In upping their forecast, they see a higher terminal rate for the Fed of 2.75% to 3.00%. This comes as they raise their US core PCE inflation forecast to 3.7% at the end of this year, as compared to 3.1% earlier. As for headline inflation, they see it at 4.6% by year-end.
Adding to that, the firm says that they expect Europe headline inflation to rise sharply to 5% this year and 2.2% in 2023. They also mention that the surge in gas prices in the region will at least shave off 0.1% of euro area GDP this year and up to 0.4% in a downside scenario.
