Inflation will fall back down to the Federal Reserve’s 2% target by early 2025, the San Francisco Fed said in a research note Friday.

Price increases, which reached a four-decade high this year, are moderating and will continue to do so as the U.S. central bank raises interest rates, Sylvain Leduc, research director at the San Francisco Fed, wrote in a note.

“The decline in inflation is expected to be gradual, reflecting the typical persistence in services inflation and lags in the effects of monetary policy,” Leduc wrote. “Overall, we expect inflation to be back at 2% by the beginning of 2025.”

Price pressures from both goods and services consumption are each already moderating, Leduc wrote. While the run up in housing prices, which led to an increase in rent costs, has cooled recently, the persistent gains will continue to weigh on inflation.

The Fed has been aggressively raising interest rates this year, including 75 basis-point increases in June and July, with a third such hike seen possible at its meeting this month. Policy makers have said their No. 1 priority is bringing inflation — which reached 6.8% in June according to the Fed’s preferred benchmark — back down to 2%. 

Fed Chair Jerome Powell has said the central bank’s cooling of the economy will likely bring some pain but may not tip the economy into a recession. Some economists have been skeptical of the Fed’s ability to execute this so-called soft landing.

“Financial markets do not fully appear to anticipate a recession in the near future, although the risk has clearly risen,” Leduc wrote.