Cleveland Fed President Loretta Mester to retire next June

Federal Reserve Bank of Cleveland President Loretta Mester announced Wednesday that she will retire June 30 of next year in accordance with the Fed's mandatory age and length-of-service policies.

The Cleveland Fed has formed a committee of existing board members to conduct a search for a new president.

Mester, who just turned 65, is not currently a voting member of the Fed committee that decides on the direction of interest rates, but she will be next year. She assumed her role as president and CEO of the Cleveland Fed in June 2014.

Fed rules require regional bank presidents to serve a 10-year term if they were appointed after turning 55, a situation that applies to Mester. They also have to retire by age 65 if they were appointed before turning 55.

Long one of the most hawkish members of the Fed's rate-setting committee, Mester has most recently swayed towards an additional hike as the central bank decides whether to raise rates further.

Mester said last month she still views inflation risks to the upside, pointing to higher oil prices since July that could seep into core prices and higher gas prices that could stall progress on bringing down inflation.

Whether the Fed’s benchmark policy rate needs to move higher than its current level and for how long it needs to stay restrictive will hinge on how the economy evolves, she has said.

The Federal Reserve last week voted to hold interest rates steady for the second meeting in a row, while still keeping the door open to interest rate hikes. The current rate is the highest in 22 years.

Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards

The central bank has projected one more rate hike this year and indicated that rates would be held at elevated levels for a while.

Prior to being named president and chief executive officer of the Federal Reserve Bank of Cleveland, Mester had been executive vice president and director of research at the Federal Reserve Bank of Philadelphia.

She joined the Philadelphia Fed in 1985 as an economist, became senior vice president and director of research in 2000, and executive vice president and director of research in 2010.

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