Assessing the Economic Outlook: Citi Strategist Anticipates Healthier Growth

In recent discussions about the global economy, Steven Wieting, Chief Investment Strategist, and Chief Economist at Citi Global Wealth, expressed optimism regarding the path to reining in inflation and achieving sustainable growth without the need for an economic collapse. Highlighting the resilience of major economies to sharp interest rate increases in the past two years, particularly in the U.S., Wieting emphasized the avoidance of a recession and the robustness of the labor market.

As inflation trends toward central banks’ targets and growth slows, conversations have shifted to the possibility of rate cuts. Wieting shared his views on CNBC’s “Squawk Box Europe,” stating that he believes the global economy does not require an economic collapse to address inflation concerns.

“We had one massive shock — one pandemic, one collapse. We didn’t need two recessions to ultimately cure our inflation problem,” Wieting noted, expressing confidence that certain economic challenges, such as manufacturing and trade declines, are likely to bottom out within the year.

The U.S. headline inflation, which stood at an annual 3.4% year-on-year in December, remains above the Federal Reserve’s 2% target but has significantly decreased from its peak of 9.1% in June 2022. Investors are eagerly awaiting Friday’s personal consumption expenditure inflation figure, the Fed’s preferred metric, for further insights into the central bank’s potential rate-cutting decisions.

Looking ahead, a preliminary estimate of fourth-quarter GDP, scheduled for Thursday, is expected to reveal a growth rate of 1.7%, marking its lowest since the 0.6% decline in the second quarter of 2022.

Wieting anticipates a healthier growth period in the coming year and beyond, emphasizing that the current period of slower global growth and employment growth in the U.S. can transition into a positive phase for the economy. He acknowledged the existence of excess supply in the economy but clarified that it was not the result of true overheating or a prolonged boom. Instead, he attributed it to excess government fiscal stimulus related to pandemic recovery, which is not expected to be repeated.

In assessing the economic environment, Wieting pointed out that the current situation differs significantly from sustained inflation periods in the past, citing a decline of 4% in the U.S. money supply over the past year, in contrast to the 1970s when it experienced almost 10% growth for the entire decade.

The discussions underscore the ongoing dynamics shaping the global economic landscape and offer insights for investors navigating the evolving market conditions.

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