Make Kitco Your Homepage

Big banks see global economy slowing more in 2023, with likely U.S. recession

Kitco News

Nov 28 (Reuters) - 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%

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)

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%

Most banks see the euro falling below parity to the dollar during the year, before clawing back by year-end.

As of 1317 GMT on Nov. 28, 2022:

EUR/USD : 1.045

USD/CNY : 7.197

USD/JPY : 138.50

U.S. 10-year Treasury yield : 3.67%

S&P 500 level (.SPX) (as of close on Nov. 25): 4,026.12

Complied by Susan Mathew in Bengaluru; Edited by Sriraj Kalluvila, Anil D'Silva and Shounak Dasgupta
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.