Major US banks have raised their inflation forecasts for China this year and lowered their expectations for interest rate cuts in China, as the escalation of tensions with Iran led to a rise in oil prices. Bank of America has joined other Wall Street banks, such as Citigroup and Goldman Sachs, in predicting a faster increase in consumer and wholesale prices in China in 2026 compared to previous forecasts, according to a report published yesterday. Additionally, the sharp rise in energy costs reduces the likelihood of monetary easing in the coming months, as Bank of America economists revised down their forecasts for two interest rate cuts totaling 20 basis points this year. The experts said: "We see monetary policy moving towards a wait-and-see stance, with less need for immediate monetary easing, but there is a greater capacity to respond quickly and decisively if external or domestic demand unexpectedly weakens, or if financial conditions tighten." Citigroup, which had previously expected interest rate cuts to resume in the third quarter of this year, now forecasts one rate cut of 10 basis points in the second half of 2026.
