According to APP, JPMorgan Chase has made a significant adjustment to its latest monetary policy path forecast. The bank now expects the Bank of England to raise interest rates by 25 basis points each in April and July 2026, reversing its previous forecast of keeping rates unchanged for the year. The European Central Bank will also adopt the exact same pace of rate hikes, similarly reversing its previous baseline expectation of no change for the year. This shift stems primarily from continued vigilance regarding the risk of a second round of inflationary effects; even though current inflation has shown signs of decline, the stickiness of wages, housing, and service prices could still push up core inflation.

JPMorgan Chase has further refined its timing for interest rate hikes. For the European Central Bank (ECB), the April meeting will likely confirm the March baseline forecast first, followed by a second rate hike in July after the new forecast is released in June, ensuring the decision is supported by sufficient data. Once the risk of a second round of inflation subsides, the bank believes the ECB will have ample reason to gradually reverse tightening, but currently only anticipates one rate cut in the second half of 2027. The Bank of England follows a similar path, with rate cuts planned for the second and fourth quarters of 2027, a more gradual pace overall.

This forecast adjustment reflects the shared concern of global central banks about the stubbornness of inflation in a high-interest-rate environment. Volatility in energy prices, geopolitical factors, and wage growth momentum could all prolong the tightening cycle. JPMorgan Chase emphasizes that the market's current pricing in premature easing needs careful revision.

The following is a comparison of JPMorgan Chase's latest and previous forecasts (based on the latest report in March 2026):

Overall, the extended tightening measures by the Bank of England and the European Central Bank will push up borrowing costs in the Eurozone and the UK, negatively impacting the stock market and real estate sector in the short term, but helping to further anchor inflation expectations. The market needs to closely monitor signals from the April meetings and the new forecasts in June to assess the likelihood of actual implementation.
Editor's Summary:
JPMorgan's recent shift in forecasts highlights the cautious stance of major central banks in the face of persistent inflation. The planned two rate hikes in 2026 and the limited rate cuts in 2027 both serve the goal of prioritizing mitigation of second-round effects. The synchronized tightening by the Bank of England and the European Central Bank will jointly influence the global interest rate environment. Investors should closely monitor core inflation data, wage trends, and geopolitical variables to dynamically adjust their expectations for bond, currency, and asset allocation.
Frequently Asked Questions
Q1: Why did JPMorgan Chase suddenly reverse its previous year-on-year interest rate forecast?
A: The core issue is that the risk of a second round of inflation has not completely subsided. Although headline inflation has declined, wages, housing, and service prices remain relatively sticky. JPMorgan Chase believes that two additional interest rate hikes are needed to further suppress demand and prevent a price spiral from recurring.

Q2: What are the specific differences in the timing of interest rate hikes between the Bank of England and the European Central Bank?
A: Both are highly synchronized, with rate hikes of 25 basis points each in April and July 2026. However, the ECB may first confirm its March forecast in April, then wait for new data in June before implementing the second rate hike in July, ensuring that its decisions are more data-dependent.

Q3: Why has the interest rate cut been significantly delayed until 2027, and the number of cuts is limited?
A: JPMorgan Chase believes there is room for a reversal only after the risk of a second round of inflation has completely subsided. The Bank of England will cut rates once each in Q2 and Q4 of 2027, while the European Central Bank will only cut rates once in the second half of the year, with a slow overall pace aimed at avoiding premature easing that could trigger another inflation rebound.

Q4: What is the actual impact of this forecast on the Eurozone and the UK economy?
A: Borrowing costs will rise further, increasing pressure on corporate financing and mortgage payments, which may dampen consumption and investment in the short term. However, in the long term, it will help stabilize price expectations and create conditions for sustainable growth. The stock and bond markets will face short-term pressure, while the pound and euro exchange rates may find support.