Angola makes biggest rate cut in years as inflation outlook improves

Angola’s central bank has delivered a larger than expected interest rate cut after inflation slowed to its lowest level in years, signalling growing confidence that price pressures are easing despite rising global uncertainty.

The Bank of Angola on Tuesday reduced its benchmark interest rate by 125 basis points to 15.75 percent from 17 percent. It follows a smaller 50 basis point cut in May and marks the central bank’s strongest move yet to support economic activity as inflation continues to decline.

Annual inflation fell to 10.11 percent in June from 10.88 percent in May and nearly 20 percent a year earlier, extending a steady downward trend that has given policymakers room to loosen monetary policy.

“We expect the pace of inflation to continue slowing in the coming months,” Governor Manuel Tiago Dias told reporters, while acknowledging that developments in the Middle East remain a source of uncertainty for the global economy.

The central bank also became more optimistic about the country’s economic outlook. It lowered its inflation forecast for the end of the year to 8.6 percent from an earlier estimate of 11.5 percent, while slightly raising its 2026 growth forecast to 3.6 percent from 3.5 percent.

The improved outlook comes as Angola, one of Africa’s biggest oil producers, stands to benefit from higher global crude prices. Stronger oil revenues could provide additional support for public finances and economic growth, even as policymakers remain alert to external risks.

Tuesday’s decision reflects the central bank’s view that inflation is now on a more sustainable downward path after years of high prices driven by currency weakness and global shocks.

In another sign of changing economic ties, the Bank of Angola recently added China’s yuan to the list of currencies that commercial banks can use to meet their foreign currency reserve requirements. The move underscores the growing role of the Chinese currency in Africa’s financial system as trade and investment links with Beijing continue to deepen.

For businesses and consumers, lower borrowing costs could encourage investment and spending, although the central bank is expected to remain cautious as geopolitical tensions and shifts in global financial markets continue to pose risks to the inflation outlook.

Faith Omoboye

Faith Omoboye is a foreign affairs correspondent with background in History and International relations. Her work focuses on African politics, diplomacy, and global governance.