Two Fed officials warned Tuesday that interest rates will likely stay high for a long time.

Atlanta Fed President Raphael Bostic said Tuesday that he’s comfortable with rates in the current range of 5.25%-5.5%, but believes rates should be held at current levels well into next year.

“I think our policy is sufficiently restrictive to get to our 2% target,” Bostic told reporters. “My next decision is not when to cut, but how to assess how rapidly the economy will move to 2%, which is more about monitoring the degree of slope and slowdown and what’s happening on supply side and whether [it's] moving in ways that allow businesses to respond to elevated demands.”

Meanwhile, Cleveland Fed President Loretta Mester said in a speech Monday night that she thinks another interest rate hike is on the table and warned that rates could be held higher for "some time."

How long the central bank holds rates at heightened levels, she added, will hinge on the strength of the US economy.

“At this point, I suspect we may well need to raise the fed funds rate once more this year and then hold it there for some time as we accumulate more information on economic developments and assess the effects of the tightening in financial conditions that has already occurred,” Mester said in a speech in Cleveland.

Mester says the focus for the Fed is shifting to how long the Fed will hold rates around current levels.

“Now our task turns to ensuring that we keep monetary policy restrictive for long enough to be confident that inflation returns to our 2% goal in a timely way," she said. "We are not there yet.”

Mester said progress is being made on inflation, but the level of inflation remains too high.

Bostic says he’s in a place where he thinks the Fed can be patient and that he doesn’t expect the Fed to have to actively tighten policy, but rather tighten through a more passive manner by holding rates around current levels for a long time.

“I think there is some degree of passive tightening that we're likely to see and that's going to do a lot of the work for us,” he said.

He also put on the table the notion for holding rates higher for longer given how resilient the economy has remained in the face of the Fed’s 11 rate hikes.

“The economy has been far more resilient than most expected and so, the notion that there might need to be some more effective tightening through passive means might be exactly appropriate,” he said.

Right now, Bostic has penciled in one rate cut towards the end of next year. Bostic expects the economy to slow gradually; however, if the economy ends up slowing at a faster pace he said he’d be open to a different “trajectory of policy.”

Bostic says he’s comfortable with the Fed's pace allowing inflation to take its time returning to the central bank's 2% target, unless inflation expectations start to increase. Bostic doesn’t see inflation returning to 2% until the end of 2025.

The majority of Fed officials see raising rates one more time this year to a range of 5.5%-5.75% before holding rates at that level into next year.

The Fed has raised rates 11 times since March 2022 in the most aggressive rate-hiking campaign since the 1980s. While inflation has dropped, it remains around 4%, around double the Fed’s target.

Mester says she sees demand moderating and that supply conditions are improving. While the job market remains strong, the imbalance between demand for workers and supply is narrowing and companies are finding it easier to find the workers they need, she said.

Fed officials have repeatedly said they need to see supply and demand come back into better balance for inflation to drop.

Speaking on a call with reporters on Tuesday, Mester said the "relatively large" increase in the 10-year yield will bear close watching in understanding how much financial conditions have changed between the Fed's September and November meetings. The 10-year yield has risen roughly 40 basis points since the Fed's Sept. 20 policy decision.

"We raised the [fed] funds rate to change financial conditions and tighten financial conditions," Mester said. "We've seen [the] 10-year rate go up quite a bit since the last meeting. That is going to feed into ... my view on whether we need to raise the funds rate again."

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