The most stunning forecast in the Congressional Budget Office’s The Budget and Economic Outlook: 2022-2023 is that rapid inflation is almost over. What the agency calls personal consumption expenditures (PCE) will rise 4.0% this year and 2.3% next year. From 2024 to 2026, the figure will rise only 2.0%.
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Oddly, gross domestic product growth, one signal inflation has not disappeared, will rise 3.1% this year. That will dip to 2.2% in 2023, a substantial deceleration. Unemployment, another factor often coupled with inflation, will continue to fall to a steady 3.5%. The labor force will continue to grow.
The CBO is not the only organization that believes inflation will fall off soon. However, the Federal Reserve fears otherwise. The central bank will raise rates by 0.5% at least two more times. A consensus is growing that this will tip the economy into recession.
Forecasters cannot eat their cake and have it too. Rising rates may tame inflation but will damage the economy. High inflation will undermine consumer and business spending. Either way, the economy is riding for a fall.
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