Originally Published: 27 JUN 23 11:46 ET

By Elisabeth Buchwald, CNN

New York (CNN) — US inflation could hit the Federal Reserve’s 2% target in 2025, Bank of America CEO Brian Moynihan told CNN in an exclusive interview Tuesday.

“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,” Moynihan told CNN’s Poppy Harlow on “CNN This Morning.”

The Fed is currently projecting an inflation rate of 2.1% that year, down from the current level of 4.4%.

Already, consumers are cutting back on spending to a level that is consistent with 2% inflation, Moynihan said, citing Bank of America customer data.

That’s both “good and bad,” he added. “Good in 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.”

Moynihan said he thinks the Fed could raise rates “a couple more times this year” to get inflation closer to its target. He also predicts the Fed will then hold rates steady until May of next year before cutting. That’s in line with traders’ forecasts, according to the CME FedWatch Tool. But around a fifth of traders think a rate cut could come in March 2024.

The mild recession, Moynihan said, would likely come “the first part of next year” and not the latter part of this year, which he previously predicted.

He also said he believes the unemployment rate likely won’t exceed 5%. During the pandemic-induced recession, the unemployment rate peaked at 14.7% in April 2020. But by July 2022 it had returned to its pre-pandemic level of 3.5%. Last month’s jobs report showed the unemployment rate rose to 3.7%, despite impressive job gains.

However, Moynihan said that even consumers who keep their jobs will be impacted by the downturn due to credit tightening, because when economic conditions worsen banks become more selective about who they loan money to. Borrowers deemed riskier could be denied a loan or charged a much higher interest rate compared to when the economy is in an expansion period.