Cyprus harmonised inflation rate drops to 1.3%

Maastricht target well within reach

 

The harmonised inflation rate (HICP) in Cyprus fell again in November 2006, to 1.3% compared with November 2005, having recorded 1.7% in October and 2.2% in September.

Cyprus is well on course to meet the inflation requirements for adopting the euro.

The Statistical Service reported that Cyprus’ 12-month average HICP rate was 2.2%. The 12-month rate is the index in the period December 2005- November 2006, compared to the index of December 2004- November 2005.

This 12-month rate will be used in mid-2007 to decide whether Cyprus has met the Maastricht criterion on inflation.

It must be no more than 1.5% above the average 12-month inflation rates in the three member states with the lowest inflation rates.

In October the lowest three 12-month inflation rates averaged 1.3%: Poland (1.2%), Finland (1.2%) and Sweden (1.5%).

This means that Cyprus’ implicit target in that month would have been 1.3+1.5 = 2.8%. This gives Cyprus 0.6% room for manoeuvre. F.M.