Cyprus Fiscal Council advises against across-the-board tax interventions for inflation

The Cyprus Fiscal Council (CFC) issued a report on October 2, 2026, titled “Inflation in Cyprus 2025–2026: From the Energy Shock to a Fiscally Prudent Response,” recommending that the government avoid across-the-board tax interventions to curb rising prices. Instead, the council advocates for temporary, targeted support measures exclusively for vulnerable population groups to maintain fiscal prudence.

The report highlights a sharp economic reversal for the country, which held the lowest inflation rate in the European Union at 0.8% in 2025. By August 2026, this figure surged to 5.2%, marking the third-highest inflation rate in the EU. The CFC attributes this volatility to Cyprus’s high sensitivity to external energy shocks, noting that fuel prices directly impacted the inflation figures, while electricity costs followed with an approximately two-month lag. The report further indicates that inflationary pressures have broadened beyond energy to include the services sector.

The council’s assessment underscores the necessity for a measured fiscal policy that balances immediate relief for households with long-term economic stability. While the current situation remains challenging, the authorities are urged to prioritize targeted interventions over generalized price containment strategies.