Cyprus Fiscal Council urges targeted support instead of broad tax cuts as inflation rises
The Cyprus Fiscal Council called for temporary support for vulnerable households as inflation reached 5.2 per cent in August 2026, the third-highest rate in the EU.
Nicosia, Cyprus. The Cyprus Fiscal Council on Friday urged a shift away from broad tax cuts in response to inflation, saying support should be temporary and targeted at vulnerable households. Its presentation, covering developments through August 2026, showed Cyprus moving from the lowest inflation rate in the European Union in 2025 to the third-highest in August 2026.
Inflation rises sharply after near-zero levels
Cyprus recorded average inflation of 0.8 per cent in 2025, the lowest rate in the EU, with inflation close to zero between July and December.
The increase began in March 2026, when inflation reached 1.5 per cent amid the crisis in Iran and disruption around the Strait of Hormuz. By August, inflation had reached 5.2 per cent, according to the council.
The council said the speed of the increase demonstrated “the unusually high sensitivity of Cyprus to an external energy shock”.
By August, Cyprus’ inflation rate was two percentage points above the euro area average, compared with two percentage points below it a year earlier.
Fiscal response and inflation forecasts
The presentation, titled “Inflation in Cyprus 2025-2026: From the energy shock to a fiscally prudent response”, examines inflation trends, the contribution of energy, food and services, and fiscal options for supporting vulnerable groups.
For 2026 as a whole, the Central Bank of Cyprus (CBC) forecasts inflation of 3.3 per cent, while the European Commission forecasts 3.6 per cent.
The CBC expects inflation to ease to around 2.4 per cent in 2027.
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