1 | We are in a transition phase. We expect a “mild slowdown” as the base case for the global economy for 2023. Lag effect of tighter policies of 2022 on growth will play out in 2023.

2 | US GDP is expected to be flat YoY in 2023 as aggressive rate hikes by the Fed start to take a toll on demand and housing market slows down. The Eurozone economy is expected to contract in 2023 due to high energy prices and rate hikes by the ECB, partially offset by a recovery in China.

3 | US inflation has peaked out and is likely to finally moderate in 2023. But it is likely to remain well above the target of 2%. Consensus expects global inflation to ease significantly both in 2023 and 2024. Current Inflation readings may not be the driving force for policy fabric in 2023 but fear of the same may force policy to remain restrictive for longer.

4 | Fed is likely to slow down the pace of rate hikes, but given its focus on restoring price stability, it is likely to continue raising rates in 2023. Central bankers are likely to pause sooner than implied by markets but sufficient conditions for policy easing are unlikely in 2023 unless there are some economic accidents in place. Fed pivot to rate cuts is expected only in 2024.

5 | At projected GDP growth of 5.8% for FY24, India will still be the fastest-growing major economy in the world. There are structural reforms which have increased both perception and potential for India.

6 | We expect inflationary pressure in India to ease based on our expectation of normalization of high food inflation and supply chains. Moreover, the decline in global inflation will also aid in domestic inflation management. For 2023, we expect headline CPI to average at 5.25-5.50%, which is within RBI's mandate.

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