Congressional Budget Office projects lower inflation and higher unemployment into 2025

The likeness of George Washington is seen on a U.S. one dollar bill, March 13, 2023, in Marple Township, Pa. The Congressional Budget Office said Friday, Dec. 15, that it expects inflation to nearly hit the Federal Reserve's 2% target rate in 2024, as overall growth is expected to slow and unemployment is expected to rise into 2025, according to updated economic projections for the next two years. (AP Photo/Matt Slocum, File)

Phillip Swagel, Director of the Congressional Budget Office, testifies during a Senate Budget Committee hearing about Social Security, July 12, 2023, on Capitol Hill in Washington. The Congressional Budget Office said Friday, Dec. 15, that it expects inflation to nearly hit the Federal Reserve's 2% target rate in 2024, as overall growth is expected to slow and unemployment is expected to rise into 2025, according to updated economic projections for the next two years. (AP Photo/Jacquelyn Martin, File)

WASHINGTON (AP) — The Congressional Budget Office said Friday it expects inflation to nearly hit the Federal Reserve's 2% target rate in 2024, as overall growth is expected to slow and unemployment is expected to rise into 2025, according to updated economic projections for the next two years.

The office's Current View of the Economy from 2023 to 2025 report estimates that the unemployment rate will hit 4.4% in the fourth quarter of 2024 and remain close to that level through 2025.

Currently, the unemployment rate is 3.7%, according to the latest Bureau of Labor Statistics data.

Meanwhile, gross domestic product, otherwise known as the overall health of the economy, is estimated to fall from 2.5% in 2023 to 1.5% in 2024 — then rebound to 2.2% in 2025, according to the CBO projections.

Compared with its February 2023 projections, CBO’s Friday report predicts weaker growth, lower unemployment, and higher interest rates in 2024 and 2025.

But in a reminder that the U.S. economy has seldom behaved as anticipated through the pandemic and its aftermath, the employment forecast looks very different from the pace of hiring so far this year.

The jobless rate has now remained below 4% for nearly two years, the longest such streak since the late 1960s.

And on the inflation front, most economists expect growth to slow and inflation to continue to decline.

This week, the Federal Reserve kept its key interest rate unchanged for a third straight time, and its officials signaled that they are edging closer to cutting rates as early as next summer.

At a news conference, Federal Reserve Chair Jerome Powell said that officials are likely done raising rates because of how steadily inflation has cooled.

In keeping with the agency’s mandate to provide objective, impartial analysis, the report makes no policy recommendations, CBO director Phillip Swagel said in the report.

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Associated Press reporter Chris Rugaber contributed to this report.