Congressional Budget Office Predicts High Inflation Through 2023

The nonpartisan agency expects the consumer price index to rise 6.1% this year and 3.1% in 2023. This forecast suggests that inflation will slow from current annual levels of 8.3%, yet it would still be dramatically above a long-term baseline of 2.3%.

The 10-year estimates do contain positive news as this year’s annual budget deficit will be $118 billion lower than forecast last year. That’s a byproduct of the end of pandemic-related spending and the solid job growth it helped to spur. As a share of the total economy, publicly held debt will drop through 2023. Still, the accumulated federal debt will likely continue to grow over the next decade to be equal to roughly 110% of U.S. gross domestic product.

The Federal Reserve has been trying to reduce inflation by raising its benchmark interest rates, causing the interest charged on 10-year U.S. Treasury notes to increase substantially in recent months. One consequence is that the government will be spending more money this year to service its debt. By 2032, the yearly interest payments will nearly be $1.2 trillion, or more than what the federal government spends on defense.

In December, President Joe Biden and Democrats admitted inflation was no longer transitory, but it took until the middle of February to pivot in the direction of vocally issuing concerns about rising costs.

“There is real inflation, and if you’re in a working-class family, it hurts. That’s why my Build Back Better plan — what’s it all about,” Biden said. “Look, families are getting clobbered by the cost of everyday things.”

Biden’s February prospective was a change from last year when former White House press secretary Jen Psaki conveyed inflation would only be temporary and transitory.

“Obviously, our analysis is going to be done by our economic experts. They continue to convey that they believe the impact will be temporary, transitory,” Psaki said.