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CBO releases U.S. GDP growth, inflation estimates

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One person races in front the U.S. Capitol during the morning hours of Washington, 02/10/2022

Brendan McDermid | Reuters

According to Wednesday’s government forecast, U.S. growth will surpass 3% by 2022. However, roaring inflation will slow each month to about 2% in 2024.

According to Wednesday’s report, the nonpartisan Congressional Budget Office projected that real gross domestic products (or GDP) would grow by 3.1% in 2022 due to consumer spending and increased demand for services.

The company revised its GDP growth estimates in 2023 to 1.5% and 2.2%, respectively. However, it is still lower than this year.

CBO released its annual report stating that the CBO projections showed the “current economic expansion” continues. The CBO also projected that the economy would continue to grow in the coming year. Businesses should increase their investment and hire to meet the high demand, but supply disruptions will slow down that growth by 2022.

This is what the CBO thinks about the U.S. economic situation at the close of every year.

  • Real GDP: 3.1% 2022, 2.2% 2023 and 1.5% 2024
  • CPI-measured inflation is 4.7%, 2.7% and 2.3% respectively in 2022, 2023 and 2024.
  • Rate of unemployment: 3.7% for 2022, 3.6% for 2023 and 3.8% 2024.
  • Federal funds rates: 1.9% for 2022 and 2.6% for 2023

According to the report’s optimistic tone, it implied that the Federal Reserve, which is the central bank charged with managing inflation in America, would be able raise interest rates during 2022-2023 without sending the U.S. into recession.

Although the CBO expects that inflation will remain at or near 2% throughout 2022/23, the CBO said price rises won’t be as rapid as they are now.

The core PCE price index, which the central bank uses to measure inflation, saw growth of 1.4% to 4.6% between 2020 and 2021. CBO believes that it will decline to 3.8% rate in 2022, due to the persistence of high rent and home costs.

CBO predicts that Fed will raise its overnight benchmark interest rate by 1.9% to combat inflation. This is well below market expectations of a rate higher than 2.5%.

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