J.P. Morgan has joined Goldman Sachs in projecting a rise in economic growth for the eurozone in 2025, driven by Germany’s fiscal relaxation measures.
The investment bank anticipates a 0.1 percentage point increase in growth to 0.8% in 2025, mirroring Goldman’s expectations. For 2026, J.P. Morgan forecasts a growth rate of 1.2%, up by 0.3 percentage points.
This adjustment is largely attributed to Germany, though the bank also foresees modestly enhanced growth throughout the region due to spillover effects and slightly more relaxed fiscal policies.
Recently, negotiations among parties to form Germany’s new government yielded an agreement to potentially loosen fiscal restrictions, prompting nearly a trillion-euro borrowing surge for defense and infrastructure investments.
Despite this optimistic outlook, J.P. Morgan warns that uncertainties, particularly those stemming from Trump’s tariff policies, could hamper growth in the near term, while a marginal rise in eurozone inflation is anticipated for the current and following year.
Last Thursday, the European Central Bank (ECB) enacted its sixth rate cut since June, reducing the deposit rate to 2.5%. However, it cautioned about “phenomenal uncertainty,” including risks that trade conflicts and increased defense spending could elevate inflation, which may lead to a pause in policy easing next month.
J.P. Morgan noted it no longer expects the ECB to implement a rate cut in April as previously projected. Instead, it foresees only two rate reductions this year, slated for June and September, as opposed to the earlier prediction of three.
The investment bank also pointed out that potential U.S. tariffs on European goods could drive a live meeting in April and a possible return to a consecutive rate cut strategy.
