01:41 PM EDT, 09/04/2024 (MT Newswires) -- Policymakers cannot afford to wait for inflation to drop to their 2% target before beginning to reduce interest rates as that would risk "labor market disruptions," Federal Reserve Bank of Atlanta President Raphael Bostic said Wednesday.

The central bank's Federal Open Market Committee tightened monetary policy by 525 basis points from March 2022 through July 2023 in a bid to tame inflation, but has since held interest rates steady, with its latest pause coming late in July.

"The most recent monthly reports bolster my confidence that inflation is likely on a sustainable path to the committee's 2% objective," Bostic -- an FOMC voting member this year -- said in a message posted on the Atlanta Fed's website.

However, Bostic said he's "not quite prepared" to declare victory over inflation yet. "History shouts to us that loosening monetary policy prematurely is a dangerous gambit that can rekindle inflation and entrench it in the economy for many months or even years."

He warned that policymakers "must not" maintain a restrictive monetary policy stance for too long. "I believe we cannot wait until inflation has actually fallen all the way to 2% to begin removing restriction because that would risk labor market disruptions that could inflict unnecessary pain and suffering."

Last month, Fed Chair Jerome Powell said the "time has come" to start easing monetary policy, though the timing and extent of rate cuts will depend on incoming data.

Markets are currently pricing in a 57% probability that the FOMC will reduce interest rates by 25 basis points Sept. 18, with the remaining odds in the favor of a more aggressive 50-basis-point cut, according to the CME FedWatch tool.

The Bureau of Labor Statistics is expected to report Friday that the US economy added 164,000 jobs in August, according to a Bloomberg-compiled consensus. Last month, BLS data showed the economy added fewer jobs than projected in July, while the unemployment rate unexpectedly rose. That report sparked recession concerns that have abated since then.

"Right now, I think we are in a generally favorable position," Bostic said Wednesday. The labor market remains "stable," while policymakers are moving closer to their price stability goal. However, other indicators are showing a "broader macroeconomic slowing" amid weakening demand, he added.

"Rest assured, I do not sense a looming crash or panic among business contacts," Bostic said. "However, the data and our grassroots feedback describe an economy and labor market losing momentum."

The US manufacturing sector remained in contraction territory in August as demand weakness weighed on new orders, according to data published Tuesday by the Institute for Supply Management and S&P Global (SPGI).