WASHINGTON (Reuters) - Inflation in the U.S. "appears to be narrowing" and that should allow the Federal Reserve to cut interest rates later this year, Atlanta Fed President Raphael Bostic said in a policy essay released on Thursday.

After concern that inflation might stall at an elevated level, Bostic said recent data point to renewed progress, including the fact that the share of goods and services increasing at a greater than 5% annual rate had dipped below 20% - more akin to where it was before the COVID-19 pandemic and similar to the share seen when inflation was slowing fast last year.

"It's moving in the right direction," Bostic said of a metric he has singled out as one of his touchstones for the U.S. central bank's battle against inflation that spiked to a 40-year high in 2022.

Inflation remains "elevated," according to the Fed's most recent policy statement, with the personal consumption expenditures price index rising at a 2.7% annual rate in April. The Fed's inflation target is 2%, and there has been little progress in recent months.

PCE inflation data for May will be released on Friday.

Bostic said that as things stand, "I continue to believe conditions will likely call for a cut in the federal funds rate in the fourth quarter of this year." In later comments to reporters, he said that one reason to be "patient" with that initial cut is so that it comes after inflation is on a clear path back to 2%, and can be seen as the first of a series of reductions.

Investors expect the rate cuts will start in September, with two quarter-percentage-point reductions by the end of this year versus the single rate cut that Bostic and many other Fed policymakers now anticipate.

"I'm not locked in to any particular policy path," Bostic said. "There are plausible scenarios in which more cuts, no cuts, or even a raise could be appropriate. I will let the data and conditions on the ground be my guide."

And recent data on jobs and economic growth, he said, point to "an orderly deceleration in activity that will restore balance between demand and supply in the economy ... It's really Econ 101."

Businesses in his southeastern district, he said in a press briefing following release of the essay, still regard inflation as the "chief concern," with most saying that current hiring and employment levels are sustainable.

Bostic said his sense is that there is no "cliff" ahead for the job market, and that he believes the Fed can meet its inflation goal "with labor markets ... that are tight by historical standards."