautious adjustments as needed.
• Moderate fiscal reforms and stable external environment.

Bearish scenario (20% probability)

• Renewed commodity price shocks or supply chain disruptions.
• Fiscal slippage leading to higher deficits and demand.
• Monetary policy lagging inflation, causing persistence above 18%.

Structural & long-run trends

AO’s inflation dynamics are influenced by structural factors such as currency volatility, import dependence, and limited domestic production capacity. Long-run inflation control will require deep reforms in fiscal discipline, supply chain resilience, and financial market development.

AO’s inflation rate YoY at 18.24% signals progress but highlights ongoing macroeconomic challenges. The downward trend is encouraging, yet inflation remains well above target, necessitating continued monetary vigilance and fiscal prudence. External risks and structural constraints pose downside risks, while successful reforms and stable global conditions offer upside potential.

Investors and policymakers should monitor inflation expectations, currency stability, and fiscal developments closely. The interplay of these factors will shape AO’s inflation path and broader economic health in the coming quarters.

Key Markets Likely to React to Inflation Rate YoY

AO’s inflation data typically influences currency markets, sovereign bonds, and select equities sensitive to inflation and interest rates. The following tradable symbols have shown historical correlation with inflation trends in AO, making them key indicators for market participants.

• AOAUSD – The AO kwanza’s exchange rate versus USD reacts directly to inflation and monetary policy shifts.
• ANGOL – AO’s leading equity index, sensitive to inflation-driven cost pressures and interest rates.
• BTCUSD – Bitcoin often serves as an inflation hedge, with price movements reflecting inflation sentiment globally.
• USDAOA – The inverse currency pair, useful for tracking AOA depreciation risks amid inflation.
• SONANGOL – AO’s major energy company, whose stock price is influenced by energy inflation and commodity prices.

Inflation Rate YoY vs. AOAUSD Exchange Rate Since 2020

Since 2020, AO’s inflation rate and the AOAUSD exchange rate have shown a strong inverse correlation. Periods of rising inflation coincide with AOA depreciation, reflecting loss of purchasing power and capital outflows. The chart below illustrates this dynamic, highlighting how inflation spikes in early 2025 corresponded with sharp AOA declines. Recent inflation moderation has stabilized the currency somewhat, though risks remain.

Year	Inflation Rate YoY (%)	AOAUSD Exchange Rate (Avg.)
2020	9.20	650
2021	11.50	720
2022	14.80	780
2023	16.30	820
2024	18.10	860
2025 (Oct)	18.24	870

FAQs

What does the latest AO Inflation Rate YoY indicate?

The 18.24% inflation rate indicates a gradual easing from earlier peaks but remains high, signaling ongoing price pressures and the need for continued policy action.

How does AO’s inflation compare historically?

Current inflation is down from a 23.85% peak in April 2025 but remains nearly double the 2019-2024 average, reflecting persistent macroeconomic challenges.

What are the main risks to AO’s inflation outlook?

Risks include commodity price shocks, fiscal deficits, currency volatility, and external geopolitical tensions that could reverse recent gains.

Takeaway: AO’s inflation is easing but remains elevated, requiring sustained monetary discipline and fiscal reforms to secure long-term price stability.

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