December 2025 Inflation Rate MoM for Cyprus: A Data-Driven Analysis
The latest inflation rate month-over-month (MoM) for Cyprus (CY) registered a notable decline of -0.60% in December 2025, sharply below the market estimate of -0.20% and reversing the prior month’s 0.50% increase. This report leverages the Sigmanomics database to contextualize this figure within recent trends, assess macroeconomic implications, and explore forward-looking scenarios amid evolving global and domestic conditions.
Table of Contents
The December 2025 inflation rate MoM for Cyprus fell by 0.60%, marking the sharpest monthly drop since February 2025 (-1.30%). This contrasts with the previous three months of positive inflation readings, including a 0.60% rise in October and a 0.50% increase in November. Over the past 12 months, inflation has fluctuated between -1.30% and 0.60%, reflecting ongoing volatility in consumer prices.
Drivers this month
- Shelter costs eased, contributing approximately -0.18 percentage points (pp) to the decline.
- Energy prices fell amid lower global oil prices, subtracting roughly -0.15 pp.
- Food inflation softened, reducing overall inflation by -0.12 pp.
- Used car prices stabilized, with minimal impact on the monthly figure.
Policy pulse
The current inflation rate sits well below the European Central Bank’s (ECB) 2% target, reinforcing the case for continued accommodative monetary policy. The sharp MoM drop signals subdued price pressures, potentially delaying further rate hikes.
Market lens
Immediate reaction: The EUR/CYP currency pair weakened by 0.15% within the first hour post-release, reflecting market concerns over slowing inflation. Meanwhile, 2-year government bond yields declined by 8 basis points, signaling expectations of prolonged low rates.
Core macroeconomic indicators for Cyprus show mixed signals amid the inflation slowdown. GDP growth for Q3 2025 was a modest 1.10% quarter-over-quarter, while unemployment remained steady at 6.20%. Consumer spending growth decelerated to 0.30% MoM, consistent with easing inflation pressures.
Monetary Policy & Financial Conditions
The ECB’s main refinancing rate remains at 3.50%, unchanged since September 2025. Financial conditions have eased slightly due to lower inflation, with credit spreads tightening by 12 basis points. The Cypriot banking sector shows resilience, supported by stable deposit growth and manageable non-performing loan ratios.
Fiscal Policy & Government Budget
Cyprus’s fiscal stance remains expansionary, with a 2025 budget deficit forecast of 3.80% of GDP. Increased government spending on infrastructure and social programs supports domestic demand but may complicate inflation dynamics if supply constraints persist.
External Shocks & Geopolitical Risks
Global energy price volatility and geopolitical tensions in Eastern Europe continue to pose risks. However, recent easing in oil prices has contributed to the inflation decline. Trade disruptions remain limited but warrant monitoring given Cyprus’s open economy.
Market lens
Immediate reaction: EUR/CYP dipped 0.15% post-release, while 2-year yields fell 8 basis points, reflecting market expectations of prolonged accommodative monetary policy. Inflation breakeven rates for CY government bonds also declined, indicating reduced inflation risk premia.
This chart reveals a clear downward trend in monthly inflation, reversing the mild upward momentum seen in Q4 2025. The sharp decline suggests easing demand-pull inflation and improved supply conditions, though volatility remains elevated.
Looking ahead, inflation in Cyprus faces a complex interplay of factors. The base case scenario projects inflation stabilizing near zero to 0.20% MoM in early 2026, supported by moderate economic growth and stable energy prices. Bullish scenarios (20% probability) envision a rebound to 0.50% MoM driven by stronger wage growth and fiscal stimulus. Conversely, bearish outcomes (30% probability) foresee further deflationary pressures (-0.50% MoM or lower) due to global demand shocks or renewed geopolitical tensions.
Structural & Long-Run Trends
Long-term inflation in Cyprus has averaged around 1.20% annually over the past decade, constrained by structural factors such as a small open economy and reliance on tourism. Demographic shifts and digitalization may exert downward pressure on prices, while climate-related costs could introduce upward risks.
Financial Markets & Sentiment
Investor sentiment remains cautious but constructive. Equity markets, particularly in Cypriot banking and tourism sectors, show moderate gains. The Cypriot euro (EUR/CYP) remains stable against major currencies, supported by ECB policy and steady capital inflows.
December’s inflation rate MoM for Cyprus signals a notable cooling in price pressures, with implications for monetary policy and economic growth. While the decline offers relief from overheating risks, it also raises concerns about demand softness and potential deflation. Policymakers must balance support for growth with vigilance against renewed inflation spikes. Market participants should monitor energy prices, wage trends, and geopolitical developments closely as they shape Cyprus’s inflation outlook in 2026.
Key Markets Likely to React to Inflation Rate MoM
Inflation data for Cyprus typically influences several key markets, including domestic equities, government bonds, and the euro currency. Investors track these closely for signals on monetary policy shifts and economic health.
- FTSE – UK equity index sensitive to European inflation trends and ECB policy.
- EURUSD – Euro-dollar pair reacts to ECB inflation outlook and interest rate expectations.
- EURJPY – Reflects risk sentiment and monetary policy divergence between Europe and Japan.
- BTCUSD – Bitcoin often viewed as an inflation hedge, sensitive to inflation surprises.
- DAX – German equity index, a bellwether for Eurozone economic conditions.
Inflation Rate MoM vs. EURUSD Since 2020
Since 2020, Cyprus’s inflation rate MoM has shown a moderate inverse correlation with the EURUSD exchange rate. Periods of rising inflation often coincide with euro appreciation, reflecting ECB tightening expectations. For example, the inflation spike in mid-2021 (0.70% MoM) aligned with a 3% EURUSD gain over three months. Conversely, deflationary months like February 2025 (-1.30%) saw EURUSD weaken by 2.50% within the same timeframe. This relationship underscores the importance of inflation data in shaping currency market dynamics.
Frequently Asked Questions
- What does the December 2025 inflation rate MoM indicate for Cyprus?
- The -0.60% MoM inflation rate suggests a cooling of price pressures, potentially delaying ECB rate hikes and signaling subdued demand.
- How does Cyprus’s inflation compare historically?
- This is the largest monthly decline since February 2025 and contrasts with the prior three months of positive inflation, indicating volatility in recent price trends.
- What are the main risks to Cyprus’s inflation outlook?
- Risks include global energy price shocks, geopolitical tensions, and fiscal policy changes, which could either reignite inflation or deepen deflationary pressures.
Takeaway: Cyprus’s December 2025 inflation rate MoM of -0.60% marks a significant shift toward easing price pressures, with broad implications for monetary policy and financial markets heading into 2026.
Sources
- Sigmanomics database, Inflation Rate MoM Cyprus, December 2025 release.
- European Central Bank, Monetary Policy Decisions, December 2025.
- Cyprus Statistical Service, Economic Indicators Q3 2025.
- International Energy Agency, Oil Market Report, November 2025.
Selected Tradable Symbols
- FTSE – UK equity index sensitive to European inflation trends and ECB policy.
- EURUSD – Euro-dollar pair reacts to ECB inflation outlook and interest rate expectations.
- EURJPY – Reflects risk sentiment and monetary policy divergence between Europe and Japan.
- BTCUSD – Bitcoin often viewed as an inflation hedge, sensitive to inflation surprises.
- DAX – German equity index, a bellwether for Eurozone economic conditions.
The December 2025 inflation rate MoM for Cyprus at -0.60% contrasts with November’s 0.50% and the 12-month average of 0.05%. This reversal highlights a significant cooling in price pressures after a period of modest inflation.
Energy and shelter costs were the largest contributors to the decline, offsetting smaller upward pressures from transportation and healthcare sectors. The monthly drop is the largest since February 2025’s -1.30%, signaling a potential inflection point in the inflation trajectory.