A deep recession is needed to bring down soaring inflation, and high prices are going to be very sticky, BofA says

According to Bank of America, it will take a deep recession to tame the high prices that are caused by inflation.

According to the bank's analysts, market pricing implies that inflation will fall to or below the 2% target in about two years, but the economy will need a severe downturn to achieve that.

"Inflation is a sticky, slow moving variable that seems to be forgotten here," analysts led by Harris wrote. Spikes can reverse quickly, but underlying inflation tends to lag behind the economy. It will take time to cool off the labor market and lower the cost of labor.

Inflation expectations will be hard to drive down, and markets are ignoring economic history, meaning that the current outlook isn't based on what happened before.

Harris said that the market is not a good gauge of inflation expectations for real people and that investors have an oversimplified view of the link between growth and inflation. It will be very difficult for the Fed to get inflation back to target in a couple of years.

The Bureau of Labor Statistics reported Friday that nonfarm payrolls increased by 372,000 in June. The Federal Reserve will be able to carry on with more aggressive rate hikes if that happens.

The percentage of respondents who think the US will go into a recession by the end of next year has gone up.