CBO boosts U.S. GDP growth estimates, says inflation has topped and will cool to 2% by 2024

A person runs in front of the U.S. Capitol building during morning hours in Washington, February 10, 2022.

According to a government forecast published Wednesday, the U.S. will have economic growth of 3% in 2022, while inflation will cool to 2% each month by the year 2024.

According to a report released Wednesday by the Congressional Budget Office, real GDP will grow 3.1% in 2022, driven by consumer spending and demand for services.

It revised its estimates for GDP growth to 2% and 1.5%, but still below this year's pace.

The current economic expansion continues and economic output will grow rapidly over the next year, according to the CBO.

The CBO sees the US economy at the end of each year.

• Real GDP: 3.1% in 2022, 2.2% in 2023, and 1.5% in 2024.
• Inflation (measured by CPI): 4.7% in 2022, 2.7% in 2023 and 2.3% in 2024.
• Unemployment rate: 3.7% in 2022, 3.6% in 2023 and 3.8% in 2024.

The report said that the Federal Reserve will be able to raise interest rates throughout the next two years without tipping the economy into a recession.

The CBO projects that inflation will stay above the Fed's 2% target throughout the next two years, but it also says that the pace of price increases won't rise above current levels.

The core PCE price index rose from 1.4% in 2020 to 4.6% in 2021. The CBO predicts that the figure will fall to a 3.8% pace in 2022, due to higher home and rent costs.

The CBO believes that the Fed will hike its benchmark overnight interest rate to 1.9% by the end of 2022, well below the market's expectation for a figure north of 2.5%.