Congressional Budget Office predicts high inflation in U.S. to ease in 2023

May 25 (UPI) -- Higher prices have topped out, but inflation will stick around for the next year, according to the Congressional Budget Office's economic outlook released Wednesday.

The nonpartisan agency predicts inflation, which is measured by the consumer-price index and has seen the fastest pace in four decades, will settle at 4.7% in the fourth quarter of this year and cool to 2.7% in 2023.

That is down from the current inflation level of 8.3%, but well above the Federal Reserve's long-term goal of 2% predicted to return in 2024.

The report comes as the Federal Reserve has begun raising interest rates to fight inflation, which some economists worry could slow the economy and possibly bring a recession in the United States.

The CBO believes the Fed will hike its benchmark interest rate to 1.9% by the end of 2022, well below the expectation of 2.5%.

The CBO report increased estimates for gross domestic product growth in 2023 to 2.2%. It also showed the federal deficit shrinking this year as COVID-19 aid expires, but measures to curb inflation could force the U.S. government to pay higher interest rates on its debt.

"In CBO's projections, the current economic expansion continues, and economic output grows rapidly over the next year," the CBO said in its report. "To fulfill the elevated demand for goods and services, businesses increase both investment and hiring, although supply disruptions hinder that growth in 2022."

The CBO restated that higher prices for food, gas and other goods will not ease significantly as long as there are global supply chain disruptions caused by the war in Ukraine.

"Elevated inflation persists in 2022 because of the combination of strong demand and restrained supply," CBO Director Phillip Swagel said in a statement. "After 2022, economic growth slows, and inflationary pressures ease."