📝 Revising Eurozone Inflation Forecast Lower On Energy Outlook: Morgan Stanley

Updating eurozone headline HICP inflation forecast to 5.4% y/y in 2023 from 6.4% y/y, with core unchanged at 3.6% y/y, update is driven by a revision in energy inflation outlook. Now see 2024 inflation at 2.3% y/y, up from the prior 2.1%, 2024 core is now revised lower to 2.4% y/y from 2.5%.

We continue to expect a contraction in output in both Q4 and Q1, the latter is expected to fall by 0.2% q/q, however, we see growth rebounding throughout 2023, notably because the impact of the energy crisis on the eurozone could prove less negative than previously feared.

Expect eurozone GDP to expand by 0.2% y/y in 2023 and by 1.2% y/y in 2024. - Morgan Stanley