(Bloomberg) -- The US inflation rate is seen easing closer to the Federal Reserve’s 2% target next year in the latest forecast from the Congressional Budget Office, as economic growth and labor market activity cools.

The agency expects personal consumption expenditures — the Fed’s preferred measure of inflation — cooling to 2.1% in 2024, according to the CBO’s semiannual forecast published Friday. Excluding energy and food costs, the gauge is set to ease to 2.4% from this year and hit 2.3% by 2025, according to the data, which incorporates economic developments through Dec. 5. 

The CBO forecast is more optimistic than the average of economists in a Bloomberg survey, who see PCE inflation easing to 2.5% in 2024. It’s also more optimistic than the Fed’s own economic projections for that gauge next year.

Price pressures are expected to ease as consumer spending takes a step back after a robust 2023, supply conditions improve and rent prices ease. The economy outperformed expectations this year but is seen slowing to a 1.5% pace in 2024 before rebounding to 2.2% in 2025. 

Meanwhile, CBO analysts forecast labor-market conditions to soften in 2024 as demand slows. The unemployment rate is seen rising to 4.4% next year from the 3.7% rate in the most recent November payrolls report. The labor force will likely get a boost from immigration over the next two years, the CBO said.

(Updates with quote and other forecasts starting in third paragraph.)

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