The three main economic themes of 2023 will be falling inflation, peaking interest rates and a recession. Together they add up to a tough year. Things would be much tougher if inflation surprised everyone and was more stubborn. That would probably mean interest rates need rise above 4.50% and real GDP falls by more than 2.0% during the recession. The alternative would be that inflation disappears much quicker and as a result interest rates don’t rise much above 3.50% and the recession is shorter and shallower. We highlight a myriad of extra potential global surprises in our new “World in 2023” webpage. (See here.)
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