Questions About CBO’s Current View of the Economy in 2023 and 2024 and the Implications for Households and the Federal Budget

This letter responds to questions about the Congressional Budget Office’s current view of the economy over the next two years, how that view compares with projections that CBO made most recently and with those of the Federal Reserve, and the implications of that view for households and the federal budget.

• CBO currently expects rates of interest and inflation to be higher over the next two years than it projected most recently.
• CBO expects economic growth in 2023 to be slower than it projected most recently, reflecting recent developments (including higher interest rates), and faster in 2024, as the economy recovers.
• Higher interest rates, higher inflation, and slower economic growth lead to less purchasing power for households and increased deficits for the federal government.

CBO’s current view of the economy incorporates available information through mid-November. The agency’s most recent projections were published in May 2022. The Federal Reserve’s most recent projections were published in September 2022.

CBO will publish its budget and economic projections early next year in the agency’s annual Budget and Economic Outlook. As part of the process of preparing that report, CBO is in the midst of revising its economic forecast. In response to interest expressed by you and other Members of Congress, the agency released a report today that provides preliminary information about the revision. The information is more comprehensive than would have been possible if CBO’s standard process for developing its forecast had not already been underway. This letter draws on that report, focusing on the economic variables you and your colleagues asked about—interest rates, inflation, and output—and the implications that CBO’s current view of the economy has for the budget.