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FACTBOX-World economy seen slowing further in 2023, with likely U.S. recession

The world’s largest investment banks expect global economic growth to slow further in 2023 following a year roiled by a war and soaring inflation that triggered one of the fastest monetary policy tightening cycles in recent times.

November 21, 2022
21 November 2022

Nov 21 (Reuters) – The world’s largest investment banks
expect global economic growth to slow further in 2023 following
a year roiled by a war and soaring inflation that 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 U.S. China Global

Morgan Stanley 2.20% 0.50% 5%
Goldman Sachs 1.80% 1.0% 4.50%
Barclays 1.70% -0.1% 3.80%
JPMorgan 1.0%
BNP Paribas* -0.10% 4.50%
* BNP Paribas expects global growth to hit a low of 2.3% in
2023, with most major economies seen falling further below
pre-pandemic growth trends over 2023–24.
U.S. inflation forecast for 2023 and Fed terminal rate forecast:
U.S. Fed
Bank Inflation (annual Terminal Rate Y/Y for 2023)

Morgan Stanley Headline CPI: 3.3% 4.625% (by Jan ’23)
Goldman Sachs Core PCE: 2.9% 5 – 5.25% (by May ’23)
Barclays Headline CPI: 3.70% 5% – 5.25% (by March ’23)
JPM Headline CPI: 4.1% 5% Core CPI: 4.2% (by Jan ’23)
BNP Paribas Headline CPI: 4.40% 5% – 5.25% (by Q1 ’23)

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, on the other hand, sees the rate between
4.25% and 4.5% by the end of next year, following a rate cut.
Forecasts for currency pairs by the end of 2023:

Bank/FX pairs USD/CNY USD/JPY EUR/USD

Morgan Stanley 1.08 6.8 140
Goldman Sachs 1.05 6.9 140

Barclays 1.05 7.3 131

Deutsche Bank 1.1 — 125

BNP Paribas 1.06 6.9 128
As of 0702 GMT on Nov. 21, 2022:
EUR/USD: 1.02
USD/CNY: 7.16
USD/JPY: 140.77
(Reporting by Susan Mathew in Bengaluru; Editing by Sriraj
Kalluvila)

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