U.S. Inflation Could Remain High For Up To Four Years: Bank Of America

Bank of America (NYSE:BAC) says that U.S. inflation could remain elevated for two to four years and said that only a financial market crash would prevent central banks from tightening policy in the next six months.

It is "fascinating so many deem inflation as transitory when stimulus, economic growth, asset/commodity/housing inflations (are) deemed permanent," the investment bank's top strategist Michael Hartnett said in a note to clients.

Hartnett thinks inflation will remain in the 2% to 4% range over the next two to four years. U.S. inflation has averaged 3% in the past 100 years, 2% in the 2010s, and 1% in 2020, but it has been annualizing at 8% so far in 2021, Bank of America said.

U.S. Federal Reserve Chairman Jerome Powell vowed last week not to raise interest rates too quickly based only on the fear of inflation.

The comments were seen as a move to soothe investor nerves after a hawkish monetary policy meeting last week suggested officials believed interest rates would rise as soon as 2023, perhaps a year earlier than anticipated.

As the first half of 2021 draws to a close, Hartnett said higher inflation, hawkish central banks and weaker growth are the key themes to watch in the second half of the year.