Two pieces of good news for Cypriot households and businesses were reserved for the data announced yesterday by Eurostat and the European Central Bank and this fact suggests that 2026 starts with good prospects.
First, harmonised inflation with a reference month of December has been entrenched at low levels, and secondly, interest rates on loans with a reference month of October 2025 are declining and in line with the EU average. But what does this mean in practice, for the two elements – inflation and interest rates – that were announced. In relation to the harmonized price index – on Thursday the Statistical Service will announce the general price index – the indication is that the pressure on household budgets a year ago is steadily weakening and in some cases reversing.
Beyond that, however, the harmonized inflation rate in Cyprus of 0.1% is by far the lowest among the Eurozone member states and equally important is that the rate of price growth has declined significantly in one year considering that in December 2024 it was 3.1%.
It should be noted that in order for the overall price level to really decrease, the inflation rate would have to fall below zero, which would mean deflation, and only then will we have a real reduction in prices and their return to the old levels.
Let's see what other countries have achieved in containing prices. Annual inflation in the Eurozone is expected to stand at 2% in December from 2.1% in November, approaching the European Central Bank's medium-term target of 2%. In the Eurozone countries, the harmonized price index is: Belgium 2.2%, Germany 2%, Estonia 4.1%, Ireland 2.7%, Greece 2.9%, Spain 3%, France 0.7%, Croatia 3.8%, Italy 1.2%, Latvia 3.5%, Lithuania 3.2%, Luxembourg 3.3%, Malta 2.3%, Netherlands 2.5%, Austria 3.9%, Portugal 2.4%, Slovenia 2.6%, Slovakia 4.1%, Finland 1.8%.
The analysis of the main components of inflation shows that services continue to be the main source of inflationary pressures in the euro area, with an annual increase of 3.4%, although slightly lower than in November (3.5%). This development is linked to increased labour costs and continued strong demand in sectors such as tourism, transport and personal services.
An upward trend is also recorded in food, alcohol and tobacco, where the annual growth rate accelerated to 2.6% from 2.4% in the previous month, suggesting that pressures on food costs have not yet fully eased in all member states. In contrast, non-energy industrial goods continue to show particularly low inflation, at 0.4%, reflecting the normalization of supply chains and the decline in raw material costs compared to previous years. The contribution of energy remains decisive, where prices at the eurozone level recorded an annual decline of -1.9% in December, compared to -0.5% in November.
At the level of lending for households and businesses, the data announced by the ECB show that interest rates are in line with the Eurozone average and in some categories are lower. Based on ECB data, the interest rate on consumer loans in Cyprus stands at 6.20% from 6.18% in October and 5.84% in September, compared to 7.33% which is the average in the eurozone.
Mortgage rates in Cyprus are also below the Eurozone average and stand at 3.2% compared to 3.30% in the eurozone. For deposit rates there is no significant change. The interest rate on deposits from households with a maturity of up to one year increased in November to 1.13% from 1.07% in October and 1.10% in September. According to the data, it is the third lowest in the eurozone after Slovenia (0.79%) and Greece (1.12%).
