A project manager is working on the budget for a long-term project.

A cost baseline is the approved version of the projected costs for the entire project. It is fixed, and, along with other aspects of the project baseline, is used as a benchmark for the rest of the project1. A cost baseline includes the cost estimates for all the tasks on the project schedule, plus the contingency reserves for identified risks (known unknowns)2. A cost budget is the cost baseline plus the management reserves for unidentified risks (unknown unknowns)2. Therefore, before determining the cost baseline, the project manager needs to add contingency into the budget to account for inflation and other changes that may affect the project costs. This is different from looking at a previous project, requiring stakeholder approval, or revising the project timeline and scope, which are not necessary steps for creating a cost baseline. References:

3: What Exactly is a Cost Baseline in Project Management? | Runn

2: Project Cost Management: Cost Baseline vs Budget for PMP Exam