During an interview with CBS News on Friday, Bank of America Chief Economist Michael Gapen stated that it “will probably take two years, if not three years to get inflation back down to the Fed’s desired 2% level.”
Gapen said, “I think the numbers tell us that the labor market is still quite hot. The unemployment rate number that you mentioned is the lowest we’ve seen since 1968. So, it’s about a five-decade low. 223,000 jobs added in the month of December. That pace has come down, but that’s a robust number in any normal expansion. So, I think job-seekers right now are probably still meeting with a lot of success and I think labor demand remains exceptionally strong.”
He added, “225,000 jobs or so per month is about twice as much job growth as I think the Fed would like to see.”
Host Catherine Herridge then asked, “The Federal Reserve chair wants to see inflation at 2%. How long will that take to get there and what will it take to get there?”
Gapen responded, “Most of us in the kind of the economics forecasting world think that that’s probably a 2-3 year path, that we’re probably past peak inflation right now, in terms of the year-on-year rates of inflation. Those should start coming down more clearly over the course of 2023, but it will probably take two years, if not three years to get inflation back down to the Fed’s desired 2% level.”
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