Inflation in Cyprus shifts to an established trend

Inflation in Cyprus has shifted from an isolated phenomenon to an established trend, according to economist Tasos Yasemides. Official data from the Statistical Service shows that the inflation rate for August 2026 reached 3.5% year-on-year, continuing an upward trajectory from 3.06% in June and 2.9% in July. Harmonized inflation also saw a significant increase, hitting 5.2% in August. The surge is largely driven by energy costs, with petroleum prices rising by 20.3% and electricity and water prices by 6.0% compared to August 2025.

Economist Yasemides noted a specific structural asymmetry regarding European Central Bank interest rate policies. Because Cyprus’s inflation is higher than the eurozone average, the real interest rate in the local economy remains lower than in the core of the eurozone, rendering the single monetary policy less restrictive than necessary. He warned that the risk of energy costs infiltrating the core inflation rate remains high.

To address this, Yasemides suggests that structural reforms are vital. He argues that as long as the country remains almost entirely dependent on imported energy, it will continue to import inflation during every external crisis. Long-term stability, he maintains, depends on reducing energy dependency through renewable sources, improved efficiency, and electrical interconnections, rather than relying solely on temporary government subsidies that merely mask the symptoms.