Global Market: J.P. Morgan sees BoE rates rising amid renewed inflation risks

J.P. Morgan expects the Bank of England (BoE) to raise interest rates by 25 basis points in November and deliver another hike in 2027 after keeping borrowing costs unchanged on Thursday, according to a report by Reuters.

The BoE's Monetary Policy Committee voted 6-3 to hold its benchmark interest rate at 3.75%, while warning that inflation could rise above 4% early next year.

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J.P. Morgan economist Allan Monks expects the central bank to raise rates in November, followed by another increase in 2027. The bank then expects the BoE to keep rates unchanged unless there is clearer evidence of second-round inflationary pressures, including a rise in wage expectations to around 4%, as per the report by Reuters.

J.P. Morgan had previously expected the BoE to raise rates once in November 2026 and then cut rates twice in 2027.

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The central bank also announced a six-month pause in its sales of government bonds as part of a longer-term overhaul of its approach to reducing its debt holdings.

The decision pushed bond yields lower and came ahead of the UK government's budget next month, as global fixed-income investors remain concerned about rising debt levels across developed economies.

J.P. Morgan described the bond-buying changes as a plan aimed at reducing uncertainty amid volatile market conditions, the report stated.

The bank also flagged concerns about the perceived overlap between the BoE's decisions and government policy, particularly given the timing of the changes ahead of the budget.