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Cyprus is on the brink of inflation

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Cyprus is on the brink of inflation

In 2021, it said goodbye to Cyprus and the eurozone with high inflation rates, with the phenomenon not expected to weaken in the coming months, as forecast by analysts and central banks.

In Cyprus, inflation in December 2021 increased at a rate of 4.8%, although the Consumer Price Index (CPI) decreased by 0.26 points and reached 105.10 points, compared to 105.36 points in November 2021. In the whole of 2021, the CPI increased by 2.5%, compared to the corresponding period last year.

Energy prices are the main cause of rising inflation. The biggest changes in the economic categories, compared to December 2020, were recorded in “Electricity”, with a percentage of 30.9% and in “Petroleum Products”, with a percentage of 27.5%. Compared to the previous month, the biggest change was presented in “Petroleum Products”, with a percentage of -2.0%.

For the period January-December 2021, compared to the corresponding period last year, the categories “Transport” (8.7%) and “Housing, Water Supply, Electricity and LPG” (7.2%) had the largest positive change, while the largest negative change was observed in the category “Communications” (-1.4%).

Eurozone

Inflation in the eurozone rose to 5% in December from 4.9% in November, to a new record high for the region and higher than the 4.7% expected by analysts.

According to data released by Eurostat, energy prices remained at the forefront of increases, up 26% from a year earlier. However, increases in the prices of food, services and imported goods were well above 2%, which is the ECB's inflation target.

Expectations

Reuters estimates that these figures are uncomfortable for the European Central Bank (ECB), which has consistently underestimated inflationary pressures and has come under fire for this from some of its officials.

As the economy recovered from the shock of the pandemic, price increases skyrocketed, surprising the ECB. Inflationary pressures were compounded by supply chain problems, which limited the availability of consumer products, while households that had been forced to save for a year began to spend on everything.

Most of these causes of inflation are temporary and therefore the pressures are expected to ease eventually. However, there are differing views on how quickly inflation will fall and at what level it will land when the economy adjusts to the new regularity.

The ECB sees inflation below 2% again at the end of this year, but a number of officials dispute that forecast, warning that the risks are on the rise and that it could move above the target next year.

Source: politis.com.cy

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