In an interview with CNBC, Atlanta Federal Reserve President Raphael Bostic emphasized that reigning in inflation remains a top priority, and the metric needs to approach the 2% mark before a rate cut can be seriously considered.

“Inflation is job one, we have to get that under control,” Bostic asserted. But rate cut is possible next year and “I would say late 2024”, he added.

“There’s still a lot of momentum in the economy. My outlook says that inflation is going to come down but it’s not going to like fall off a cliff,” he explained.

“It’ll be sort of a progression that’s going to take some time. And so we’re going to have to be cautious, we’re going to have to be patient, but we’re going to have to be resolute,” added Bostic.

In the context of a broader economic outlook, Bostic dismissed the possibility of a recession. He projected a slowdown in economic activity but remained optimistic about the economy’s resilience and the eventual return of inflation to the 2% target.

Comments from some key Fed officials overnight underscore the central bank’s cautious approach in the face of evolving economic conditions, particularly the rise in treasury yields and persistent inflation.

Philadelphia Fed President Patrick Harker asserted, “We are at the point where we can hold rates where they are.” He acknowledged the recent data trends, noting, “So far, economic and financial conditions are evolving roughly as I expected,” but added that some indicators have been “a tad stronger than my baseline forecast.” Harker championed patience in monetary policy, suggesting that “a resolute, but patient, stance of monetary policy will allow us to achieve the soft landing that we all wish for our economy.”

Dallas Fed President Lorie Logan emphasized the natural tightening effect of the recent uptick in treasury yields, stating they have “done some of this tightening work for us.” While Logan recognized some progress in inflation management, she conceded, “it’s still too high.” Stressing the importance of the broader economic environment, she remarked, “It’s important that we have continued restrictive financial conditions.”

Chicago Fed President Austan Goolsbee approached the inflation debate from a historical perspective. He noted, “There’s a widely held conventional wisdom that if you get the inflation rate down more than 5 percentage points you will have to have a big recession to do that.” Contrary to this belief, Goolsbee expressed optimism, saying, “So far, we haven’t had that recession, I’m still hopeful we can avoid it entirely.”

Lastly, Atlanta Fed President Raphael Bostic laid clear his priorities, stating, “As for inflation, that is job one for now.” He elucidated the broad impacts of inflation, observing that “Across the economy and demographic groups, inflation is the force that is most painful and drives more people to precariousness.”

Fed Chair Jerome Powell, in his speech at the Economic Club of New York, asserted that while the option for an additional rate hike remains open, a prudent and careful approach will be the governing principle. Market participants, digesting Powell’s words, now overwhelmingly anticipate an extension of Fed’s pause in November, a sentiment reflected in fed fund futures pointing towards a 100% chance of this outcome. Referring to the recent rise in yields, he said it might have an effect “at the margins” on reducing the necessity for further rate hikes.

Powell suggested that the surge in yields might be linked to growing concerns surrounding fiscal deficits and mentioned that the process of Quantitative Tightening could also be influencing it. Highlighting that the uptick in yields acts as a de facto policy tightening, Powell raised the possibility that this might reduce the need for aggressive rate hikes in the future.

Although inflation metrics have dipped during the summer, Powell emphasized, “inflation is still too high, and a few months of good data are only the beginning.” The inflation outlook remains uncertain, marked by the unpredictability of its stabilization point in the upcoming quarters, and Powell concedes that, “the path is likely to be bumpy.”

With an eye on economic growth and labor market dynamics, Powell indicated that persistent above-trend growth or sustained labor market tightness could trigger a reevaluation of the inflation outlook. Such developments “could warrant further tightening of monetary policy.”

Underscoring the complexities and potential pitfalls ahead, Powell stated, Committee is “proceeding carefully.” “We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks,” he added.

Full prepared remarks of Fed Powell here.