Filenews 1 September 2022
Inflation in Cyprus recorded its first -small- decrease in August, after many months, falling to 9.6% from 10.6% in July, but remaining at very high levels.
However, data released yesterday by Eurostat show that inflation in the Eurozone cannot be contained, marking a new all-time high at 9.1%, up from 8.9% in July.
Looking at the main components of inflation in the Eurozone, energy is expected to have the highest annual rate in August (38.3%, compared to 39.6% in July), followed by food, alcohol and tobacco (10.6%, compared to 9.8% in July), non-energy industrial goods (5.0%, compared to 4.5% in July) and services (3.8%, compared to 3.7% in July).
In Cyprus inflation flirts close to the level of 10% and in July it was the first time since the beginning of the year that it exceeded this threshold. It is worth noting, however, that despite the slight decline in August, it is above the Eurozone average. Since March, when the effects of the war in Ukraine began to become apparent, inflation began to rise, coupled with the fact that there were pre-existing problems from the side effects left by the pandemic. In March inflation in Cyprus was 6.2% a month after the beginning of the war in Ukraine, in April it rose to 8.6%, in May 8.8% and in June 9%.
The question now is whether the euro area's average inflation is enough to push the ECB towards raising the interest rate by 75 basis points, as some of the Governing Council want. This is an increase that has already been made twice by the Federal Reserve, although ECB officials warn that they should not follow the American example as Europe prepares for a recession, the Bloomberg agency reports. However, analysts no longer rule out the ECB holding an unusually large 75 basis point increase in its interest rates at its next meeting in September as part of its effort to rein in prices. In July the ECB raised its interest rates by 50 basis points, although it had previously announced that the increase would be by 25 points, as central bank officials saw an increase in inflationary pressures.
The surge in energy prices even before the start of the heating season and the reversal of some subsidies in Germany, almost ensure that inflation will continue to climb and exceed 10%, to peak towards the turn of the year, Reuters points out.
The highest level of inflation in the euro area was recorded in August by Estonia (25.2%), Lithuania (21.1%) and Latvia (20.8%). They are followed by the Netherlands (13.6%), Slovakia (13.3%), Slovenia (11.5%) and Greece (11.1%). The lowest inflation in the Eurozone is recorded by France (6.5%), followed by Malta (7.1%) and Finland (7.6%). In Germany, inflation in August stands at 8.8%, in Italy at 9%, in Spain at 10.3% and in Portugal at (9.4%).
