Inflation in Cyprus has once again entered a sharp upward trend, climbing to 5.2% in August 2026, ranking the country second highest in the entire Eurozone (behind only Lithuania at 5.8%).
Appearing as a guest on the program “Alpha News,” economist Tasos Giassemidis analyzed Eurostat’s preliminary data, sounding the alarm about new burdens on households and foreshadowing another interest rate hike by the European Central Bank.
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The change over the course of a year is dramatic, as Cyprus went from 0.0% in August 2025 to 4.4% in July of this year and reached 5.2%, far exceeding the Eurozone average (3.3%).
As Mr. Yiasemidis explained, the main driver of this pressure is the rally in international fuel prices, with energy inflation in the Eurozone soaring to 14.3%.
“When oil was trading between $67 and $70 per barrel, Cyprus had some of the lowest inflation rates in the Eurozone, whereas now that it’s hovering between $90 and $95, it’s experiencing this surge.”
“Imported inflation” also contributed to this phenomenon due to increased consumption during the tourist season, combined with geopolitical tensions in the Middle East and Ukraine.
The immediate impact of this rise in Europe is expected to be reflected directly in monetary policy.
“The fact that inflation in the Eurozone is well above 2%, I believe that all analysts now take it for granted that the ECB will raise interest rates by 0.25% next week,” emphasized Mr. Yiasemidis.
This development directly burdens citizens who have taken out variable-rate loans, increasing the overall cost of servicing their debts.
At the same time, the rise in fuel prices is causing a ripple effect across the entire market. With prices at gas stations hitting new highs and temporary government relief measures having now been absorbed, the increased costs of freight and insurance are gradually being passed on to production costs and retail prices.
Significant price hikes are already being seen in the housing sector (rents and real estate) as well as in food, where problems in the primary sector, natural disasters, and high import costs are compounding the issue.
Commenting on Cyprus’s structural weaknesses, Mr. Yiasemidis emphasized that the island’s energy isolation makes it particularly vulnerable.
“Unless there are strategic changes regarding energy storage, renewable energy production, grid modernization, and the introduction of natural gas, Cypriot citizens will continue to face significant pressures on the cost of living.”
Finally, the surge in inflation is directly affecting public finances ahead of the submission of the new state budget. Due to the implementation of the Automatic Price Index Adjustment (APA), government spending will be revised upward, with the economist estimating that annual inflation will range between 3% and 3.5%, leading to an overall increase in the public sector wage bill of approximately 2% to 2.5%.
