Congressional Budget Office says U.S. inflation to last into 2023

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The Congressional Budget Office released an economic outlook Wednesday saying that high inflation will persist into the next year, which could force the federal government to pay higher interest rates on its debt.

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The non-partisan agency expects the consumer price index to rise 6.1% this year and 3.1% in 2023. This forecast suggests that inflation will slow to the current annual level of 8.3%, yet it will still be dramatically above the long-term baseline of 2.3. ,

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There is positive news in the 10-year projections as this year’s annual budget deficit will be $118 billion lower than last year’s forecast. It is a byproduct of the end of pandemic-related spending and the solid job growth it helped fuel.

As a share of the total economy, publicly held debt will decline by 2023. Nevertheless, the accumulated federal debt is likely to increase to the equivalent of about 110% of US GDP over the next decade.

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The Federal Reserve is trying to contain inflation by raising its benchmark interest rates, which has raised interest on 10-year US Treasury notes significantly in recent months.

One consequence is that the government will spend more money this year to pay off its debt. By 2032, annual interest payments will exceed about $1.2 trillion or more the federal government spends on defense.

Still, the CBO warned that its numbers are “subject to considerable uncertainty, due to the ongoing pandemic and other world events, including Russia’s ongoing war in Ukraine.” According to the CBO, the report dates back to at least the first few months of the war.

Economists have said the coronavirus relief programs released by both Biden and the Trump administration have contributed to higher inflation levels. But delays in action by the Fed, supply chain disruptions and the uproar following Russia’s invasion of Ukraine in February have fueled higher prices.

Ben Harris, the Treasury Department’s assistant secretary for economic policy, tweeted on Tuesday that factors driving inflation included rising corporate profits, driven by a lack of business competition — as well as business crippling the economy as the pandemic slows. Not being fully prepared to reopen. The restrictions were lifted.

The administration has insisted that its plan puts the US economy in a stronger position than the rest of the world as unemployment stands at a low 3.6%.

“The US rescue plan has fueled an exceptionally rapid recovery and leaves us in a stronger position to deal with the global challenges posed by supply chains and the economic fallout from Russia’s invasion of Ukraine,” he tweeted.

The report says from 2032 onward, “If current laws remain generally unchanged, the deficit will continue to grow relative to the size of the economy over the next 20 years, giving debt as a percentage of GDP during that period an upward trajectory.” will be kept.”

Maya McGinnis, chair of the Committee for a Responsible Federal Budget, told the Associated Press ahead of the release that the pandemic, the war in Ukraine and other factors point to the importance of reducing the annual deficit.

“Unfortunately, the underlying story here is one of financially unstable situation and on top of that, we have this additional challenge of inflation and a reminder that external shocks keep coming upon us,” she said.

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