HSBC Private Bank: Middle East Conflict Affects Rate Cut Expectations

HSBC Private Bank stated in its mid-term investment outlook on May 27 that due to the Middle East conflict, the market has largely dismissed expectations for interest rate cuts in developed markets in 2026. According to Jin10, HSBC Private Bank agrees with the market's view that the U.S. Federal Reserve should maintain its current stance this year. The bank noted that the UK and Europe are relatively more vulnerable to the energy price shocks stemming from the Middle East conflict, which is currently hindering their economic growth and increasing inflation risks. HSBC Private Bank forecasts that the Bank of England will raise interest rates twice in 2026, each by 25 basis points, while the European Central Bank is expected to raise rates three times. "The Middle East conflict has heightened inflation expectations and risk premiums due to increased uncertainty," the bank stated.