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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 (NYSE:MS) 2.20% 0.50% 5%
Goldman Sachs (NYSE:GS) 1.80% 1.1% 4.50%
Barclays (LON:BARC) 1.70% -0.1% 3.80%
JPMorgan (NYSE:JPM) 1.6% 1% 4%
BNP Paribas (OTC:BNPQY) 2.3% -0.10% 4.50%
UBS 2.1% 0.1% 4.5%
U.S. inflation forecast for 2023 and Fed terminal rate forecast:
Bank U.S. Inflation Fed Terminal Rate
(annual Y/Y for
2023)
Morgan Stanley Headline CPI: 4.625% (by Jan ’23)
3.3%Core PCE: 3.8%
Goldman Sachs Headline CPI: 3.2% 5 – 5.25%
Core CPI: 3.2% (by May ’23)
Core PCE: 2.9%
Barclays Headline CPI: 3.70% 5% – 5.25% (by March
’23)
JPM Headline CPI: 4.1% 5% (by Jan ’23)
Core CPI: 4.2%
BNP Paribas Headline CPI: 4.40% 5% – 5.25% (by Q1 ’23)
UBS Headline CPI: 3.6% 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 4.5% by the end of next year, following 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.
Forecasts for currency pairs, yields on U.S. 10-year Treasuries, S&P 500 target by the end of 2023:
Bank/Metric EUR/U USD/C USD/J S&P 500 Target (NYSE:TGT) U.S.
SD NY PY 10-year
yield
Morgan Stanley 1.08 6.8 140 3,900 3.50%
Goldman Sachs 1.05 6.9 140 4,000
Barclays 1.05 7.3 131 3.75%
JPM 1 7.2 133 3.4%
Deutsche Bank (ETR:DBKGn) 1.1 125
BNP Paribas 1.06 6.9 128 3,400 3.50%
UBS 1.04 6.9 135 3%
3,700 (by June
2023)
UBS sees the euro falling below parity to the dollar by March 2023 before clawing back by September.
As of 1207 GMT on Nov. 23, 2022:
EUR/USD: 1.03
USD/CNY: 7.16
USD/JPY: 141.44
10-year U.S. Treasury yield: 3.77%
S&P 500 level (as of close on Nov. 22): 4,003.58
