Citigroup thinks that the global economy will have a “less hard” landing this year.
(Reuters) -Citigroup economists raised their predictions for global growth slightly on Wednesday. They see a “less hard” landing, but still think the world economy will grow at the slowest rate in 40 years.
In a note written by economists led by Nathan Sheets, the Wall Street brokerage said that improving macroeconomic trends make them think that global growth will slow to about 2.2% this year. This is 0.25% more than what they thought before.
Citigroup (NYSE:C) said that its cautious pessimism is because China’s economic outlook is stronger and clearer than it was thought to be before, the euro area isn’t shrinking like it was thought to, and the United States is holding up well.
The bank did say, though, that high inflation around the world may slow growth.
“Based on what we know, global headline inflation is still between 6% and 7%, which is well above what central banks want,” Sheets said.
Last week, both BofA and Goldman Sachs (NYSE:GS) said they thought the U.S. Federal Reserve would raise rates three times this year, taking the Fed funds rate above 5%. This week, the brokerage said it agreed with those predictions.
Globally, U.S. stocks had big gains at the start of the year after a big drop in 2022. This was due to the belief that inflation has reached its peak, China’s reopening, and a possible pause or cut in interest rates.
But when more big-picture economic data showed that inflation was sticking around, central banks like the Fed said they would raise rates again.
Citigroup added, “It looks like 2023 will be the year when the effects of that cycle of rate hikes will be felt more fully.”