The CBO thinks the Fed will raise interest rates this year, disagreeing with Wall Street

Projections in the CBO report indicate that GDP is projected to increase by 2.3 per cent in 2019, but that it will slow down thereafter and reach a level of 1.7 per cent by 2020-2023. This is actually lower than the expectations of the Fed, which forecasts a gain of 2.3% in 2019, followed by 2% and 1.8% in the following years, which corresponds to a long-term trend of 1.9 %.

The report notes that the Fed must guard against a "production gap" or the difference between real GDP and its potential.

When the economy grows faster than its potential, resources are under pressure and inflation rises. The CBO anticipates that the gap will remain positive until 2022, when it will become negative and then weaken.

"A positive output gap indicates that the demand for goods and services temporarily exceeds the maximum sustainable capacity of the economy to deliver them, resulting in increased demand for labor as well as a upward pressure on inflation and interest rates, "the report says.

The Fed is responsible for keeping inflation around 2%, although officials said the goal was "symmetrical", which means they would not be alarmed if it slightly exceeded the mandate. The Fed has approved four point-point increases in 2018 and its current target rate is between 2.25% and 2.5%.

The markets do not anticipate any rate hikes at the Federal Open Market Committee meeting this week. The probability increases slowly over the course of the year, with traders forecasting a 22% increase by December, according to the CME's futures tracker.