In its latest forecast released Friday, the CBO predicted a 1 percentage point drop in gross domestic product growth, reaching 1.5 percent next year. It pointed to factors like weakened consumer spending leading to the slower output. 

However, the CBO also expects that figure to reach 2.2 percent in 2025, buoyed by “lower interest rates and improved financial conditions.”  

The unemployment rate is also projected to rise to 4.4 percent in the fourth quarter of 2024, or about half a percentage point higher than where it stood at the start of this quarter. The CBO predicts the rate will remain “close to that level through 2025.” 

“The labor force grows at a moderate pace, with an increased contribution to that growth stemming from projected immigration over the next two years,” the nonpartisan budget scorekeeper said. 

It also predicted annual inflation would continue its downward trend, falling to as low as 1.9 percent in the first quarter of 2024, before rising to 2.1 in the second quarter and 2.2 percent in the third and fourth quarters.

The estimates are based on the CBO’s projections of the personal consumption expenditures (PCE) price index, which is the Fed’s preferred inflation measure. 

While Fed Chair Jerome Powell said earlier this week that inflation is “still too high,” he also expressed confidence that nation was within striking distance of the central bank’s goal.  

“We are likely at or near the peak rate for this cycle,” he said this week, as the Fed decided to continue holding interest rates at decades-high levels to curb spending and slow inflation. 

The Hill’s Aris Folley has more here.