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Stagflation-lite: A Subtle Economic Threat That Could Disrupt Global Policy

by THEFUTURE.TEAM

Policymakers might not favor the term “stagflation,” but its modern, milder variant—stagflation-lite—could soon dominate their concerns. With U.S. President Donald Trump threatening import tariffs that risk igniting a global trade war, the stage is set for a scenario where below-trend growth meets above-trend inflation.

Bank of England Governor Andrew Bailey recently dismissed the term, remarking, “I don’t use the word stagflation. It doesn’t have a particularly, frankly, precise meaning.” Once coined to describe the 1970s mix of economic stagnation and runaway inflation, “stagflation” now often labels any scenario where growth falters while inflation runs hot—even if only moderately so.

Yet, even this diluted form can pose serious challenges. Policymakers’ tools are typically designed either to spur growth or rein in inflation—rarely both simultaneously. As economists warn that tit-for-tat protectionist measures could usher in stagflation-lite, central bankers worldwide might find themselves grappling with an economic conundrum unlike any other.

Across the pond in Britain, data underscores these concerns. Recent figures reveal inflation climbing to 3%—well above the Bank of England’s 2% target—while economic growth shows signs of cooling. Analysts at Morgan Stanley and HSBC have trimmed their 2025 UK GDP growth forecast to 0.9% from 1.4%, and the BoE now projects inflation will peak at 3.7% later this year before subsiding.

The debate extends to Europe as well. At the European Central Bank, contrasting views have emerged: Isabel Schnabel, a noted hawk, is leaning toward pausing rate cuts, while Italian central bank chief Fabio Panetta cautions that growth could be even weaker than anticipated.

As global trade tensions simmer and economic indicators point to a potential stagflation-lite environment, the challenge for policymakers is clear. Balancing the dual mandates of sustaining growth and controlling inflation will require unprecedented finesse—a balancing act that, if mismanaged, could have far-reaching implications for the global economy.

Bank of Cyprus Upgrade Signals Fresh Optimism For Greek And Cypriot Banks

by THEFUTURE.TEAM

Regional Banks Enter A More Favorable Cycle

Bank of Cyprus and Eurobank are well positioned to benefit from a renewed re-rating of Greek and Cypriot bank stocks, according to Cyprus-based investment firm Roemer Capital, which upgraded Bank of Cyprus to a buy rating and reaffirmed its positive view on Eurobank.

The firm cited easing geopolitical tensions, resilient economic growth in Greece and Cyprus, lower funding costs and Greece’s expected transition to developed-market status as the main factors supporting the sector.

Roemer Capital also lowered its cost of equity assumptions, updated its forecasts following first-quarter 2026 results and extended its valuation horizon to the end of 2027, raising target prices across its banking coverage.

Bank Of Cyprus Gets The Largest Upgrade

Bank of Cyprus received the biggest revision, with Roemer Capital upgrading the stock from hold to buy and setting a target price of €11.10, implying potential total upside of 27%.

The firm highlighted the bank’s strong capital generation, profitability and projected 100% dividend payout, describing it as the strongest capital-return story among the banks under coverage. Roemer Capital maintained its buy rating on Eurobank, assigning a target price of €4.90 and forecasting potential upside of 28%. The report said the bank is well placed to benefit from loan growth, improving operating performance and merger-and-acquisition synergies.

National Bank of Greece and Piraeus Bank also retained buy ratings, with expected returns ranging from 25% to 36%. Optima Bank was upgraded to buy, while Alpha Bank remained at hold on valuation grounds.

Why Growth Still Sets The Region Apart

According to Roemer Capital, Greek and Cypriot banks continue to benefit from stronger economic fundamentals than many western European peers. The report pointed to faster economic growth, healthier balance sheets, low levels of non-performing exposures, capital ratios approaching 20% and strong customer deposit bases.

Analysts expect performing loans across the sector to grow at a compound annual rate of 6% to 8% through 2028, supported by private investment, digitalisation, green manufacturing, supply-chain expansion and a gradual recovery in household lending.

The report also said the conclusion of lending under the EU Recovery and Resilience Facility is unlikely to materially affect credit growth, as banks have already shifted back towards traditional commercial lending. Roemer Capital expects Euribor to remain between 2.2% and 2.5%, a level it believes should support both lending activity and net interest margins.

Geopolitics, Valuation And Market Structure Support The Case

The report said improving geopolitical conditions have strengthened the investment outlook, noting that Brent crude prices have largely returned to pre-war levels while Greek government bond yields have stabilised at around 3.5%. Although geopolitical risks remain, Roemer Capital believes the likelihood of a major inflationary shock or significant pressure on bank profitability has eased.

Another important catalyst identified by the firm is Greece’s expected promotion to developed-market status by FTSE Russell, STOXX and MSCI over the coming months.

According to the report, the reclassification should improve liquidity and attract a broader base of international investors. Roemer Capital also said Euronext’s acquisition of the Athens Exchange is expected to strengthen market infrastructure and increase international visibility, particularly for Bank of Cyprus and Optima Bank.

The firm noted that Bank of Cyprus has already benefited from its Athens listing, with average daily trading value increasing from less than €400,000 before its September 2024 move to nearly €6 million afterwards.

Economic Momentum Remains A Core Tailwind

Roemer Capital said both Greece and Cyprus have moved beyond post-crisis recovery and are now supported by private-sector-led growth. For Cyprus, the report highlighted recent tax reform and efforts to simplify the legal and regulatory framework, while also noting that limited foreign banking competition continues to support domestic lenders.

Overall, Roemer Capital expects Greek and Cypriot banks to remain well-positioned for profitable loan growth over the coming years.

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