Congressional Budget Office Revises 2025 Economic Forecast: Unemployment and Inflation Outlook Improved

Diccon Hyatt is a seasoned financial and economic journalist with extensive experience covering the pandemic-era economy. Over the past two years, he has authored numerous articles that simplify complex financial topics, focusing on how economic trends affect personal finances and the broader market. His previous roles include work at U.S. 1, Community News Service, and the Middletown Transcript.

In a notable update, the Congressional Budget Office (CBO), a nonpartisan federal agency providing economic analysis to Congress, released new projections on Thursday indicating a brighter short-term economic outlook than previously anticipated.

Highlights of the Updated Economic Forecast

• The CBO’s latest projections reveal a milder economic slowdown than earlier forecasts suggested.
• Recent economic data demonstrates stronger-than-expected growth and resilience in the U.S. economy.
• Unemployment is projected to remain lower, and inflation is expected to moderate faster than prior estimates.

The updated CBO report reflects the surprising robustness of the U.S. economy, which continues to advance despite the Federal Reserve’s aggressive interest rate hikes aimed at curbing inflation. Consumer spending remains strong, and the labor market is thriving, defying earlier predictions of a recession triggered by high borrowing costs.

Specifically, the CBO now forecasts the unemployment rate to average 3.8% in the third quarter of 2024, a significant improvement from the 4.9% projected in February. Furthermore, inflation, as measured by the Consumer Price Index (CPI), is expected to decelerate more rapidly, reaching an annual rate of 2.5% by mid-2025, down from the current 3%.

While the CBO still anticipates an economic slowdown, the severity is expected to be less pronounced than previously thought. The unemployment rate is projected to rise to 4.5% by mid-2025, which, although higher than the current near-record-low of 3.6%, remains below the earlier forecasted peak of 5.1%.

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