On Wednesday, economists from Citigroup raised their global growth forecast slightly and predicted a “less hard” landing, although the world’s economy is still projected to grow at the slowest rate in 40 years. The Wall Street brokerage now estimates global growth to slow to 2.2 percent in 2023, 0.25 percent higher than their previous forecast due to improving macroeconomic trends, including a stronger economic outlook for China, stagnation in the euro area, and resilience in the United States. While these trends may be encouraging, Citigroup warned that stubbornly high inflation may temper growth, as global headline inflation is still running between 6-7 percent, well above central bank targets. In line with Bank of America and Goldman Sachs’ views last week, Citigroup also expects the U.S. Federal Reserve to hike rates three times this year, taking the Fed funds rate beyond 5 percent. Despite strong gains in U.S. stocks at the beginning of the year, due to expectations that inflation has peaked, China’s reopening, and a pause or cut in interest rates, more macroeconomic data has pointed to sticky inflation, signaling more rate hikes. Citigroup concluded that 2023 will be the year when the effects of that hiking cycle more fully play through.
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