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Fed's Mester: June still viable option for rate hike

Audit the Fed misguided: Cleveland Fed Pres.

Cleveland Federal Reserve President Loretta Mester told CNBC on Thursday that she still believes June is a "viable option" for an interest rate hike by the Fed because the economy is picking up steam.

That said, it doesn't necessarily mean she thinks the central bank should definitely lift off from zero at that time.

"I can't tell you today what I will or will not support in June. I want to see the data that comes in over time," the nonvoting member of the Federal Open Market Committee said in an interview with "Power Lunch. "

"We are data dependent in the sense of we look at incoming economic data, see how it affects our outlook and then set policy based on that."

The central bank has used the word "patient" in recent policy statements when referring to when it will begin to raise rates, and taking that language out will make June a viable option, Mester said. "Right now 'patient' is defined as no rate rise before two meetings."

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Fed Chair Janet Yellen testified to Congress on Tuesday that there would be no rate hike for at least the next couple of FOMC meetings.

Earlier this month, Mester told a bankers' group in Columbus, Ohio, that the U.S. economy is on course for a rate hike by June.

"The economy actually is picking up momentum," she told CNBC. "We've had strong labor market reports over the last six months."

While inflation is below the Fed's goal, she said Thursday's news on U.S. consumer prices was not a surprise. The Labor Department reported its Consumer Price Index fell 0.7 percent last month, the largest decline since December 2008. However, the core rate, excluding food and energy costs, "stabilized," she said.

"My forecast is for inflation to go back up to 2 percent by the end of next year," Mester said.

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She's also predicting 3 percent gross domestic product growth for 2015.

Auditing the Fed

Meanwhile, Mester backed Yellen's opposition to Congress' move to audit the Fed. The chair spent two days testifying before Congress and was grilled by Republicans about what they called the central bank's lack of transparency.

"I wish we were all as poised as Janet Yellen was," Mester said.

The "audit the Fed" movement is "misnamed, and it's also misguided," she added, noting that the Fed's financial statements are already audited.

"The Fed is accountable to Congress and the American public, and we behave in a manner that shows we are," she said.

—Reuters contributed to this report.