JP Morgan forecasts euro zone recession as winter gas crisis looms

"We expect the ECB to deliver another 50 basis points of hikes by year-end," JPMorgan said, cutting it from a previous forecast of 75 bps in three instalments.

The bank's economists cut their economic forecasts, predicting euro zone GDP growth would slow to 0.5% this quarter and then contract 0.5% in both the fourth quarter of this year and the first quarter of next year. Picture: Michael Nagle/Bloomberg.

The euro zone's looming gas crisis along with Italy's renewed political troubles will push the bloc into a mild recession by early next year and limit European Central Bank interest rate hikes, JPMorgan has warned.

The bank's economists cut their economic forecasts, predicting euro zone GDP growth would slow to 0.5% this quarter and then contract 0.5% in both the fourth quarter of this year and the first quarter of next year. Two consecutive quarters of contraction are the traditional definition of recession.