The has been an increase in U.S. Federal Reserve’s interest rates by 375 basis points this year, ever since it rolled out its first hike in March. Many banks see a fall in the euro below parity to the dollar during the year, before clawing back by year-to-end
The largest investment banks in the world expects global economic growth to slow ahead in 2023 following a year affected by the RussiatoUkraine conflict and soaring inflation. It triggered one of the fastest monetary policy tightening cycles during recent times.
The has been an increase in U.S. Federal Reserve’s interest rates by 375 basis points this year, ever since it rolled out its first hike in March. Since then, a spark in worries about a recession existed. Even the central bank is expected to temper its pace of hikes.
Real GDP (annual Y/Y) forecasts for 2023 reads as follows:
Bank Global U.S. China Morgan Stanley 2.20 per cent 0.50 per cent 5 per cent Goldman Sachs 1.80 per cent 1 per cent 4.50 per cent Barclays 1.70 per cent to 0.1 per cent 3.80 per cent J.P.Morgan 1.6 per cent 1 per cent 4 per cent BNP Paribas 2.3 per cent to 0.10 per cent 4.50 per cent UBS 2.1 per cent 0.1 per cent 4.5 per cent BofA 2.3 per cent to 0.4 per cent 5.5 per cent Credit 1.6 per cent 0.8 per cent 4.5 per cent Suisse Deutsche Bank 2 per cent 0.8 per cent 4.5 per cent
U.S. inflation forecast for 2023 and Fed terminal rate forecast as follows:
Bank U.S. Inflation Fed Terminal Rate (annual Y/Y for 2023) Morgan Stanley Headline CPI: 3.3 per cent 4.625 per cent Core PCE: 3.8 per cent (by Jan ’23) Goldman Sachs Headline CPI: 3.2 per cent 5 to 5.25 per cent Core CPI: 3.2 per cent (by May ’23) Core PCE: 2.9 per cent Barclays Headline CPI: 3.70 per cent 5 per cent to 5.25 per cent (by March ’23) J.P.Morgan Headline CPI: 4.1 per cent 5 per cent Core CPI: 4.2 per cent (by Jan ’23) BNP Paribas Headline CPI: 4.40 per cent 5 per cent to 5.25 per cent (by Q1 ’23) UBS Headline CPI: 3.6 per cent 5 per cent BofA Headline CPI: 4.4 per cent 5 per cent to 5.25 per cent (by March ’23) Credit Suisse 4.75 per cent to 5 per cent Headline CPI: 3.8 per cent (by March ’23) Deutsche Bank Headline CPI: 4.3 per cent 5.125 per cent.
Morgan Stanley by March ’23 sees the Fed delivering its first rate reduced by December 2023, taking the benchmark rate to 4.375 per cent by the end of that year. Barclays foresees the rate between 4.25 per cent and 4.50 per cent by next year ending, whereas Deutsche Bank sees it at 4.625 per cent after a rate cut.
According to UBS, it expects the U.S. inflation to be “close enough” to the Fed’s 2 per cent target by the end of 2023 for the central bank to consider rate cuts. BofA sees the rate between 2.75 per cent and 3.00 per cent by the end of 2024.
Forecasts for currency pairs, yields on U.S. 10 to year Treasuries, S&P 500 target by the end of 2023: Bank EUR/U USD/C USD/J S&P 500 U.S. SD NY PY Target 10 to year yield Morgan Stanley 1.08 6.8 140 3,900 3.50 per cent Goldman Sachs 1.05 6.9 140 4,000 4.34 per cent Barclays 1.05 7.3 131 3.75 per cent J.P.Morgan 1.0 7.2 133 3.4 per cent BNP Paribas 1.06 6.9 128 3,400 3.50 per cent UBS 1.04 6.9 135 3,700 3 per cent (by June 2023) BofA 1.1 7 137 4,000 3.25 per cent 1.02 7.3 135 4.10 per cent Credit Suisse Deutsche Bank 1.1 6.8 125 4,500 3.65per cent.
Many banks see a fall in the euro below parity to the dollar during the year, before clawing back by year-to-end. As of 1317 GMT on Nov. 28, 2022: EUR/USD: 1.045 USD/CNY: 7.197 USD/JPY: 138.50 U.S. 10 to-year Treasury yield: 3.67per cent S&P 500 level (as of close on 25 November): 4,026.12