How the interest rate cuts are expected to affect the Cyprus economy

07:08 - 10 June 2024

Financial Services

The European Central Bank’s (ECB) decision to reduce interest rates by 0.25% is expected to have a positive impact on the Cyprus economy, according to University of Cyprus professor Sofronis Clerides.

In an interview with the Cyprus News Agency, Clerides said we should now expect a reduction of borrowing rates, though he wasn’t too sure about deposit rates, since, as he said, during the last two years of constant hikes by the ECB, borrowing rates in Cyprus increased accordingly, while deposit rates to a much lesser degree.

According to Clerides, the ECB’s decision had been widely anticipated given the various statements being made since the beginning of the year; though as inflation showed signs of stabilising in recent weeks, there were some concerns over whether the rate cuts would be going ahead after all.

But as Clerides pointed out, the ECB made sure to clarify that this didn’t mean the reductions would continue, especially given how the rate at which inflation has been reducing decelerated in recent weeks.

“This has created some concerned, in the sense that while at the beginning of the year, around two-three months ago, many were speaking of a series of reductions on the way, starting from June; now the first reduction has arrived, but with a reservation about the next moves,” he explained.

And so, we will have to see how things go with inflation over the next two to three months to reach safer conclusions, said Clerides.

How the interest rate cuts are expected to affect the Cyprus economy

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