It’s our view that 2023 will be a year of transition from a contraction regime to one of recovery.
We explore the implications of this shift in our base case scenario, which assumes a rapid decline in headline inflation to below core inflation (assumed to remain above target over the coming years). We expect sufficient disinflation in early 2023 to allow central banks to first scale back and then end rate hikes. This is likely to be in the second quarter of 2023 for the US Federal Reserve and in the second half of the year for the European Central Bank and Bank of England.
