Governor of the Central Bank of Cyprus (CBC) Constantinos Herodotou said Thursday that a reduction in interest rates should be expected within 2024, barring unforeseen developments. He also highlighted the importance of staying attuned to inflation data for a timely adjustment of interest rates.

Herodotou met with Finance Minister Makis Keravnos, who noted that there was a descent in prices of essential goods, particularly fuels. He added that Cyprus government was closely monitoring the situation, with plans for targeted support measures to prevent inflation resurgence.

Both Keravnos and Herodotou acknowledged the positive trajectory of the Cypriot economy amid challenges, but stressed the need for vigilance due to geopolitical developments and tensions.

"We have observed that the Cypriot economy is on a good path, and we must preserve it," stated Keravnos.

Governor Herodotou said there was consensus both in facing external challenges and acknowledging the remarkable resilience of the Cypriot economy. However, he urged continuous monitoring and readiness due to existing uncertainties, especially geopolitical tensions.

When asked about the trajectory of ECB interest rates amid slowing inflation, Herodotou expressed optimism, saying that the drop in inflation rates within the Eurozone and Cyprus was "very good news."

He cited the significant decrease in Cypriot inflation from 8.1% in 2022 to 1.9% in December 2023, attributing the positive trend to effective monetary policies and well-targeted support measures.

Herodotou acknowledged the prevailing uncertainty due to geopolitical developments such as the Suez Canal attacks and the situation in the Middle East. However, he anticipated interest rate reductions within 2024, emphasising the need to base decisions on data.

"We take into account the progress, and I would say that, certainly, if we do not witness any unexpected developments, interest rate reductions will start within 2024," he said.

However, Herodotou underscored the importance of timing in the potential reduction of interest rates, cautioning against an early descent that could reignite inflation pressures, requiring the reapplication of measures to control them. “At the same time, any delay might harm economic growth," he highlighted.

"Therefore, based on the data, we must assess when it is justified within 2024 I believe, the decline in interest rates," he said.

Referring to the potential impact of Houthi attacks on Red Sea shipping routes on the Cypriot economy, the Finance Minister assured that the majority of consumer products come from European countries. He highlighted however concerns in sectors like tourism, specifically cruise ships, which have recently faced losses.

Regarding the utilization of new economic frameworks by borrowers, Keravnos reported positive responses and a high number of applications for the new mortgage to rent scheme for vulnerable lenders. He praised the government's stable framework for auctions and its protective measures.

Governor Herodotou reminded that the Central Bank has been encouraging banks and credit acquiring companies to engage in continuous restructuring and negotiations for loan agreements, resulting in substantial positive outcomes for borrowers and the overall economy.