Inflation will decrease slightly but likely continue into 2023, the Congressional Budget Office said in a report released on Wednesday on the outlook of the economy and federal budget for the next ten years.
The consumer price index will hit 4.7 percent in the fourth quarter of 2022 compared with the same period in 2021, the CBO projected. Inflation will continue to decrease to 2.7 percent by the fourth quarter of 2023. Inflation would thus remain higher than levels recorded prior to the Covid pandemic.
“In CBO’s projections, elevated inflation persists in 2022 because of the combination of strong demand and restrained supply in the markets for goods, services, and labor. In response, the Federal Reserve tightens monetary policy, and interest rates rise rapidly,” CBO director Phillip L. Swagel said in a statement on the report.
The projection comes after the CPI hit 8.5 percent in March 2022 compared with the same month in 2021, the highest increase since 1982. The Federal Reserve announced in March that it would raise interest rates for the first time since December 2018 in order to rein in inflation.
Concerns over inflation have come to a head prior to the 2022 midterms. A CBS News poll released on Monday found that 69 percent of respondents felt the state of the U.S. economy is “bad.”
The CBO report also projected that U.S. GDP will grow by 3.1 percent in the fourth quarter of 2022 compared with the same period the previous year, slower than the 5.5 percent pace recorded in the fourth quarter of 2021. GDP growth will likely slow to 2.2 percent in 2023.