Lower Inflation, Elevated Unemployment in CBO's 2025 Economic Projection

According to revised economic predictions for the next two years, the Congressional Budget Office stated on Friday that it anticipates inflation to almost reach the Federal Reserve's 2% target rate in 2024 as general growth is anticipated to slow and unemployment to climb through 2025.

According to the office's Current View of the Economy from 2023 to 2025 report, the unemployment rate is expected to reach 4.4% in the fourth quarter of 2024 and be relatively stable until 2025.

Currently, the Bureau of Labor Statistics' most recent statistics show that the unemployment rate is 3.7%.

Congressional Budget Office's Economic Projections

According to CBO predictions, the gross domestic product, or GDP, which measures the state of the economy generally, is expected to decline from 2.5% in 2023 to 1.5% in 2024 before rising to 2.2% in 2025.

The CBO's Friday report projects slower growth, lower unemployment, and higher interest rates in 2024 and 2025 compared to its February 2023 predictions. However, the employment prediction is significantly different from the rate of hiring thus far this year, serving as a reminder that the U.S. economy has seldom responded as expected throughout the epidemic and its aftermath.

This is the longest sequence of unemployment below 4% since the late 1960s, and it has lasted for over two years. Regarding inflation, the majority of experts anticipate that growth will abate and that inflation will keep falling.

Federal Reserve's Forward Guidance

For the third meeting in a row, the Federal Reserve left its benchmark interest rate steady this week, and policymakers hinted that they may lower rates as early as next summer.

Fed Chair Jerome Powell stated during a press conference that given how persistently inflation has decreased, rate hikes are probably finished.

According to CBO director Phillip Swagel, the study offers no policy recommendations in accordance with the agency's purpose to provide objective, unbiased research.

What worries Biden the most is that the economy will be creating just 45,000 new jobs per month when elections approach at the end of the next year.

Due to the softening job market, inflation will be lower in 2025 at 2.1%. That's excellent news for Biden, who has been under fire for allegations that Bidenomics was to blame for the recent 40-year period of high inflation the nation experienced. That's close to the 2% objective that the Federal Reserve aims for.

It can be recalled that, for the third consecutive week, the Federal Reserve held its benchmark interest rate steady on Wednesday, and policymakers hinted that they anticipate reducing it by three quarter points in the next year.

After the sharpest rate rises in four decades, the Fed's statement on Wednesday made it quite clear that it is done raising interest rates and is moving toward lowering them as early as next summer.

At a press conference, Chair Jerome Powell stated that given how persistently inflation has decreased, Fed policymakers are probably done hiking rates.