Cyprus harmonised inflation stable at 2.5% in May

Within Maastricht limits for now

The harmonised inflation rate (HICP) for Cyprus in May was 2.5% year on year, the same rate as recorded in April, although higher than the 2.1% year-on-year rate recorded in May 2005.

Prices rose by 0.2% compared with the previous month but there was a sharp difference among different categories.

For example, prices of food and non-acloholic beverages fell by 0.94% month on month, probably for seasonal reasons. However, prices of transport, affected by oil prices, rose 1.51% compared with the previous month, having already risen by 2.03% in April.

For the period January-May 2006 the HICP recorded an increase of 2.4% compared to the corresponding period of 2005.

The Statistical Service noted that the (all important) 12-month average rate in June 2005 to May 2006 was 2.0%.

This is the rate that will be used next year to assess Cyprus’ readiness for the euro.

Had that assessment taken place in April, Cyprus’ 12-month average target would have been 2.6%. Data for May are not yet out.

For the time being, therefore, Cyprus is within Maastricht limits. However, the real test will probably come in the autumn, when food prices start to rise again and the summer sales season is over.

This may be why the Central Bank Governor, Christodoulos Christodoulou, said on Thursday that he was concerned about inflation.

Fiona Mullen