CBO Projects Fed Rate Cut Despite Stubborn Inflation

Economic

Central Bank

Summary:

CBO forecasts slight Fed rate cuts to address labor market risks, even as inflation is projected to remain elevated.

The Congressional Budget Office (CBO) forecasts the Federal Reserve will likely cut interest rates slightly this year, aiming to address potential downside risks to the U.S. labor market.

In its latest economic outlook released Thursday, the CBO noted that inflation is expected to remain above the Fed's 2% target. The agency attributed this persistent price pressure to higher tariffs and increased demand stemming from the Trump administration's tax cuts.

Rate and Labor Market Outlook

According to the forecast, short-term borrowing costs, currently in a range of 3.5% to 3.75%, are projected to fall to 3.4% by the fourth quarter of this year. The CBO expects rates to hold at that level through 2028.

On the employment front, the U.S. unemployment rate is anticipated to end the year at 4.6%. The CBO projects a gradual improvement, with the rate declining to 4.4% by 2028.

Inflation Projections Through 2028

The CBO also provided a detailed inflation forecast. It expects the Fed's preferred inflation measure will ease to 2.7% this year. Looking further ahead, the agency projects inflation will continue to fall, settling at 2.1% by 2028, closer to the central bank's long-term goal.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education