J.P. Morgan delays BoE rate hike forecast to November on inflation risks
With Middle East tensions still clouding the inflation outlook, J.P. Morgan now expects the Bank of England's next interest rate increase to come in November instead of July. The revised call follows the BoE's decision to keep rates unchanged at 3.75% even after a truce deal between the U.S. and Iran.
Highlights
- J.P. Morgan delays its forecast for the next Bank of England rate hike to November from July, citing persistent UK inflation risks linked to Middle East conflict.
- Bank of England maintains rates at 3.75%, with Governor Andrew Bailey expressing optimism about conflict truce but caution over its impact on UK inflation.
- J.P. Morgan notes rate hikes by the Bank of Japan and European Central Bank and signals that global tightening pressures will likely influence BoE's policy stance.
Forecast shift after BoE holds rates
As reported by Reuters, the brokerage says it had previously expected a 25-basis-point increase in July, but it now sees the next move coming later in the year as policymakers weigh inflation risks tied to the recent conflict in the Middle East.The Bank of England keeps rates steady at 3.75%, with Governor Andrew Bailey saying he is "very encouraged" by the truce agreement signed by U.S. President Donald Trump and Iran, but not convinced it will prevent a further rise in British inflation.
In a note, J.P. Morgan says that if growth and the labour market recover as inflation rises further in the second half of 2026, stronger pass-through effects into core prices and wages could follow.
Global tightening adds pressure on BoE outlook
Persistent inflation, driven in part by oil price shocks, keeps central banks globally waiting for more evidence before setting their rate paths.The Bank of Japan and the European Central Bank raise rates over the past week, while hawkish projections from U.S. Federal Reserve policymakers signal higher borrowing costs this year. J.P. Morgan says that if other major central banks tighten because of resilient global growth and inflation concerns, it doubts the BoE would remain on hold.
Our earlier coverage of the Bank of England’s rate hold at 3.75% focused on the MPC’s 7–2 vote to keep policy unchanged as easing oil prices reduced immediate pressure to tighten. We noted that two members dissented in favor of an immediate hike, while the majority preferred to wait for clearer evidence that energy costs and inflation will spill over into broader wages and core prices.
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