March 17 (Reuters) - J.P. Morgan now expects the Bank of England to keep interest rates unchanged throughout 2026, abandoning its earlier forecast for two quarter-point cuts in April and June after
J.P. Morgan sees BoE staying on extended pause with next cut in 2027
J.P. Morgan Revises Bank of England Rate Cut Forecast Amid Inflation Concerns
Forecast Changes and Rationale
March 17 (Reuters) - J.P.Morgan on Tuesday pushed back its forecast for the Bank of England's next interest rate cut to the first quarter of 2027, pointing to inflation pressures caused by higher energy prices.
The brokerage had previously expected a 25‑basis-point cut each in April and June.
Impact of Global Events on Energy Prices
J.P. Morgan's forecast shift comes as the ongoing Middle East conflict and the effective closure of the Strait of Hormuz lift global energy prices. That could drive renewed inflation risks across Europe, prompting several major brokerages to push back their BoE policy trajectory.
Barclays on Monday also forecast no rate cuts this year.
Inflation and Economic Outlook
Extended Pause and Inflation Targets
J.P. Morgan said the central bank is now likely to enter an "extended pause" as elevated energy costs could potentially delay the return of BoE's inflation target to 2%.
The brokerage lifted its fourth-quarter average inflation forecast to 2.9% from 2.2%, warning inflation may not normalise until well into 2027.
UK GDP Growth Forecast
J.P. Morgan also cut its 2026 UK GDP growth forecast to 0.6% from 0.8%, citing real-income pressure from higher energy bills, which are set to rise sharply in July and remain elevated into next winter.
Upcoming Monetary Policy Meeting
Market Expectations
The central bank's next monetary policy meeting is scheduled on Wednesday and traders are betting on a 98.1% chance for rates to remain unchanged, per data compiled by LSEG.
Brokerage Commentary
"We think the BoE will acknowledge that rates are still restrictive at this week’s meeting, and retain a mild easing bias. But the prospect of further easing is likely to be pushed well away from the BoE’s near-term agenda," the brokerage added.
(Reporting by Rashika Singh in Bengaluru; Editing by Mrigank Dhaniwala and Devika Syamnath)
