Breaking news

Cyprus Inflation Slows To 1.2% As Eurozone Price Pressures Ease

Overview Of The Inflation Landscape

The latest data from Cyprus indicates that the annual inflation rate has decelerated to 1.2% in January 2026, significantly lower than both the euro area and European Union averages. This development, reported by Cystat and Eurostat, underscores the easing of price pressures across the region.

Sectoral Dynamics Driving The Numbers

The Harmonised Index of Consumer Prices (HICP) fell from 2.9% in January 2025 to 1.2% year over year, while monthly inflation declined by 0.3%.

The strongest annual increases were recorded in recreation, sports, and culture (+5.8%), followed by restaurants and accommodation services (+4.8%) and education (+3.4%). Food and non-alcoholic beverages rose by 3.2%, while alcohol and tobacco, health services, and personal care goods posted more moderate gains.

By contrast, clothing and footwear prices declined sharply, falling 6.2% annually and 12.1% month over month, making the category one of the largest downward contributors to the overall index.

Regional And Economic Comparisons

Across the euro area, inflation slowed to 1.7% in January, down from 2% in December, while the EU average eased to 2% from 2.3%. The figures point to a broader regional cooling trend, although price dynamics remain uneven across member states.

France (0.4%), Denmark (0.6%), Finland (1%), and Italy (1%) recorded some of the lowest annual inflation rates. At the other end of the spectrum, Romania (8.5%), Slovakia (4.3%), and Estonia (3.8%) reported significantly higher readings.

Major economies, including Germany, Spain, Greece, Portugal, Malta, and Croatia, showed mid-range inflation levels, reflecting differing domestic cost pressures across the bloc.

Inflation Drivers And Key Contributions

Energy prices played a central role in slowing inflation. In the euro area, energy costs fell by 4% year over year, while Cyprus recorded an annual energy decline of 6.5%, helping reduce overall price growth.

Services, which account for nearly half of the consumer basket, remained the main upward driver, contributing 1.45 percentage points to inflation. Non-energy industrial goods had a more limited impact, while food, alcohol, and tobacco continued to add pressure with annual growth of 2.6%.

Conclusion

The slowdown in Cyprus inflation to 1.2% reflects both domestic price stabilization and broader easing trends across the euro area. Falling energy costs are helping offset persistent service-sector pressures, reshaping the inflation profile as policymakers and investors monitor the next phase of economic adjustment.

Cyprus Central Bank Reports Sharp Decline In New Loans For January 2026

Overview Of Lending Trends

The Central Bank of Cyprus (CBC) reported a marked downturn in total net new loans for January 2026. The figures reveal a decline of €377.7 million in net new loans compared with the previous month, reflecting broader adjustments in both consumer and housing credit markets.

Detailed Lending Activity

Net new loans in January totaled €247.3 million, based on €495.9 million in total new lending. In December 2025, net new loans reached €625.0 million from €986.9 million in total lending. Changes were recorded across several credit categories. Net new consumer loans increased slightly to €18.9 million from €17.2 million in December. Housing loans declined to €95.7 million from €135.4 million in the previous month.

Interest Rate Movements

Interest rates for both consumer and housing loans declined slightly during the period. Consumer loan rates fell to 7.20% from 7.22%, while housing loan rates decreased to 3.70% from 3.78%. Deposit rates showed limited changes. Household term deposits remained at 1.20%, while deposits from non-financial corporations increased to 1.34% from 1.27%.

Comparative European Context

In comparison with other euro area countries, lending rates in Cyprus are close to the median for outstanding loan balances. Margins for households are around 0%, while margins for non-financial corporations stand at approximately 0.4%. The transmission of monetary policy in Cyprus broadly follows developments in the wider euro area, particularly during periods of monetary tightening or easing. However, the pass-through of rate changes to new loans, especially those issued to non-financial corporations, appears lower than in some other euro area markets.

Shifts In Borrower Behavior And Market Dynamics

The CBC report also highlights changes in borrower preferences regarding interest rate structures. The share of new housing loans with variable interest rates has declined from nearly 100% in early 2022 to 11.6%. Fixed-rate loans have become more common in new housing lending, although many of these products later transition to variable rates.

Banking Liquidity And Deposit Rates

In addition to lending trends, the Central Bank of Cyprus noted that deposit rates in Cyprus remain among the lowest in the euro area. High liquidity levels within the banking system contribute to this trend. Cypriot banks reported a liquidity coverage ratio of 319% in December 2025, compared with a euro area median of 192% and an EU average of 161%. These liquidity levels influence the pricing of deposits in the domestic market. Changes in policy interest rates have also shown limited pass-through to new deposits, reflecting the structure of Cyprus’s relatively small banking sector. The CBC report highlights ongoing developments in both lending and deposit conditions within the country’s banking system as economic conditions and borrowing preferences continue to evolve.

Aretilaw firm
eCredo
The Future Forbes Realty Global Properties
Uol

Become a Speaker

Become a Speaker

Become a Partner

Subscribe for our weekly newsletter