JP Morgan predicts a recession in the eurozone due to the gas crisis

JP Morgan predicts a recession in the eurozone due to the gas crisis

The looming euro zone gas crisis and Italy’s political woes will push the bloc into a mild recession and cap interest rate hikes by the European Central Bank, JPMorgan forecast on Wednesday.

The bank’s economists cut their economic forecasts, forecasting euro zone GDP growth to slow to 0.5% this quarter and then contract 0.5% in both the fourth and first quarters of next year. .

“Our new forecasts are based on gas prices of €150/MWh,” the bank said.

They added that those higher prices would push headline inflation up 1.2 percentage points in the short term, though it would fall again next year due to the downturn in the economy.

“We expect the ECB to hike 50 basis points in total by the end of the year,” up from 75 basis points previously forecast, JPMorgan added.

“We now forecast 25 bps in September and 25 bps in October,” wiping out a further 25 bps hike that had been forecast for December, the US bank said.

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