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ECB to start lifting rates as soon as April on inflation pressures, brokerages say

BY Reuters | ECONOMIC | 01:26 AM EDT

(Corrects paragraph 2 to say that Barclays (BCS) and J.P. Morgan expect a second rate hike in June and July, respectively, not rate hikes in June and July)

March 20 (Reuters) - J.P. Morgan, Morgan Stanley (MS) and Barclays (BCS) expect the European Central Bank to hike interest rates in 2026, a sharp shift from their previous forecasts for rates to remain on hold, as policymakers flagged rising inflation risks from the Middle East war.

Barclays (BCS) and J.P. Morgan expect a rate hike in the ECB's April policy meeting, followed by further increases in June and July, respectively.

Morgan Stanley (MS) expects 25-basis-point hikes each in June and September.

The sudden shift comes after the ECB kept its key interest rate steady at 2% on Thursday, but policymakers expect to discuss hikes in the coming months as the Iran war threatens to push up inflation in the euro zone.

(Reporting by Siddarth S in Bengaluru; Editing by Sonia Cheema)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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