J.P. Morgan Pushes BoE Rate Hike Forecast to November Over Inflation Concerns
Bank of England Interest Rate Decision and Market Reactions
J.P. Morgan Revises Forecast Amid Inflation Uncertainty
June 18 (Reuters) - J.P. Morgan on Thursday pushed back to November its forecast for the Bank of England's next interest rate increase, after the central bank kept rates steady at 3.75% amid uncertainty over inflation risks stemming from the Middle East tensions.
The brokerage had previously expected a 25-basis-point increase in July.
Impact of Middle East Tensions and Truce Deal
The central bank's decision came after a much-anticipated truce deal was signed between U.S. President Donald Trump and Iran to end the conflict.
Governor Bailey's Assessment
While Governor Andrew Bailey said he was "very encouraged" by the deal, he said he was not convinced it would stall a further rise in British inflation.
Global Inflation and Central Bank Responses
Persistent inflation, led by oil price shocks, has kept central banks around the world waiting for more evidence before setting their interest rate trajectories.
"If growth and the labour market recover as inflation picks up further in 2H26, this could lead to stronger pass-through effects into core and wages," J.P.Morgan said in a note.
Actions by Other Major Central Banks
The Bank of Japan and the European Central Bank have raised rates in the past week, while hawkish projections from U.S. Federal Reserve policymakers have signalled higher borrowing costs this year.
"If a range of other central banks tighten due to a mix of resilience in the global growth outlook and inflation concerns, we doubt the BoE would sit and hold," J.P. Morgan added.
Reporting Credits
(Reporting by Kanchana Chakravarty in Bengaluru; Editing by Tasim Zahid)
