CBO Releases US GDP Growth and Inflation Estimates

A person runs in front of the United States Capitol building in the morning in Washington, February 10, 2022.

Brendan McDermid | Reuters

US economic growth will exceed 3% in 2022, while runaway inflation has peaked and will cool monthly to around 2% at some point in 2024, according to government forecasts released Wednesday.

The nonpartisan Congressional Budget Office estimated that real gross domestic product, or GDP, will grow 3.1% in 2022, driven by consumer spending and demand for services, according to the report released Wednesday.

It revised up its estimates for GDP growth in 2023 and 2024 to 2.2% and 1.5%, respectively, but still below this year’s pace.

“In the CBO’s projections, the current economic expansion continues and economic output increases rapidly over the next year,” the CBO said in its report. “To meet high demand for goods and services, businesses are increasing both investment and hiring, although supply disruptions are hampering that growth in 2022.”

Here’s what the CBO sees for the US economy at the end of each year:

  • Real GDP: 3.1% in 2022, 2.2% in 2023 and 1.5% in 2024.
  • Inflation (measured by the CPI): 4.7% in 2022, 2.7% in 2023 and 2.3% in 2024.
  • Unemployment rate: 3.7% in 2022, 3.6% in 2023 and 3.8% in 2024.

The optimistic tone of the report appears to include an implicit prediction that the Federal Reserve, the nation’s central bank charged with managing inflation, will be able to raise interest rates throughout 2022 and 2023 without tipping the US economy in a recession.

While the CBO expects inflation to remain well above the Fed’s 2% target throughout 2022 and 2023, it also said it’s likely the pace of price increases won’t exceed not current levels.

Growth in the PCE core price index, the metric the central bank prefers to use to gauge inflation, rose from 1.4% in 2020 to 4.6% in 2021. The CBO estimates the figure should decline at a rate of 3.8% in 2022 due to the lingering effect of rising house prices and rents.

The CBO estimates that the Fed, to counter inflation, will raise its benchmark overnight interest rate to 1.9% by the end of 2022, well below market expectations for a northerly number. 2.5%.

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