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%

Citi 1.9% 0.7% 5.6%

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)

J.P.Morgan Headline CPI: 5% (by Jan '23)

4.1%Core CPI: 4.2%

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)

Citi Headline CPI: 4.1% 5.25% - 5.5%

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 4.50% 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/ USD/JPY S&P 500 U.S.

CNY Target 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 3%

(by June

2023)

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%

Citi 1.15 6.90 133 4.35%

Wells Fargo 1.01 - 1.09 130 - 140

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

As of 1315 GMT on Nov. 30, 2022:

EUR/USD: 1.038

USD/CNY: 7.07

USD/JPY: 138.75

U.S. 10-year Treasury yield: 3.72%

S&P 500 level (as of close on Nov. 29): 3,957.63

(Compiled by Susan Mathew in Bengaluru; Edited by Sriraj Kalluvila, Anil D'Silva and Shounak Dasgupta)