US Inflation Expected to Approach Fed’s 2% Target in 2024, CBO Reports

In a recent forecast released by the Congressional Budget Office (CBO), the United States is anticipating a gradual easing of its inflation rate to the Federal Reserve’s target of 2% in 2024.

The CBO’s semiannual projection published on Friday outlines expectations for the cooling of personal consumption expenditures, the preferred measure of inflation for the Federal Reserve.

According to the CBO data, the personal consumption expenditures are expected to ease to 2.1% in 2024.

When excluding energy and food costs, the gauge is projected to decrease to 2.4% from the current year and further decline to 2.3% by 2025.

The forecast incorporates economic developments up to December 5 and factors in the changing landscape of supply conditions and consumer spending patterns.

The anticipated reduction in price pressures is attributed to several factors, including a moderation in consumer spending following a robust 2023, improvements in supply conditions, and a potential easing of rent prices.

While the US economy surpassed expectations in the current year, the forecast suggests a slowdown to a 1.5% growth pace in 2024, followed by a rebound to 2.2% in 2025.

Simultaneously, the CBO analysts predict a softening of labor market conditions in 2024 as demand begins to decelerate.

The unemployment rate is projected to rise to 4.4% in the coming year, compared to the 3.7% rate reported in the most recent November payrolls report.

The labor force is expected to receive a boost from immigration over the next two years, as highlighted by the CBO.

As the US navigates economic dynamics, the CBO’s insights provide a glimpse into the potential trajectory of inflation, offering valuable considerations for policymakers and economic stakeholders in the year ahead.