The global growth backdrop weakened last year, reflecting high energy prices,disruptions in China, and tightening by major central banks to quell sustainedinflationary pressures. Signs of slowing inflation and less severe slowdowns in activity improve the prospects of‘soft-ish’ landings US GDP turned upward in H2 22. We expect: the underlying trajectory to continue to ascend in Q1 2023 at a slowing pace, withhousehold service spending offsetting the drag from housing and consumer goods. a shallow recession from Q2 to Q4 2023, with the unemployment rate surpassing NAIRU. The US labor market has been exceptionally resilient, underpinning aggregatedemand along with excess savings. US inflation peaked but remains elevated. Has been pushed down by softer energy prices and deflationary pressures in core goods. The outlook now hinges on core service price inflation slowing. The FOMC intends to reach a “sufficiently restrictive” policy rate. Upside inflationrisks are now accompanied by overtightening risks. We expect that the target range will peak at 5.00-5.25% in May, followed by cuts in late2023 / early 2024. download...
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