DECEMBER | 2023
T
he Congressional Budget Oce periodically
updates its economic forecast to ensure that its
projections reect recent economic develop-
ments and current law. CBO will publish its
budget and economic projections for 2024 to 2034early
next year in its annual Budget and Economic Outlook.
is report provides details about CBO’s most recent
projections of the economy through 2025, which reect
economic developments as of December5, 2023 (see
Table 1). CBO develops its economic projections so
that they fall in the middle of the range of likely out-
comes under current law. ose projections are highly
uncertain, and many factors could lead to dierent
outcomes. In CBO’s latest projections:
•
Output growth slows in 2024 and rebounds in 2025.
e growth of real gross domestic product (GDP,
adjusted to remove the eects of ination) falls
from 2.5percent in 2023 to 1.5percent in 2024as
consumer spending weakens and investment in
private nonresidential structures contracts. In 2025,
real GDP growth rises to 2.2percent, supported
by lower interest rates and improved nancial
conditions. (Unless this report indicates otherwise,
annual growth rates are measured from the fourth
quarter of one year to the fourth quarter of the next.)
•
Labor market conditions soften in 2024. Growth in
payroll employment slackens, and the unemployment
rate rises from 3.9percent in the fourth quarter of
2023 to 4.4percent in the fourth quarter of 2024 and
remains close to that level through 2025. e labor
force grows at a moderate pace, with an increased
contribution to that growth stemming from projected
immigration over the next two years.
1
1. See Testimony of Julie Topoleski, Director of Labor, Income
Security, and Long-Term Analysis, before the Joint Economic
Committee, CBO’s Demographic Projections (November15,
•
Ination continues to slow over the next two years
and approaches the Federal Reserve’s target rate
of 2percent. As measured by the price index for
personal consumption expenditures (PCE), ination
falls from 2.9percent in 2023 to 2.1percent in 2024,
reecting softer labor markets and slower increases in
rents. In 2025, ination rises slightly, to 2.2percent,
as downward pressures on ination in food and
energy prices ease and stronger economic activity
modestly increases price pressures for some categories
of services.
•
Interest rates on Treasury securities peak in 2024
and then recede through 2025. e Federal Reserve
holds the federal funds rate (the rate that nancial
institutions charge each other for overnight loans of
their monetary reserves) between 5.25percent and
5.50percent through the rst quarter of 2024 and
then reduces it in response to slowing ination and
rising unemployment. e rate on 10-year Treasury
notes increases to 4.8percent in the second half of
2024 and begins to fall in mid-2025.
Compared with its February2023projections,
CBO’s current projections exhibit weaker growth,
lower unemployment, and higher interest rates in 2024
and 2025.
2
e agency’s current projectionsof inationare
mixed relative to those made in February 2023.
•
Slower economic growth during 2024 (by
1.0percentage point) and 2025 (by 0.4percentage
points) largely occurs because of slower-than-projected
growth in consumption, investment, and exports. e
2023), www.cbo.gov/publication/59683. CBO expects to publish
its next comprehensive demographic projections in January2024.
2. See Congressional Budget Oce, e Budget and Economic
Outlook: 2023 to 2033(February2023), www.cbo.gov/
publication/58848.
CBO’s Current View of the
Economy From 2023 to 2025
