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    Escriva expresses satisfaction with inflation targets despite slow GDP growth and competitiveness concerns

    by VT Markets
    /
    Sep 12, 2025
    The ECB policymaker noted that GDP growth is sluggish, which poses a risk to competitiveness. However, it seems they are comfortable with current policies since the inflation target has been met. Meeting the inflation target means prices are stable over time. Even though this target has been reached, the slow GDP growth reveals ongoing economic challenges, especially in maintaining competitiveness.

    End Of Rate Hikes

    With inflation appearing under control, it is clear that the European Central Bank’s rate hikes are over. Eurostat’s early estimate for August 2025 shows annual inflation at 1.9%, just below the ECB’s goal. This suggests that the next move in policy is more likely to be a cut rather than an increase. We can expect lower short-term interest rates and bond yields throughout the Eurozone. This signals an opportunity to invest in derivatives that benefit from lower rates, such as taking fixed positions in interest rate swaps or purchasing futures on German Bunds. This marks a significant change from the hawkish stance the ECB maintained in 2023 and 2024. The expected shift to a more relaxed monetary policy should help European stocks, especially as it lowers borrowing costs for businesses. One way to capitalize on this is by using call options on indices like the Euro Stoxx 50. This is a relief after the second-quarter 2025 GDP figures showed minimal growth at just 0.1%.

    Pressure On Euro

    The difference in policy between the European Central Bank and the US Federal Reserve, which has taken a more measured approach, is likely to put downward pressure on the EUR/USD exchange rate. Therefore, we should explore strategies that benefit from a weaker Euro, like purchasing put options on the currency. Interest rate markets are currently estimating over a 70% chance of a 25 basis point cut at the December 2025 meeting. Create your live VT Markets account and start trading now.

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