CBO boosts U.S. GDP growth estimates, says inflation has topped and will cool to 2% by 2024

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  • The nonpartisan Congressional Budget Office estimates that real GDP, or GDP, will grow by 3.1% in 2022, it said in a Wednesday report.
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  • “In CBO’s projections, the current economic expansion continues, and economic output accelerates next year,” the CBO said in its report.
  • The upbeat tone of the report included an implicit prediction that the Federal Reserve would be able to raise interest rates without putting the US economy into recession.

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According to a government forecast published Wednesday, US economic growth will exceed 3% in 2022, while roaring inflation tops and will cool to about 2% each month in 2024.

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According to the report released Wednesday, the nonpartisan Congressional Budget Office projected that real GDP, or GDP, would grow by 3.1% in 2022, driven by consumer spending and demand for services.

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

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“In CBO’s projections, the current economic expansion continues, and economic output accelerates next year,” the CBO said in its report. “To meet increased demand for goods and services, businesses increase both investment and hiring, although supply disruptions hinder that growth in 2022.”

The upbeat tone of the report included an implicit prediction that the Federal Reserve, the nation’s central bank for managing inflation, would be able to raise interest rates during 2022 and 2023 without putting the US economy into recession.

While the CBO projects inflation will remain well above the Fed’s 2% target in 2022 and 2023, it also said it is likely that the pace of price increases will not pick up above current levels.

Growth in the core PCE price index, the central bank prefers to use to measure inflation, rose from 1.4% in 2020 to 4.6% in 2021. The CBO estimates that this figure should drop to 3.8% in 2022 due to the pace. Persistent impact of higher house and rent costs.

The CBO believes the Fed, to combat inflation, will raise its benchmark overnight interest rate to 1.9% by the end of 2022, well below the market expectation of north of 2.5%.

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