What's happened
The Congressional Budget Office (CBO) has revised its economic forecasts for the next three years, showing slower growth, higher inflation, and increased unemployment for 2025. The update reflects the impact of recent policy choices, including tariffs and immigration restrictions, which are hampering near-term economic performance.
What's behind the headline?
The CBO's revised forecasts reveal a clear shift in the US economic trajectory. The downgrade to 1.4% growth in 2025, from an initial 1.9%, is primarily driven by a slowdown in consumer spending caused by tariffs and immigration restrictions. These policies increase costs for households and businesses, eroding purchasing power and dampening economic activity.
The forecasted rise in inflation to 3.1% and higher unemployment at 4.5% signals a more challenging economic environment than previously expected. While GDP growth is projected to rebound to 2.2% in 2026, the overall outlook suggests a sluggish recovery, with growth rates leveling off in subsequent years.
This update underscores how policy choices directly influence economic performance, with tariffs and immigration policies acting as headwinds. The projections also indicate that the administration's efforts to stimulate growth may be offset by these restrictive measures, which could have long-term implications for the labor market and consumer confidence.
The forecasted lower population growth, due to deportations and reduced immigration, further compounds economic challenges, potentially constraining future growth and productivity. Overall, the outlook suggests that current policies are likely to hinder economic resilience and recovery, emphasizing the need for recalibrated strategies to foster sustainable growth.
What the papers say
The projections are based on the latest reports from the Congressional Budget Office, as published by AP News and The Independent. Bloomberg's coverage confirms the downgrade in growth and inflation expectations, emphasizing the impact of recent policy decisions. While AP News highlights the broader economic implications, Bloomberg focuses on the specific figures, providing a comprehensive picture of the economic outlook. The Independent echoes these findings, framing them within the context of policy impacts and future challenges. All sources agree that recent policy choices are central to the revised forecasts, with no significant dissenting opinions presented.
How we got here
The CBO's latest projections update its January forecasts, incorporating recent economic data and policy impacts. The new outlook highlights the effects of tariffs, reduced immigration, and policy decisions made under the current administration, which have contributed to a slowdown in growth and increased inflation. These projections serve as a baseline for policymakers to assess economic strategies amid ongoing political debates.
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Donald John Trump is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021.
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The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides budget and economic information to Congress.