Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated on Friday that the Federal Reserve should patiently lower the policy interest rate to between 3% and 3.5% by the end of next year, when inflation is expected to drop to the 2% target level, and to pull the US economy out of recession. Speaking at the Mississippi Economic Education Council's American Business Forum in Jackson, Mississippi, Bostic said, "I'm not in a rush to be neutral." "We must bring inflation back to the 2% target; I don't want us to reach a point where inflation is stuck because we haven't restrained inflation for long enough, so I will wait patiently."

He also indicated that he expects the Federal Reserve to further reduce the target for short-term borrowing costs, which currently stands between 4.75% and 5.00%.

"If the economy continues to develop—if inflation continues to decline, the labor market remains robust, and we still see positive production—we will be able to continue on the path back to neutrality," he said.

Bostic stated that the Federal Reserve's neutral policy interest rate—where borrowing costs neither stimulate nor restrict economic growth—might be between 3% and 3.5%. He mentioned that the Federal Reserve's preferred inflation rate is currently at 2.2%, and it might reach the Federal Reserve's 2% target by the end of 2025, "which should be the timetable for when we should achieve neutrality."

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Financial markets are currently pricing in expectations for two rate cuts of 25 basis points before the end of the year and further rate cuts next year, with the policy rate potentially reaching a range of 3.25%-3.5% by September 2025.

The Federal Reserve cut the policy rate by 0.5 percentage points last month, a larger-than-expected reduction, to prevent borrowing costs from cooling the labor market too quickly. Since then, employment market data have been stronger than expected, with monthly job growth accelerating and the unemployment rate dropping to 4.1%.

Bostic has previously stated that he expects only two 25-basis-point rate cuts in the last two Federal Reserve meetings of this year.

Bostic said, "I have never thought about a recession." "I have always believed that the current economy has enough momentum to absorb the restrictive nature of our policies and to push the inflation rate down to the 2% target. I am grateful that this situation has been so good. But the task is not yet complete."