U.S. economic growth will exceed 3% in 2022, while roaring inflation has topped and can cool every month to around 2% by some point in 2024, based on a government forecast published 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, based on the report released Wednesday.
It revised its estimates for GDP growth in 2023 and 2024 upward to 2.2% and 1.5%, respectively, but still below this 12 months’s pace.
“In CBO’s projections, the present economic expansion continues, and economic output grows rapidly over the subsequent 12 months,” the CBO said in its report. “To meet the elevated demand for goods and services, businesses increase each investment and hiring, although supply disruptions hinder that growth in 2022.”
Here’s what the CBO sees for the U.S. economy at the top of annually:
- Real GDP: 3.1% in 2022, 2.2% in 2023, and 1.5% in 2024.
- Inflation (measured by CPI): 4.7% in 2022, 2.7% in 2023 and a pair of.3% in 2024.
- Unemployment rate: 3.7% in 2022, 3.6% in 2023 and three.8% in 2024.
- Federal funds rate: 1.9% in 2022, and a pair of.6% in 2023.
The upbeat tone of the report appeared to incorporate an implicit prediction that the Federal Reserve, the nation’s central bank answerable for managing inflation, will have the opportunity to boost rates of interest throughout 2022 and 2023 without tipping the U.S. economy right into a recession.
While the CBO projects inflation will stay well above the Fed’s 2% goal throughout 2022 and 2023, it also said it’s likely that the pace of price increases won’t rise above current levels.
Growth within the core PCE price index, the metric the central bank prefers to make use of to measure inflation, rose from 1.4% in 2020 to 4.6% in 2021. The CBO estimates that the figure should recede to a 3.8% pace in 2022 on account of the persistent effect of upper home and rent costs.
The CBO believes that the Fed, to counteract inflation, will hike its benchmark overnight rate of interest to 1.9% by the top of 2022, well below the market’s expectation for a figure north of two.5%.
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