That has in turn contributed to the rising price of natural gas, which has flowed into food prices, by making fertiliser more expensive, and into the prices of energyintensive industrial goods. These spillover effects across markets have led inflation to reach 5.9% in the euro area at the last reading, with energy inflation above 30%.
Cyprus has seen similar price pressures, with inflation rising by 5.8% – driven mainly by higher energy and food prices (26.2% and 6.8%, respectively). We had been expecting these disruptions to ease as economic conditions returned to normal after the pandemic. However, the Russia-Ukraine war has now introduced considerable uncertainty into the outlook for the economy.