Fed’s Rafael Bostic doesn’t expect interest rate cuts until ‘late 2024’

Atlanta Fed President Rafael Bostic said Friday that he does not envision interest rate cuts until 2024.

Although he cited progress on inflation and a slowing economy, the central bank official told CNBC that there is still a lot of work to be done before the Fed reaches its inflation target of 2% per year.

“I would say late 2024,” Bostic replied when asked about the time frame in which the first decline could occur.

The Fed has raised its key borrowing rate 11 times since March 2022, bringing the total to 5.25 percentage points. While Bostic said he doesn’t see policymakers easing monetary policy anytime soon, he was vocal in insisting that interest rates have reached a “sufficiently restrictive” level where they don’t need to be raised anymore.

However, he warned that the road back to acceptable levels of inflation could be long.

“There is still a lot of momentum in the economy,” Bostic said during an interview with “Squawk Box.” My expectations are that inflation will decline, but it will not like to fall off a cliff.” “It’s going to be kind of a progression that’s going to take some time. So we’re going to have to be careful, we’re going to have to be patient, but we’re going to have to be resolute.”

Bostic is not a voting member this year on the Federal Open Market Committee, which sets interest rates, but he will get a vote in 2024.

He said he does not expect “that we will cut interest rates before the middle of next year, at the earliest.”

“I’m really trying to keep people focused on what inflation is, which is still at 3.7%. Our target is 2,” he said. “They are not the same thing, and we have to get very close to 2% before we can think about any kind of relaxation in our position.”

After a slew of Fed spokesmen in recent days, including Chairman Jerome Powell on Thursday, market pricing removed any chance of an interest rate increase when the Federal Open Market Committee meets from October 31-November. 1. The probability of an increase in December is only 25%, according to FedWatch is also from CME Groupl, which measures pricing in the federal funds futures market.

Markets expect cuts of two or three points by the end of 2024.

One reason the Fed might consider easing interest rates is slowing or stagnant economic growth. While Bostic said he does not expect a future recession, he sees conditions changing. He said business contacts told him they were preparing for a slowdown.

“We will not see a recession, and that is not my view,” he said. “We will see a slowdown, and inflation will fall to 2%.”

Bostic spoke after some significant moves in financial markets, particularly in Treasury yields. After breaching the psychologically important 5% level earlier in the session, the benchmark 10-year Treasury yield has retreated somewhat, most recently trading near 4.97%.

Don’t miss these CNBC PRO stories: