In an interview with CNN, Bank of America CEO Brian Moynihan revealed that the United States could reach the Federal Reserve’s 2% inflation target by 2025. Moynihan shared his insights on Tuesday, shedding light on the current economic landscape.

Moynihan stated, “We think it will take [Fed officials] all of this year and all of next year and into 2025 before they get inflation in line with their long-term target,” during a conversation with CNN’s Poppy Harlow on “CNN This Morning.”

Currently, the Federal Reserve projects a 2.1% inflation rate for 2025, which signifies a decline from the current level of 4.4%.

Drawing from Bank of America customer data, Moynihan pointed out that consumers are already reducing their spending, aligning it with a 2% inflation scenario. He characterized this trend as positive and negative, explaining, “Good if that’s what the Fed needs to see inflation under control. Not so good because it does mean we have a higher probability of a mild recession coming true.”

To move closer to its target, Moynihan suggested that the Fed might increase rates “a couple more times this year.” Following that, he predicted that rates would remain steady until May of the following year before a potential cut. This outlook aligns with traders’ predictions as indicated by the CME FedWatch Tool. However, approximately one-fifth of traders believe a rate cut could occur as early as March 2024.

Moynihan revised his previous predictions and anticipated a mild recession in the first part of next year rather than in the latter part of this year.

Regarding the unemployment rate, Moynihan expressed confidence that it would not exceed 5%. The unemployment rate peaked at 14.7% throughout the pandemic-induced recession in April 2020. However, by July 2022, it had returned to its pre-pandemic level of 3.5%. Despite impressive job gains, last month’s jobs report showed a slight rise in the unemployment rate to 3.7%.

Moynihan cautioned that even individuals who retain their jobs could face challenges during the economic downturn due to credit tightening. As economic conditions worsen, banks tend to be more selective about lending money, potentially denying loans to riskier borrowers or charging significantly higher interest rates than in periods of economic expansion.

As the economy navigates toward achieving the Federal Reserve’s inflation target, experts closely watch for any signs of economic stability, keeping a keen eye on indicators such as interest rates and unemployment levels.