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 0.5pc this quarter and then contract 0.5pc 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. “Our new forecasts assume gas prices at 150 euros/MWh” the bank said in note on Wednesday, adding that combined with strains like in Italy, it would add up to a 2pc hit to euro zone GDP. The high gas prices would also push up headline inflation by 1.2pcage points in the near term, although it would drop again next year due to the economy’s negative reaction and thereby reduce the degree to which the ECB hikes rates. “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. “We now expect 25bp in September and 25bp in October” the US bank said, removing an additional 25bp hike that had been pencilled in for December. The recession call follows an IMF warning on Tuesday that both Europe and the United States would see virtually no growth next year if Russia cuts off Europe’s gas supply completely and slashes its oil exports further. JPMorgan said its new 150 euros/MWh baseline gas price forecast – which is well below current prices of more than 200 euros likely required gas flows through Europe’s main Nord Stream 1 pipeline to hold at around 40pc of normal levels.