BNP 2024 Outlook: Rate Cuts Reduce Risk Landing Will Be Hard

In its 2024 global outlook, BNP writes "there will be a landing" but "as the downward trend in inflation is sufficiently established, major central banks are likely to feel confident enough to begin cutting rates in the not-too-distant future, reducing the risk that this landing will be a hard one."

• Global: "In the near term, the risk is that the current Goldilocks environment of resilient growth and falling inflation persists. Conversely, renewed upward surprises to inflation remain a key risk later."
• US: 0.9% GDP growth. Average sequential quarterly growth rate of about 0%; Q2 contraction with slow H2 recovery driven by easing financial conditions/Fed cuts.
• Eurozone: 0.6% GDP growth. After a technical recession in H2 2023, a gradual uptick in around the spring "thanks to rising real incomes".
• Japan: 1.0% GDP growth. Notable global outlier, NIRP to end in March.
• China/EM: 4.5% CH GDP growth - "Cyclical headwinds from the property sector as well as overcapacity in manufacturing look set to keep weighing on investment.". Increasing concern for EM debt sustainability, leading to higher risk premia (Brazil and SAfrica most vulnerable).
• Rates: Higher-for-longer on long-end yields, but not the short end = bull steepeners.
• FX: Structurally bearish USD, but "the depreciation path will be bumpy".
• Note: BNP published its outlook on Dec 4