Citigroup forecasts 'less hard' landing for world economy this year

Citigroup economists on Wednesday raised their global growth forecast slightly and see a "less hard" landing but still expect the world's economy to grow at the slowest pace in 40 yearsq

(Reuters) -Citigroup economists on Wednesday raised their global growth forecast slightly and see a "less hard" landing but still expect the world's economy to grow at the slowest pace in 40 years.

The Wall Street brokerage now sees global growth slowing this year to about 2.2%, 0.25% higher than their previous estimate due to improving macroeconomic trends, it said in a note by economists led by Nathan Sheets.

Citigroup said its cautious pessimism is due to China's stronger and clearer economic outlook than previously estimated, stagnation in the euro area as opposed to a contraction estimated earlier and resilience in the United States.

 

The bank, however, said that stubbornly high inflation across the globe may temper growth.

"By our reckoning, global headline inflation is still running somewhere in the 6-7% range, well above central bank targets," Sheets said.

Echoing BofA and Goldman Sachs views last week, the brokerage also said it expected the U.S. Federal Reserve to hike rates thrice this year, taking the Fed funds rate beyond 5%.

Globally, U.S. stocks posted strong gains in the beginning of the year after a rout in 2022, on expectations that inflation has peaked, China's reopening and a pause or cut in interest rates.

But after more macroeconomic data pointed to sticky inflation, central banks including the Fed signalled more rate hikes.

"It appears that 2023 will be the year when the effects of that hiking cycle more fully play through," Citigroup added.

(Reporting by Aniruddha Ghosh in Bengaluru; Editing by Rashmi Aich)