Prices of Consumer Goods and Services. One measure of consumer price inflation is the annual rate of change in the consumer price index for all urban consumers (CPI-U). Over the 2020–2050 period, that measure of inflation averages 2.1 percent in CBO’s projections. That long-term rate is less than the average rate of inflation since 1990 of 2.4 percent per year. Under a chained measure of CPI-U inflation, CBO projects prices to grow at a rate that is about 0.25 percentage points less than the annual increase in the traditional CPI-U.17

Prices of Final Goods and Services. Over the 2020–2050 period, the annual inflation rate for all final goods and services produced in the economy, as measured by the rate of increase in the GDP price index, is projected to average 1.9 percent. That long-term rate is slightly lower than the average growth in the GDP price index since 1990. The GDP price index grows at a different rate than the consumer price index because it is based on the prices of a different set of goods and services and uses a different method of calculation.

Changes in Projections of Inflation Since Last Year. Inflation, as measured by growth in either the CPI-U or the GDP price index, is projected to be considerably lower from 2020 to 2024 than CBO projected last year. Lower inflation is an effect of the pandemic, which reduced the supply of certain goods and services, putting upward pressure on their prices, and caused demand for certain other goods and services to plummet, putting downward pressure on those prices. On net, in CBO’s projections, the effects of the pandemic point to a significant drop in inflation over the next few years. Over the 2020–2024 period, CBO expects the CPI-U to grow at an average annual rate of 1.7 percent, significantly less than the average of 2.4 percent that the agency projected last year for the same period. The agency expects the GDP price index to grow at an average annual rate of 1.5 percent over the first five years of the projection period, substantially less than the 2.1 percent average that the agency projected for that period last year.