U.S. economic growth will exceed 3% in 2022, while roaring inflation has topped and will cool each month to around 2% by some point in 2024, according to 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, according to 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 year's pace.
"In CBO's projections, the current economic expansion continues, and economic output grows rapidly over the next year," the CBO said in its report. "To fulfill the elevated demand for goods and services, businesses increase both investment and hiring, although supply disruptions hinder that growth in 2022."
Here's what the CBO sees for the U.S. 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 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.
- Federal funds rate: 1.9% in 2022, and 2.6% in 2023.
The upbeat tone of the report appeared to include an implicit prediction that the Federal Reserve, the nation's central bank in charge of managing inflation, will be able to raise interest rates throughout 2022 and 2023 without tipping the U.S. economy into a recession.
While the CBO projects inflation will stay well above the Fed's 2% target throughout 2022 and 2023, it also said it's likely that the pace of price increases won't rise above current levels.
Growth in the core PCE price index, the metric the central bank prefers to use 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 due to the persistent effect of higher home and rent costs.
The CBO believes that the Fed, to counteract inflation, will hike its benchmark overnight interest rate to 1.9% by the end of 2022, well below the market's expectation for a figure north of 2.5%.