US Federal Reserve
US Federal Reserve could increase interest rates earlier than expected. Reuters

The US Federal Reserve could raise interest rates in the next six months, according to a top official.

Cleveland Fed President Loretta Mester told Fox Business Network television channel that the central bank is expected to raise interest rates in the first half of 2015, as the economy is currently on a "very firm footing."

"The Fed is preparing the public and the markets," she said in an interview.

"I do believe that inflation will gradually move back to our target, so I could imagine interest rates going up in the first half of the year."

Mester said the outlook for the economy is "pretty good" with growth rate of around 3% in 2015 and inflation heading back up toward the Fed's 2% target while unemployment continues to decline.

She noted that rate hike will still depend on favourable unemployment and inflation levels. Mester, who was appointed at the Cleveland Fed in June, was a voter on the policy-setting Federal Open Market Committee in 2014. She does not have a vote on policy in 2015.

As "the real rate of return on capital goes up, we want to make sure that our short term policy rate is moving up with it," she added. "There is no predetermined formula."

In the aftermath of the 2008 financial crisis, the US Fed lowered interest rates to near zero levels in significant implications for the global economy.

Given the recovery in the US economy with better labour and inflation conditions, economists and investors expected a rate hike in mid 2015.