Cypriot Economists Warn ECB May Raise Interest Rates Further Amid Middle East Conflict and Rising Oil Prices
Cypriot economists have cautioned that the European Central Bank (ECB) could implement additional interest rate hikes if the Middle East war escalates, with rising oil prices likely to extend inflationary pressures. University of Cyprus economist Sofronis Clerides highlighted that worsening conflict could drive oil prices higher, leading to further rate increases that would raise borrowing costs and strain household and business budgets.
Both Clerides and University of Nicosia economist Marios Christou noted the ECB’s expectation that inflation will not return to its 2% target until the end of 2027 signals prolonged price pressures. Christou explained that the inflation surge is primarily cost-push, driven by higher energy and production costs due to the conflict, rather than rising demand.
The economists emphasized that the interest rate rises are intended to curb consumption, but they also increase the financial burden on consumers, especially those with low incomes or floating-rate loans like mortgages. With over a year of anticipated economic pressure ahead, households may face continued challenges due to rising costs and increased loan repayments.
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