The Wall Street bank had forecast a contraction of 0.1% for the region in November. A technical recession is generally defined as two consecutive quarters of contraction in Gross Domestic Product (GDP).
Euro zone inflation is expected to be around 3.25% by the end of 2023 compared with 4.50% previously forecast, economists said.
In December, consumer price growth in the euro zone slowed to 9.2% from 10.1% the previous month, Eurostat data showed last week.
Core inflation in the region is also expected to ease to 3.3% by the end of the year as goods prices cool, but continued upward pressure on services inflation is expected due to rising costs. jobs, Goldman said.
Given the “persistent” nature of inflation, Goldman expects the European Central Bank to remain aggressive, raising interest rates by 50 basis points in February and March before cutting them to 25 bps in May for a terminal rate of 3.25%. .
For the UK, Goldman forecasts a smaller 0.7% GDP contraction, compared with a previous expectation of a 1% contraction, thanks to lower wholesale gas prices.
As the UK job market remains overheated, the US bank sees another 100bp of rate hikes from the Bank of England.
