Cyprus has a higher inflation rate than the euro area average. According to the latest figures, released by Eurostat, the inflation rate in Cyprus in June hit 4 per cent, up from 3.5 per cent the previous month, moving in the opposite direction, compared to the euro area, where it had fallen from 3.2 per cent in May to 2.8 per cent this month.

Why the inflation rate in Cyprus was moving in a different direction was unclear. Prices rose in the euro area countries because of the rise in the world price of oil which pushed up energy costs, significantly. Eurostat’s flash estimate found that energy recorded the highest annual inflation rate in the euro area, at 8.7 per cent in June. On the plus side, it had decreased from 10.8 per cent in May.

Why is it that in Cyprus the inflation rate has risen in June, despite the fact that energy costs declined and tourist demand is lower? Other factors are pushing up prices, which nobody seems interested in examining, because the politicians have decided the main objective is dealing with the rising cost of living! This is what public debate centres on, and it includes demands for ‘measures’ to help people cope with rising prices, regardless of the possibility that this would increase the inflation rate and ultimately the cost of living.

The problem is that the government is under the illusion that inflation can be brought under control through popular measures such as reduced taxes (fuel, electricity, basic goods) and the automatic indexing of wages, also known as CoLA. These measures usually have the opposite effect as they boost demand and increase labour costs. But the finance ministry is not interested in such issues, its only concern being the publicity game and putting a positive spin on its management of the economy.

In an announcement, issued on Thursday, to welcome the increase of the Financial Wellbeing Index in Cyprus. by four points to 54.6 in 2025, the ministry claimed it was “tackling inflation and supporting households” by changing tax policy in order to increase disposable income! Are finance ministry officials unaware that increasing disposable income at a time of inflation is a bit like adding petrol to a fire? More disposable income pushes up prices rather than stabilises them as the finance ministry is misleadingly claiming.

Perhaps someone should inform the finance minister that inflation cannot be tackled with changes to tax policy, increasing disposable income and positive announcements aimed at presenting the government’s misguided policies in a positive light. The 4 per cent inflation rate which is markedly higher than the average for the euro area should be ringing alarm bells at finance ministry, because if nothing is done to rein it in, it could eventually get out of control.