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1 Kyoung Mook Lim & John Seliski, CBO's Current View of the Economy from 2025 to 2028 1 (September 12, 2025)

handle is hein.congrec/cbcurtvw0001 and id is 1 raw text is: The Congressional Budget Office periodically updates its economic forecast to reflect changes in laws that affect revenues and spending, recent economic devel- opments, and updated demographic projections. This report explains recent changes that have affected CBO's projections and provides details about the agency's latest economic forecast-namely, its projections of output, the labor market, inflation, interest rates, and trade flows through 2028. Those projections reflect tariffs imple- mented as of August 19, 2025; other administrative actions taken as of August 28, 2025; and economic devel- opments and laws put in place as of September 2, 2025. They also reflect CBO's updated demographic projec- tions, which are based on laws and policies in place as of July 31, 2025, and which do not incorporate the effects of subsequent administrative or judicial actions, including those affecting immigration. Early next year, the agency will publish its economic projections for 2026 to 2036 as part of The Budget and Economic Outlook. That publication will also provide updated projections of federal outlays and revenues, which are not included in this report. Changes in CBO's Economic Projections Since January 2025 CBO's latest economic projections reflect several substan- tial changes in federal policy and economic developments that have occurred since the agency last published its pro- jections on January 17, 2025, at the end of the previous Administration.' In accordance with the Congressional Budget Act of 1974, as amended, those projections did 1. Congressional Budget Office, The Budget and Economic Outlook: 2025 to 2035 (January 2025), www.cbo.gov/publication/60870, and Additional Information About the Economic Outlook: 2025 to 2035 (January 2025), www.cbo.gov/publication/61135. not account for any expectations about future changes in laws or policies.2 The major factors underlying most of the changes in CBO's projections are the 2025 reconciliation act (Public Law 119-21), higher tariffs, and lower net immigration (the number of people who enter the United States in a given period minus the number who leave in that peri- od).3 CBO's updated projections also reflect interactions among those factors as well as data released since January. Those data include equity prices and inflation that were higher, and residential investment that was weaker, than in CBO's January projections-reflecting, in part, higher interest rates and a slower rate of household formation than previously projected. The pattern of economic growth over the next several years reflects differences in the timing of the effects on the 2. For explanations of the laws that govern how CBO prepares its baseline projections and the procedures the agency uses to do so, see Congressional Budget Office, CBO Explains How It Incorporates Administrative andJudicial Actions When Updating Its Baseline Projections and Preparing Cost Estimates (December 2024), www.cbo.gov/publication/60846, and CBO Explains How It Develops the Budget Baseline (April 2023), www.cbo.gov/publication/58916; and Robert W Arnold, How CBO Produces Its 10-Year Economic Forecast, Working Paper 2018-02 (Congressional Budget Office, February 2018), www.cbo.gov/publication/53537. 3. CBO's updated economic projections also include the effects of the American Relief Act, 2025 (P.L. 118-158), and the Full- Year Continuing Appropriations and Extensions Act, 2025 (P.L. 119-4). Both of those laws increased CBO's projections of federal purchases of goods and services relative to the amounts underlying the agency's January 2025 economic forecast, which was finalized before the laws were enacted. Notes: All years referred to in this report are calendar years. Unless this report indicates otherwise, historical data shown in the text, tables, and figure describing the economic forecast reflect data from the Bureau of Economic Analysis and other sources in early September 2025, and all annual growth rates are measured from the fourth quarter of one calendar year to the fourth quarter of the next year. For figures that supplement this report, see Congressional Budget Office, CBO's Current View of the Economy in 14 Slides (September 2025), www.cbo.gov/publication/61700.