Slower for Longer

Macroeconomic news has been front and center. Signs of cooling inflation have sparked market rallies, while investors are hanging on every word from the Fed. The sensitivity is well-placed: the end of the Fed’s tightening cycle is in sight, and fear of recession is pervasive.

As discussed in our global Annual Outlook for 2023, no economy is facing a promising year ahead. Balancing the objectives of fighting inflation while maintaining employment and output will be a universal challenge. The U.S. still has a path to achieving a soft landing, but it will not be a banner year. The outlook is for a slow, unsteady year, with inflation still elevated and moderate job losses likely.

U.S. workers and consumers have shown great resiliency throughout the shocks of COVID, an energy crunch, geopolitical uncertainty and high inflation. Reasons for pessimism have always been close at hand, but growth has prevailed. We hope to see that same spirit continue in the year ahead.

Key Economic Indicators

Influences on the Forecast

  • At its November meeting, the Federal Open Market Committee (FOMC) executed its fourth hike of 75 basis points. The accompanying statement contained new wording suggesting that the Committee would consider the “cumulative tightening of monetary policy [and] the lags with which monetary policy affects economic activity and inflation.” This phrase was a clear signal that future hikes will be of a smaller magnitude, and an end to the tightening cycle will follow.