IMF Staff Country Reports

Cyprus: Selected Issues

May 28, 2024

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Format: Chicago

International Monetary Fund. European Dept. "Cyprus: Selected Issues", IMF Staff Country Reports 2024, 138 (2024), accessed November 21, 2024, https://doi.org/10.5089/9798400276439.002

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Summary

This Selected Issues paper highlights disinflation and monetary transmission in Cyprus. Inflation in Cyprus dropped in 2023 due to the diminishing impact of supply-side shocks and moderating demand. However, some domestic price pressures persist, mostly from nonfiscal aggregate demand. The analysis suggests that high core inflation in 2023 was driven both by demand and supply factors. The post-pandemic inflation surge is attributed to both supply and demand factors, with the latter dominating most of the time. Wage dynamics will influence the inflation outlook. While risks of a wage-price spiral have declined substantially, the extent to which remaining demand pressures will affect future inflation will partly depend on wage dynamics. Deposit rates saw delayed and smaller increases, likely driven by high banking sector liquidity and low competition. Continued commitment to containing aggregate demand is supporting the final stage of disinflation. The last mile of disinflation would benefit from containing aggregate demand. While supply disruptions are no longer materially impacting inflation, domestic demand continues to put pressure on prices.

Subject: Climate change, Environment, Inflation, International organization, Monetary policy, Natural disasters, Prices

Keywords: D.c, B. climate mitigation, Climate change, Drivers of inflation, Europe, Global, Green tax reform, IMF-WB CPAT tool, Inflation, International Monetary Fund Washington, Natural disasters, Policy pass-through

Publication Details

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