The world’s largest investment banks expect global economic growth to slow further in 2023 following a year roiled by the Ukraine conflict and soaring inflation, which triggered one of the fastest monetary policy tightening cycles in recent times.
The U.S. Federal Reserve has increased interest rates by 375 basis points this year since rolling out its first hike in March. This has sparked worries about a recession, even as the central bank is expected to temper its pace of hikes.
Real GDP (annual Y/Y) forecasts for 2023:
| Bank | Global | U.S. | China |
| Morgan Stanley | 2.20% | 0.50% | 5% |
| Goldman Sachs | 1.80% | 1% | 4.50% |
| Barclays | 1.70% | -0.1% | 3.80% |
| J.P.Morgan | 1.6% | 1% | 4% |
| BNP Paribas | 2.3% | -0.10% | 4.50% |
| UBS | 2.1% | 0.1% | 4.5% |
| BofA | 2.3% | -0.4% | 5.5% |
| Credit Suisse | 1.6% | 0.8% | 4.5% |
| Deutsche Bank | ~2% | 0.8% | 4.5% |
| Citi | 1.9% | 0.7% | 5.6% |
U.S. inflation forecast for 2023 and Fed terminal rate forecast:
| Bank | U.S. Inflation (annual Y/Y for 2023) | Fed Terminal Rate |
| Morgan Stanley | Headline CPI: 3.3%Core PCE: 3.8% | 4.625% (by Jan ’23) |
| Goldman Sachs | Headline CPI: 3.2%
Core CPI: 3.2% Core PCE: 2.9% |
5 – 5.25%
(by May ’23) |
| Barclays | Headline CPI: 3.70% | 5% – 5.25% (by March ’23) |
| J.P.Morgan | Headline CPI: 4.1%Core CPI: 4.2% | 5% (by Jan ’23) |
| BNP Paribas | Headline CPI: 4.40% | 5% – 5.25% (by Q1 ’23) |
| UBS | Headline CPI: 3.6% | 5% |
| BofA | Headline CPI: 4.4% | 5% – 5.25%(by March ’23) |
| Credit Suisse | Headline CPI: 3.8% | 4.75% – 5% (by March ’23) |
| Deutsche Bank | Headline CPI: 4.3% | 5.125% (by March ’23) |
| Citi | Headline CPI: 4.1% | 5.25% – 5.5% |
Morgan Stanley sees the Fed delivering its first rate cut by December 2023, taking the benchmark rate to 4.375% by the end of that year. Barclays sees the rate between 4.25% and 4.50% by the end of next year, while Deutsche Bank sees it at 4.625% after a rate cut.
UBS expects U.S. inflation to be “close enough” to the Fed’s 2% target by the end of 2023 for the central bank to consider rate cuts. BofA sees the rate between 2.75% and 3.00% by the end of 2024.
Forecasts for currency pairs, yields on U.S. 10-year Treasuries, S&P 500 target by the end of 2023:
| Bank | EUR/USD | USD/CNY | USD/JPY | S&P 500 Target | U.S. 10-year yield |
| Morgan Stanley | 1.08 | 6.8 | 140 | 3,900 | 3.50% |
| Goldman Sachs | 1.05 | 6.9 | 140 | 4,000 | 4.34% |
| Barclays | 1.05 | 7.3 | 131 | 3.75% | |
| J.P.Morgan | 1.0 | 7.2 | 133 | 3.4% | |
| BNP Paribas | 1.06 | 6.9 | 128 | 3,400 | 3.50% |
| UBS | 1.04 | 6.9 | 135 | 3,700 (by June 2023) | 3% |
| BofA | 1.1 | 7 | 137 | 4,000 | 3.25% |
| Credit Suisse | 1.02 | 7.3 | 135 | 4.10% | |
| Deutsche Bank | 1.1 | 6.8 | 125 | 4,500 | 3.65% |
| Citi | 1.15 | 6.90 | 133 | 4.35% | |
| Wells Fargo | 1.01 – 1.09 | 130 – 140 |
Most banks see the euro falling below parity to the dollar during the year, before clawing back by year-end.
As of 1315 GMT on Nov. 30, 2022:
EUR/USD <EUR=>: 1.038
USD/CNY <CNY=>: 7.07
USD/JPY <JPY=>: 138.75
U.S. 10-year Treasury yield <US10YT=RR>: 3.72%
S&P 500 l
(REUTERS)
