JP Morgan: Eurozone Economic Recovery Expected to Speed Up, Germany's Trillion-Dollar Stimulus Package Becomes Key Driver

Recently, JPMorgan has joined the ranks of Goldman Sachs and raised its expectations for the economic growth of the Eurozone in 2025, thanks mainly to Germany's reform measures in fiscal policy. Similar to Goldman Sachs, JPMorgan expects the Eurozone's economic growth rate to increase by 0.1 percentage points to 0.8% in 2025. For 2026, JPMorgan predicts a growth rate of 1.2%, up 0.3 percentage points from previous forecasts. Economists at JPMorgan said in a report on Friday: "This forecast adjustment is mainly driven by the German economy, and we also expect that, due to the policy spillover effects and moderately loose fiscal policy, economic growth in other regions of the Eurozone will also slightly strengthen." Last week, various parties involved in forming the new German government reached a consensus to relax fiscal rules, which will lead to a borrowing boom of nearly a trillion euros to support defense and infrastructure spending. However, JPMorgan also warned that the uncertainty brought by Trump's tariff policy may put pressure on economic growth in the coming months, and it is expected that inflation in the Eurozone will rise slightly in the next two years. The European Central Bank lowered the deposit rate to 2.5% last Thursday, marking the sixth rate cut since June last year. However, the bank also warned of "enormous uncertainty," including the risk of higher inflation from trade wars and increased defense spending, which increases the possibility of pausing policy easing next month. In the same report, JPMorgan stated that, compared to the previously predicted 25 basis point rate cut, it is now expected that the European Central Bank will not cut rates in April. The institution expects only two rate cuts this year - in June and September, compared to the previous forecast of three rate cuts. JPMorgan added: "We note that the risk of the United States imposing tariffs on European goods may prompt the European Central Bank to hold an emergency meeting in April and adopt a strategy of consecutive rate cuts."