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Bank of America Chief U.S. Economist Michael Gapen explains indications of inflation relief in the cost of goods and services, restructuring of supply chains, and more. Segment originally aired on November 10, 2022.
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Bank of America economist sees signs of inflation relief

Amid concerns about rising inflation, a Bank of America economist has identified some promising signs that could indicate relief on the horizon. Ethan Harris, head of global economics research at the bank, has suggested that recent data points to a potential easing of inflationary pressures in the near future.

One key indicator that Harris has pointed to is the recent slowdown in the pace of job growth. While this may seem like a negative development at first glance, Harris believes that it could actually be a positive sign for inflation. As the labor market tightens and unemployment falls, wage pressures typically increase, which can contribute to inflation. However, a slower rate of job creation could indicate that wage pressures are easing, which could help to alleviate inflationary concerns.

Additionally, Harris has highlighted the fact that supply chain disruptions, which have been a major driver of inflation in recent months, may be starting to abate. This could alleviate some of the upward pressure on prices that has been seen in sectors such as manufacturing and logistics.

Another factor that Harris has considered is the potential for a moderation in consumer demand. As the initial surge in spending following the reopening of the economy begins to level off, there could be less upward pressure on prices. This could be particularly true if consumers start to pull back on their spending as they face higher prices for goods and services.

Harris has also pointed to the Federal Reserve’s recent signaling of its intention to start scaling back its bond-buying program as a potential factor in curbing inflation. The central bank has been purchasing large amounts of assets in an effort to support the economy during the pandemic, and a reduction in these purchases could help to cool off inflationary pressures.

While there are still risks and uncertainties surrounding the outlook for inflation, Harris’s analysis provides a hopeful perspective for policymakers and investors. If his predictions come to fruition, it could mean that the current inflationary spike is transitory rather than a sustained trend, which would be welcome news for consumers and the broader economy.

Of course, it’s important to note that the situation remains fluid, and there are many variables at play that could influence the trajectory of inflation in the coming months. However, the insights provided by Bank of America’s economist offer a ray of hope for those who have been concerned about the recent surge in prices. As the economy continues to evolve, it will be crucial to keep a close eye on key indicators and developments in order to gauge the trajectory of inflation and its potential impact on the recovery.