Former Cleveland Federal Reserve Bank President Loretta Mester said the Federal Reserve may need to raise interest rates this year. She expressed concern that the 2% inflation target has not been met for more than five years, and warned of inflationary pressures from higher oil prices amid worsening Middle East tensions and the AI boom. She pushed back against Fed Chair Warsh's view that the AI revolution could boost productivity and allow rate cuts in the future, and asserted that current monetary policy is not restrictive given the economy's resilience. She expects the Fed to discuss rate hikes at the FOMC meeting later this month, and said rising oil prices could warrant a hike, while noting that the slowdown in June CPI growth means a hike is not needed this month.