The director of the nonpartisan Congressional Budget Office warned Wednesday that the economy is headed for at least a bumpy landing — and possibly worse — as a result of the Federal Reserve’s fight against inflation.
“For 2023, we project stagnant output, rising unemployment, gradually slowing inflation and interest rates that remain at or above their levels at the beginning of the year — before the economy subsequently rebounds,” said CBO Director Phillip Swagel in unveiling the agency’s annual forecasts for the economy and the U.S. budget.
CBO stated that it expected the Treasury Department to run out of borrowing room Between July and September, the limit will be below. However, it cautioned that the deadline could be extended to July if the tax revenue is lower than forecasted in the following months. Echoing projections A few private sector economists.
In its economic forecastThe CBO stated that. “Output growth comes to a halt in early 2023 in response to the sharp rise in interest rates in 2022.”
The CBO forecasted that the unemployment rate will reach 5.1% by 2023. This is a significant increase from the 3.4% in January, which was a 53-year record. According to CBO’s forecast, the economy (as measured by gross domestic product) is expected to contract in the first half 2023 before recovering to show a slightly positive reading for the whole year.
“The first half of the year in our projections is a difficult time.”
Congressional Budget Office Director Phillip Swagel
This gloomy outlook is a sign of something positive for the agency. It is possible to say that there will be growth. “halt” CBO predicts that GDP will fall in the first quarter of 2023. more upbeat data readings recently have made economists increasingly optimistic The Fed might pull off an a “soft landing” — raising interest rates enough to cool economic growth and tame inflation but not so much that the economy stops growing.
Swagel refused to comment on whether the agency projected a recession. However, Swagel noted that the National Bureau of Statistics Economic The arbiter for when there is an economic recession or expansion is research.
“The first half of the year in our projections is a difficult time,” He stated. “It’s got rising unemployment. It’s not an enormous rise in the unemployment rate, but it’s certainly a rising unemployment rate. And income growth is slightly negative.”
Swagel was himself a believer. Aug. is more positive In a letter addressed to legislators, he stated that it was premature to determine if the economy has entered a recession.
“It is possible that, in retrospect, it will become apparent that the economy moved into recession sometime this year. However, that is not clear from data that were available at the beginning of August,” He wrote.
One bright note in the agency’s forecasts was on inflation. Comparatively to the previous year, inflation measured using the Consumer Price Index will fall to 4.8% by 2023. It is predicted that it will slowly decline to 3.0% and 2.2% respectively in 2024-2025.
CBO’s projections also included a forecast of the year Social Security wouldn’t be able make all benefits payments. Its “exhaustion date,” Had moved 1 year closer to 2032 than 2033.