J.P. Morgan warns BoE won't hold out long on interest rates

J.P. Morgan has pushed back its forecast for the Bank of England’s next interest rate hike to November, tearing up its previous prediction of a July increase after the central bank chose to hold rates steady at 3.75%.

The shift comes in the wake of a highly anticipated, landmark truce signed between U.S. President Donald Trump and Iran, aimed at ending the monthslong Middle East conflict that has severely disrupted global energy markets. While BoE Governor Andrew Bailey expressed optimism regarding the peace deal, he emphasized that the central bank is not yet convinced the truce will be enough to stall a fresh wave of British inflation, News.Az reports, citing Reuters.

Persistent global inflation, initially triggered by severe oil price shocks during the conflict, has forced central banks worldwide to take a cautious approach to their monetary policies. J.P. Morgan economists warned in a client note that if economic growth and the UK labor market rebound sharply in the second half of 2026 as inflation rises, it could trigger aggressive pass-through effects into core inflation and domestic wages.

The Bank of England's cautious pause makes it a notable outlier this month. Both the Bank of Japan and the European Central Bank raised interest rates over the past week, while hawkish projections from the U.S. Federal Reserve signal that American borrowing costs will remain higher for longer this year.

J.P. Morgan notes that the BoE is unlikely to maintain its holding pattern for long if its global peers continue to tighten monetary policy. As international growth proves resilient and inflation pressures linger, the Wall Street brokerage expects the UK central bank will ultimately be forced to follow suit with a 25-basis-point hike before the end of the year.

News.Az 

By Aysel Mammadzada