Central Bank urges targeted cost-of-living aid to avoid fuelling inflation

Nicosia, Cyprus. The Central Bank cautioned on Tuesday that cost-of-living assistance should target vulnerable households, as broad support could increase demand and drive prices higher.

Central Bank warns against blanket support

Addressing the House commerce committee, Central Bank spokeswoman Maria Papageorgiou said untargeted payments could encourage greater consumption among households, adding to inflationary pressure.

She referred to a European study indicating that price pressures had not affected 31 per cent of Cypriot households.

Papageorgiou said the European Central Bank was increasing interest rates to curb inflation caused by demand, but that higher rates had limited impact on price increases driven by energy costs.

Ministry outlines responses to rising costs

Finance ministry permanent secretary Andreas Zachariades attributed inflation mainly to external influences, particularly fuel and energy. He outlined three approaches: short-term assistance, reforms to increase incomes and steps to reduce energy consumption.

Government relief already announced included reduced VAT on electricity, cuts bringing fuel and heating taxes down to the EU minimum, and a zero VAT rate for essential goods.

When asked whether shoppers were benefiting from these savings, Zachariades acknowledged that confirming their passage to consumers was difficult.

Minister’s absence draws criticism

Finance Minister Makis Keravnos was absent from the meeting. Committee chairman Nikos Georgiou, a Disy MP, said the lack of political representation from the government made discussion of the matter extremely difficult.

Zachariades attended only briefly and departed before proceedings concluded.