高盛-全球2024展望报告

Note:ThefollowingisaredactedversionoftheoriginalreportpublishedNovember8,2023[28pgs].

8November2023|11:01AMEST

GlobalEconomicsAnalyst

MacroOutlook2024:TheHardPartIsOver

■Theglobaleconomyhasoutperformedevenouroptimisticexpectationsin2023.GDPgrowthisontracktobeatconsensusforecastsfromayearagoby1pp

globallyand2ppintheUS,whilecoreinflationisdownfrom6%in2022to3%sequentiallyacrosseconomiesthatsawapost-covidpricesurge.

■Moredisinflationisinstoreoverthenextyear.Althoughthenormalizationinproductandlabormarketsisnowwelladvanced,itsfulldisinflationaryeffectisstillplayingout,andcoreinflationshouldfallbackto2-2%%byend-2024.

■Wecontinuetoseeonlylimitedrecessionriskandreaffirmour15%US

recessionprobability.Weexpectseveraltailwindstoglobalgrowthin2024,includingstrongrealhouseholdincomegrowth,asmallerdragfrommonetaryandfiscaltightening,arecoveryinmanufacturingactivity,andanincreased

wilingnessofcentralbankstodeliverinsurancecutsifgrowthslows.

■MostmajorDMcentralbanksarelikelyfinishedhiking,butunderourbaselineforecastforastrongglobaleconomy,ratecutsprobablywon'tarriveuntil

2024H2.Whenratesultimatelydosettle,weexpectcentralbankstoleavepolicyratesabovetheircurrentestimatesoflong-runsustainablelevels.

■TheBankofJapanwilllikelystartmovingtoexityieldcurvecontrolinthespringbeforeformallyexitingandraisingratesin2024H2,assuminginflationremainsontracktoexceedits2%target.Near-termgrowthinChinashouldbenefitfromfurtherpolicystimulus,butChina'smulti-yearslowdownwilllikelycontinue.

■Themarketoutlookiscomplicatedbycompressedriskpremiaandmarketsthatarequitewellpricedforourcentralcase.Weexpectreturnsinrates,credit,

equities,andcommoditiestoexceedcashin2024underourbaselineforecast.Eachoffersprotectionagainstadifferenttailrisk,soabalancedassetmixshouldreplace2023'scashfocus,withagreaterrolefordurationinportfolios.

■Thetransitiontoahigherinterestrateenvironmenthasbeenbumpy,but

investorsnowfacetheprospectofmuchbetterforwardreturnsonfixedincomeassets.Thebigquestioniswhetherareturntothepre-GFCratebackdropisanequilibrium.TheanswerismorelikelytobeyesintheUSthanelsewhere,

especiallyinEuropewheresovereignstressmightreemerge.WithoutaclearchallengertotheUSgrowthstory,thedollarislikelytoremainstrong.

JanHatzius

+1(212)902-0394|jan.hatzius@

GoldmanSachs&Co.LLC

DominicWilson

+1(212)902-5924|

dominic.wilson@

GoldmanSachs&Co.LLC

JosephBriggs

)9h0i2g1@

GoldmanSachs&Co.LLC

VickieChang

+142121902-69Y5|vickiechang@

GoldmanSachs&Co.LLC

DeveshKodnani

+1(917)343-9216|

devesh.kodnan@

GoldmanSachs&Co.LLC

GiovanniPierdomenico

+4412017051-6807|

giovanni.pierdomenico@

GoldmanSachsInternational

Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ForRegACcertificationandotherimportantdisclosures,seetheDisclosureAppendix,orgoto

/research/hedge.html

GoldmanSachs

GlobalEconomicsAnalyst

MacroOutlook2024:TheHardPartIsOver

Theglobaleconomyhasoutperformedevenouroptimisticexpectationsin2023.As

Exhibit1shows,wenowestimatethatglobalGDPwillgrow2.7%thisyear,1ppabovetheBloombergconsensusforecastofayearago.TheUnitedStatesisontrackfor

growthof2.4%,afull2ppabovetheconsensusforecastofayearago.Thesurpriseselsewherearegenerallysmaller,butwedoexpectbeatsin88%oftheeconomies

underourcoverageonaGDP-weightedbasis.

Exhibit1:GrowthHasOutperformedOurOptimisticExpectationsin2023

Source:Bloomberg,GoldmanSachsGlobalirvestmentResearch

SolidGDPgrowthhastranslatedintomore-than-solidlabormarketperformance.Exhibit2showsthattheunemploymentrateacrossalleconomiesunderourcoveragethat

producehigh-qualitylabormarketdatacontinuedtoedgedownin2022-2023andnowstandsaboutVppbelowitspre-pandemiclevel.Importantly,thisimprovementisvisibleeveninsomekeyeconomiesthathaveseenverylowrealGDPgrowth,suchasthe

Euroarea.

8November20232

GoldmanSachsGlobalEconomicsAnalyst

Exhibit2:UnemploymentHasSettledBelowPre-PandemicLevels

*GDP-weightedaverageafallcountniesinGScoverage,excludingcountneswthlowdataqualty(egmanySub-SaharanAhicancountnes)orthatfaceestreme,idiosyncratcmacroshocks(e,RussiaandUkraine).

Source:HaverAnalytics,GoldmanSachsGloballnvestmentResearch

Thesepositivesurprisescamedespiteseveralunexpectednegativeshocks.First,bothshort-termandlong-terminterestratesrosesignificantlyfurtherthanimpliedbymarketpricing—partlyduetobetter-than-expectedgrowthdatabutalsopartlyduetomore

hawkishcentralbankreactionfunctions,atleastearlyintheyear.Second,therewasabriefbutseriousboutofbankingsectorinstabilityintheUSandEuropeduringthe

spring.Andthird,theIsrael-Hamaswarisasoberingreminderofthegrowingsecurityrisksfacingtheworldorder,althoughsofarithasnothadamajorimpactonoilprices,financialmarkets,ortherealeconomyoutsidetheMiddleEast.

Butinanimportantway,eventheseobservationsstillunderstatetheamountofgoodnewsthat2023hasdelivered.Notonlyhavegrowthandemploymentsurprisedtotheupsideinthefaceofseveralnegativeshocks,butallthishasoccurredalongsidemuchlowerinflationacrossalleconomiesthatsawalargeandunwantedpost-pandemicpricesurgein2021-2022.

Todemonstratethesizeoftheimprovement,Exhibit3plotstheaveragecoreCPI

inflationrateofallG10economiesminusJapan(wherehigherinflationwasdesired)

plustheEM"earlyhiker"economiesthatexperiencedthebiggestinflationsurgesandthusdeliveredthemostaggressivemonetarypolicytightening.Sincetheendof2022,

sequentialcoreinflationinthisgroupofeconomieshasfallenfrom6%to3%

sequentially.Centralbankshavethereforeachievedmorethanthree-quartersoftheadjustmentneededtogetinflationbacktotheirtargets.

8November20233

GoldmanSachs

GlobalEconomicsAnalyst

geam

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NewZaaland

人作

EuoNa

US(PCE)

Hungary

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Romm和

Poand

Chie

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Exhibit3:ASharpDropinCoreInflationAcrosstheEconomiesThatSawaPost-PandemicSurge

*GDP-weightedaverageofG10economiesex.JapanpiusEMearlyhikers.

Source:HaverAnalytics,GoldmanSachsGloballnvestmentResearch

Theimprovementiswidespreadacrosseconomies.Exhibit4showsthatevery

economyinourgroupofG10andEMeconomieshasseenaverymeaningful—andinmostcasesdramatic—inflationdeclinefromthepeak.

Exhibit4:CoreInflationHasDeclinedVeryMeaningfullyEverywhere

Corerufice

Percent.3m

anrualrale

荡·

CyuePeak

Latest30

5·

20

6

15

4

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CjoePee

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Peroent,3m

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20

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8

0

0

6

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Source:HaverAnalyics,GoldmanSachsGlotalInvestmentHesearch

Theimprovementisalsobroadacrosspriceindexcomponents.Exhibit5showsthat

therighttailofthedistributionofpricechanges(whichcapturesbigpriceincreases)has

shiftedpartwaybacktowarditspre-pandemicposition,althoughithasnotfully

normalizedbecauseof"catch-up"movesinlaggingareaswherepricesareset

relativelyinfrequently(e.g.,healthcareandinsurance).Bycontrast,thelefttailofthedistribution(outrightpricedeclines)hasremainedstablethroughoutthisepisode.ThismeansthatthedropinpricesofitemssuchasenergyorUSusedcarsoverthepastyearisthe

8November20234

GoldmanSachs

GlobalEconomicsAnalyst

exception,andthatare-anchoringoflowandstableinflationinmoreregular

expendituressuchasrestaurantmealsorhouseholdproductsisthemoredominantreasonfortheimprovement.

Exhibit5:InflationIsFallingBecausetheRightTailofPriceIncreasesIsNormalizing

CategoryInflationRate(QuarterAgo,Annualized)

*GDP-woigtodaerageofUS(PCE).Euroaroa.UK,andCanasa

Source:HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

8November20235

GoldmanSachsGlobalEconomicsAnalyst

TheLastMile

Wedon'tthinkthelastmileofdisinflationwillbeparticularlyhard.First,althoughthe

improvementinthesupply-demandbalanceinthegoodssector—measuredforexamplebysupplierdeliverylags-isnowlargelycomplete,theimpactoncoregoodsdisinflationisstillunfoldingandwilllikelycontinuethroughmostof2024(Exhibit6).

Exhibit6:GoodsDisinflationStillHasFurthertoRun

Note.ForbomPMisandinflahon,weshowtheGDP-weightedaverageoftheUS(PCE),theEuroArea,theUK.Canada,andAustraia.DashedIneindicatesGStorecast

Source:HaverAnalytics,GoldmanSachsGloballInvestmentResearch

Second,shelterinflationhasconsiderablyfurthertofall.ThisistrueacrossDM

economies,althoughthesizeoftheimpactissmallerintheEuroareaandtheUK

whereowneroccupiedhousingisexcludedfromthekeyinflationmeasures(Exhibit7).

Exhibit7:ShelterCostInflationHasFurthertoFall

Percent.gogPeecent,9P0PercertagepoirthShelleCarrbutionstoPercertagepotmts,

Nsts:DashedIinesindcateGstecass

Source:HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

Third,andmostimportantly,thesupply-demandbalanceinthelabormarket

continuestoimprove,asshowninExhibit8.Theleftchartshowsthatourjobs-workersgap—

6

8November2023

GoldmanSachs

GlobalEconomicsAnalyst

8November2023

7

如oaunmRmo

measuredasjobopeningsminusunemployedworkers—istrendingdowneverywhere.Intheory,thisimprovementcouldoccurinabenignwayviaadeclineinjobopeningsorinamoreperniciouswayviaanincreaseinunemployment.Inpractice,theadjustmenthassofaroccurredalmostentirelyinabenignfashion,asjobopeningshavedeclinedwithoutariseinunemployment—orinmoretechnicalparlance,the"Beveridgecurve"hasshiftedbackmostofthewaytoitspre-pandemicposition,asshownintheright

chart.Weexpectincrementalrebalancingtoremainmostlypainless,asjobopeningratesremainelevatedrelativetolevelsimpliedbyeconomicfundamentals(andthushaveroomtonormalizefurther)inmostmajoreconomies,andafullreversalto

pre-pandemiclevelsisprobablynotrequiredgiventhatinflationundershotcentralbanktargetsduringthatperiod.

Exhibit8:TheLaborMarketIsEasingasJobOpeningsFallWithoutHigherUnemployment

NcteWeusepnvate-sechormessurestonowcastjsoosenngstoficsidntanotyetawalatieandaweumeuechungetlatestwunetothecompoe

UnemploymentRale(%)

Fanoe,taig2001

weSan

showteGDP-wegtndaverageottheUS,Gemang

PeUK,Carads,Austratu,SwedanandNorvagsnee

Source:HaverAnalytics,GoldmanSachsGlotbalInvestmentHesearch

Inlightofthisimprovementandthesharpdeclineinheadlineinflation,itisnot

surprisingthatnominalwagegrowthhasstartedtoslowmeaningfullyback

towardtarget-consistentlevels(Exhibit9).Togetherwithgenerallyanchored

inflationexpectations,thissuggeststhatsignificantsecond-roundeffectsfromtheearlierinflationsurgeareunlikely.

Goldman

Sachs

GlobalEconomicsAnalyst

Exhibit9:SequentialWageGrowthIsSlowingEverywhere

Area

Note.WeuseGSsequenfialwaoetrackersforDMwagegrowth.

Source:HaverAnahytics,GoldmanSachsGlobalInvestmentResearch

Theupshotfromthisdiscussionisthatlastyear'sdisinflationdoesindeedhavefurthertorun.OnaverageacrosstheG10ex.JapanandtheEMearlyhikers,weexpecta

slowdowninsequentialcoreinflationfrom3%nowtothe2-2k%rangethatwouldbe

broadlyconsistentwiththeinflationtargetsofmostDMcentralbanksbytheendof2024(Exhibit10).Ifanything,wethinkthattheriskstotheachievementof

target-consistentinflationareontheearlierside.

Exhibit10:CoreInflationShouldCooltoBroadlyTarget-ConsistentLevelsbyEnd-2024

GSCoreInflationForecasts

Percent,yearagoMajorDMsPercent,yearagoPercent,yearagoAggregateofG10ex.JapanPercent,yearago

"Weshoweartyhikerswithstandingcoreinflationforecasts,includingtheCzochRepublie,

Hungary,Mexico,Poland,andRomania.DashedlinesindicateGSforecasts.

Note:DashedlinesindicateGSforecasts

Source:HaverAnalyics,GoldmanSachsGlotalInvestmentHesearch

8November20238

GoldmanSachs

GlobalEconomicsAnalyst

There'sJustNoNeedforaRecession

Despitethegoodnewsongrowthandinflationin2023,concernsaboutarecession

amongforecastershaven'tdeclinedmuch.EvenintheUS,whichhasoutperformedsoclearlyongrowthinthepastyear,Exhibit11showsthatthemedianforecasterstill

estimatesaprobabilityofaround50%thatarecessionwillstartinthenext12months.'Thisisdownonlymodestlyfromthe65%probabilityseeninlate2022andfarabove

ourownprobabilityof15%(whichinturnisdownfrom35%inlate2022).

Exhibit11:WeHaveBecomeMoreConfidentThattheUSEconomyWillAvoidRecession

PercentUS12-MonthAheadRecessionProbability

Source:Bloamberg,GoldmanSachsGlothalInvestmentHesearch

Morebroadly,weexpectanotheryearofgrowthoutperformanceacrossmostoftheeconomieswecover.Weforecast2.6%globalgrowthin2024onanannualaveragebasis,atouchaboveourestimateofglobalpotentialgrowth(Exhibit12).Mostnotably.ourforecastscallforUSgrowthtoagainoutpaceitsDMpeers,withcountry-level

forecastsimplying1.1ppoutperformance(vs.consensus)intheUS,0.5ppinJapan,0.5ppinCanada,0.3ppinChina,0.3ppinAustralia,and0.2ppintheEuroarea.

ThelatestestimatethattheUSeconomywillenterarecessionasdefinedbytheBusinessCycleDatingCommitteeoftheNationalBureauofEconomicResearchinthenext12monthsis55%intheBloombergsurveyshowninthechartand48%inthelatestWallStreetJournalsurvey.

9

8November2023

GoldmanSachs

GlobalEconomicsAnalyst

Exhibit12:WeForecastAbove-ConsensusGDPGrowthin2024

RealGDPGrowthAnnualAverageQ4/Q4

PercentChangeyoy

20232024

GSConsensus(cConsensus

c

2025

Consensus

2024

GS

Potential

GS

US

EuroArea

Germany

France

Italy

Spain

Japan

UK

Canada

Australia

China

India

Brazil

Russia

.4

0.5

-0.1

0.9

0.7

2.4

1.9

0.5

1.3

2.0

5.3

6.4

3.1

2.4

2.3

0.5

-0.4

0.8

0.7

2.3

1.9

0.4

1.1

1.8

5.2

6.5

.0

2.0

.1

0.9

0.6

1.1

0.7

1.7

1.5

0.5

1.1

1.8

4.8

.3

1.6

2.1

.0

0.7

0.5

0.8

0.6

.4

1.0

0.4

0.6

1.5

4.5

6.1

.6

1.3

.9

.5

1.3

1.3

1.2

1.7

1.1

.

1.7

2.4

4.2

6.5

2.4

1.3

1.8

1.5

1.5

1.4

1.2

2.0

1.0

1.3

2.0

2.2

4.5

6.4

2.0

1.2

1.8

1.3

1.0

1.3

1.2

1.8

1.3

0.

1.4

.0

4.6

5.7

2.5

0.9

1.8

1.1

1.3

1.1

0.8

1.3

.9

1.4

1.8

.6

4.2

6.1

2.1

2.0

World

2.72.52.62.12.72.7

2.6

2.5

Notn:Allforocastscalculatedancalendarynarbasisexceptwhenotherwisestatod.IMFforocastsusodforInda2025consensuswhenquartersnatavailsbleinBloomberg.TheglcbalgrowthaggregatesusemarketFXcountryweights.

Source:Bloomberg.GoldmanSachsGlotalInvestmentHesearch

Therearefourmainreasonsforouroptimismongrowth.

Thefirstreasonisourconstructiveoutlookforrealdisposableincomegrowthinan

environmentofmuchlowerheadlineinflationandstill-stronglabormarkets.AlthoughweexpectUSrealincomegrowthtoslowfromtheoutsized4%paceseenin2023to2%%in2024,thisshouldstillbesufficienttosupportconsumptionandGDPgrowthofatleast2%.Meanwhile,boththeEuroareaandtheUKshouldseeameaningfulaccelerationinrealincomegrowth—toaround2%byend-2024—astheRussiangasshockfades(Exhibit13).

Exhibit13:ContinuedRealIncomeStrengthintheUSandaPickupinEurope

RealDisposableincomeGrowth

Note:DashedlinesindicateGSforecasts

Source:HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

Thesecondreasonisthatwhilemonetaryandfiscalpolicywilllikelyweighon

growthacrosstheG10,thebiggestdragisbehindus.Aswehaveshownrepeatedly,themaximumimpactofmonetarytighteningonthegrowthrate(asopposedtoleve)of

10

8November2023

GoldmanSachs

GlobalEconomicsAnalyst

GDPoccurswithashortandreasonablypredictablelagofabouttwoquarters.Wethereforeexpectasmallerdragfromtighterfinancialconditionsin2024thanin2023,evenafterfactoringintherecentincreaseinlong-terminterestrates.

Weestimatethatfiscalpolicywillsubtract0.2ppfromglobalgrowthin2024,withonlyaslightlylarger0.3ppdraginDMs.ThedragislikelytobesmallintheUSbecausemostpandemic-relatedstimulushasalreadyendedandfiscalconsolidationisunlikelytostartinapresidentialelectionyear.ItshouldbelargerintheUK(whereanelectionalso

oomsbuttheenergycrisissupportwillneverthelessrolloff)andinSouthernEurope

(whichwilllikelyseetheendofenergy-relatedpaymentsandapullbackinEURecoveryFundspending).Ourcombinedmonetaryandfiscalimpulseestimateissettofade

despitemodestfiscalheadwinds,however,andpointstoamaximumpainpointinlate2022(Exhibit14).

Exhibit14:AManageableDragfromMonetaryandFiscalPolicy

Source:GoldmanSachsGlobalInvestmentResearch

Thethirdreasonisthatmanufacturingactivityshouldrecoversomewhatin2024fromasubdued2023pace.Weakindustrialactivitythisyearreflectedacombinationof

unusualheadwinds,includingarebalancingofspendingbacktowardsservicesfromgoods,theEuropeanenergycrisis,aninventorydestockingcyclethatcorrectedforanoverbuildin2022,andaweakerthan-expectedreboundinChinesemanufacturing.

Mostoftheseheadwindsaresettofadethisyear,asspendingpatternsnormalize,gas-intensiveEuropeanproductionfindsatrough,andinventories-to-GDPratios

stabilize,promptingamanufacturingrecoverybacktowardstrendfrombelow(Exhibit15).

8November202311

GoldmanSachs

GlobalEconomicsAnalyst

Exhibit15:Gas-IntensiveEuropeanManufacturingIsFindingaTroughandInventoriesAreEdgingBacktoNormalLevels

hdex

NeteDashesteesindcaeethe2017.19aea9PbwdNoeThe202303agor*gateuesPelalestvuesansleleftoreaceourtry

Source:HaverAnalytics,GoldmanSachsGlotalInvestmentHesearch

Thefinalandmostnovelreasonforoptimismongrowthisthatbecausecentralbanksdon'tneedarecessiontobringinflationdown,theywilltryhardtoavoidone.SeveraloftheEMearlyhikers—includingBrazilandPoland—havealreadybeguntocutpolicy

ratesfromhighlyrestrictivelevelsandarelikelytodeliverongoingsteadycuts.WeseelessscopeforpreemptiveeasinginDMeconomies,butthinkDMcentralbankswouldloselittletimebeforepivotingtocutsifthegrowthoutlookdeterioratedmeaningfully.Indeed,ouranalysisofpasthikingcyclesconfirmsthatmajorcentralbanksaretwiceaslikelytocutratesinresponsetodownsidegrowthrisksonceinflationhasnormalizedtosub-3%ratesrelativetowheninflationisabove5%(Exhibit16).Thisisanimportant

insurancepolicyagainstarecession.

Exhibit16:CentralBanksAreMoreWillingtoPursueInsuranceCutsasInflationCools

Year-Over-YearInflationRate(Percent)

Source:GoldnanSachsGlobalnwestmentResearch

8November202312

GoldmanSachs

GlobalEconomicsAnalyst

AHigherPolicyRateRegime

Althoughweseealowerhurdleforratecutsin2024andsomeEMcentralbanksarealreadypreemptivelyeasingpolicy,ourbaselineeconomicforecastscallforinflationtoremainmodestlyabovetarget,unemploymentratestoremainbelowtheirlong-run

levels,andGDPtogrowataroughlytrendpacein2024.SoalthoughweforecastthatmajorDMcentralbanks(asidefromJapan)arefinishedhiking,ourbaselineforecastimplieslittleincentiveforthemtocutinterestratesinthenearterm,andwedonot

expectDMratecutsuntil2024H2barringaweakerthan-expectedgrowthoutcome.

AcrossDMcentralbanks,weexpecttheECB,BoE,andBoCtostartcuttingonthe

earlierside,probablyin2024Q3butpossiblyevenearlier.Thisisbecauseofthe

expectedinflationprogressintheEuroareaandaweakergrowthoutlookintheUK,andbecauseofareactionfunctionthatputsmoreweightonthelevelofthepolicyrate

relativetoneutralinCanada.Bycontrast,weanticipatethatgrowthoutperformanceintheUSwilllessentheurgencytolowerratesanddelaythefirstratecutuntil2024Q4,whilefirminflationshouldkeepAustraliaonholduntil2024Q4aswell.Withinflationstillmodestlyaboveofficialtargets,centralbanksarelikelytoproceedcautiouslyafter

initiatingtheirrate-cuttingcycles,andinallcasesweforecastonlyagradualnormalizationata25bpperquarterpace(Exhibit17).

Exhibit17:CutsAreComingSooner(inEM)orLater(inDM)

NoteDashetinesndcaleGStoeasNote:DasretinesindcateGStosats.

SoureeHaverAnalytics.GoldmanSachsGlotalInvestmentHesearch

Whenpolicyratesultimatelydosettle,weexpectcentralbankstoleavethemabovetheong-runsustainablelevelstheycurrentlyproject.Weareraisingourlong-runpolicyrate

forecastsby50bpinmajorDMsto3.5-3.75%intheUS,2.5%intheEuroarea,3%intheUK,and3.5%inbothCanadaandAustralia,withsimilarupgradesinother

economies.

Themostimportantdriverofthisforecastchangeisourlongstandingviewthattheneutralrateisapoorlyidentifiedconcept,andthatchangesinfinancialconditionsaremoreusefulindeterminingtheappropriatestanceofpolicy.Aslabormarkets

8November202313

GoldmanSachs

GlobalEconomicsAnalyst

rebalance,growthisaroundpotential,andinflationnormalizesbacktotarget,many

centralbankswillseetheargumentforfurthereasingasrelativelyweak,especially

whencomingfromabove.Andifeconomiesdoproveresilientwithpolicyratesat

elevatedlevels,somecentralbankscouldreevaluatetheirestimatesoflonger-runratesandconcludethat,inretrospect,thedowngradesduringthepost-2008cyclewere

excessive.

Severaleconomicfundamentalsalsoargueforhigherlongerrunratesgoingforward.First,globalgovernmentdeficitsarelikelytoremainelevateddespiteincrementalfiscalconsolidation.Second,higherinvestmentthiscycle—whethertofacilitatethe

transitionto"netzero"orthewidespreadadoptionofgenerativeAl—couldalsoput

upwardpressureonneartermequilibriuminterestrates.Finally,theproductivityboostspromisedbygenerativeAl—whichrecentlypromptedustoupgradeourlonger-run

growthforecastsby0.4ppintheUS,0.3ppinotherDMs,and0.2ppinadvancedEMs—couldputupwardpressureonrates,especiallyifthegenerativeAladoptiontimelineismorefrontloaded(Exhibit18).

Exhibit18:ElevatedDeficitsandtheWidespreadAdoptionofGenerativeAlShouldSupportHigherLong-TermRates

Source.GoldmanSachsGlobalInvestmentResearch

8November202314

TheBankofJapanExits

AmongDMeconomies,Japanstandsapartbecausetheinflationpickupwaslargely

desired.Afterthreedecadesofanemicpricepressuresoroutrightdeflation,thestrong2023shuntowageroundsignaledthattheBoJwasmovingtowards