JP Morgan now expects ECB to hike rates in March 2027
The bank now sees a hike following a December increase, reversing its forecast of rates on hold through 2027.
Published
JP Morgan now expects the European Central Bank to raise interest rates by 25 basis points in March 2027, reversing its earlier forecast of rates on hold through the year. The bank's new path follows a rate increase it expects the ECB to deliver in December.
Euro-area households raised their inflation expectations last month, according to the ECB's monthly survey. One-year expectations climbed to 3.0% and three-year expectations to 2.9%, both higher than in July.
ECB officials have sent mixed signals on where rates go next. President Lagarde says there is no sign of second-round inflation effects. Olli Rehn says the inflation picture has shifted since the ECB's last comfort zone. Gabriel Makhlouf says every meeting is live and that inflation risks skew higher. Fernando Pereira says risks have risen considerably in the months since the ECB's last rate move in September.
JP Morgan's shift brings its forecast into line with market consensus, which expects four rate increases by the end of 2027, and with recent ECB rhetoric signaling openness to further tightening if inflation risks persist. But with policymakers stressing the absence of second-round effects and warning that more hikes could hurt growth, the forecast reflects uncertainty about the inflation path rather than conviction.