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Fed's Mester sees 2015 rate rise, confident on inflation

Loretta Mester, President and CEO of the Federal Reserve Bank of Cleveland, walks with James McAndrews (L), vice president of the Federal Reserve Bank of New York, as they arrive for the opening reception of the Jackson Hole Economic Policy Symposium, in Jackson Hole, Wyoming August 21, 2014. REUTERS/David Stubbs

NEW YORK (Reuters) - The U.S. Federal Reserve will likely raise interest rates next year since inflation, while a bit low now, remains stable and should rise to target by the end of 2016, a top Fed official said on Thursday.

Loretta Mester, head of the Cleveland Fed, told reporters the central bank needs to be "forward looking" in deciding when to tighten policy based on inflation. She added that market volatility is to be expected as a rate-rise approaches.

(Reporting by Jonathan Spicer; Editing by Lisa Shumaker)