Inflation remained steady in Cyprus in February, at a time when there is a list of products with zero VAT rate from November 1, 2023, until April 30, 2024, and the reduction in fuel excise duty and subsidy on electricity prices are in effect.
Yesterday, Eurostat announced that harmonized inflation in Cyprus in February was 2.2% from 2.1% in January, remaining steady in the first two months of the year but significantly lower than last year’s 6.7% and 5.8% in February 2022.
The deceleration of fuel and electricity prices, both in January and February, by 2.3% and 2.9% respectively, seems to have been the most significant factor in restraining overall inflation, considering that last year in January and February, the energy index rose by 16.2% and 13.5% respectively.
However, the feeling in thousands of households is that the accuracy remains (as previous increases have been incorporated into the prices of most products), despite the fact that the price measurement numbers are at satisfactory levels.
On February 21, the Government announced the extension of measures to address accuracy, aiming to restrain or reduce some prices and alleviate thousands of citizens.
The food price index, which concerns households, fell to 2.3% in February from 3.2% in January and 7.5% in February 2022.
In the euro area, inflation decreased to 2.6% from 2.8% in January, and significant deceleration was recorded in the prices of the food, alcohol, and tobacco index, as they increased “only” by 4%, compared to a 5.6% increase in January, while service prices increased by 3.9% (compared to 4%) and non-industrial goods by 1.6% (compared to 2%), while energy prices decreased by 3.7% compared to a 6.1% decrease in January.
Structural inflation decreased to 3.1% from 3.3%. Examining the main components of inflation in the eurozone, food, alcohol, and tobacco are expected to have the highest annual rate in February (4.0%, compared to 5.6% in January), followed by services (3.9%, compared to 4.0% in January), non-energy industrial goods (1.6%, compared to 2.0% in January), and energy (-3.7%, compared to -6.1% in January).
In local measurements, the highest inflation in February was in Croatia at 4.8% annually, in Estonia at 4.4%, and in Austria at 4.2%. Conversely, in Latvia, the Consumer Price Index showed an annual increase of just 0.7%, in Italy 0.9%, and in Lithuania 1.1%.
In France, inflation fell to a low of 2.5% in February, as it stood at 3.1% compared to 3.4% in January, and inflation in Germany fell to its lowest level since mid-2021 in February. Significant deceleration was recorded in Spain’s inflation in February, and the Consumer Price Index was at an annual rate of 2.8%, down from 3.4% in January.
The announcement of Eurostat’s data comes a few days before the ECB’s board meeting on March 7, with analysts predicting that it is unlikely to proceed with a relaxation of its policy at this stage. According to a Bloomberg survey, economists estimate that an early reduction in interest rates would be a worse mistake for the European Central Bank than a much delayed reduction. Indeed, they now see a smaller decrease in interest rates in 2024.
