(Reuters) - Federal Reserve Bank of Cleveland President Loretta Mester reiterated on Thursday that she believes the central bank will be able to lower interest rates this year, but she noted there is no urgency to act right yet.

Fed interest rate policy is in a "good place" to take stock of the economy's performance and the central bank has the "luxury" of waiting before acting on rates, Mester said in the text of a speech to be given before an event in London.

While Mester reiterated her expectation that inflation will continue to move back toward 2%, perhaps more slowly this year than it did last year, she also reiterated that she needs to gain confidence price pressures are in fact waning. She noted "at this point, I think the bigger mistake would be to move rates down too soon or too quickly without sufficient evidence that inflation is on a sustainable and timely path back to 2%."

But given the outlook, Mester, who has a vote on the rate-setting Federal Open Market Committee in 2024 but will retire later this year, still expects the central bank will lower its interest rate target range this year. That range is currently set at between 5.25% and 5.5%.

If the economy does what it is projected to do, when it comes to lowering rates, "I expect we will find ourselves in that position sometime later this year," she said. "My base case is that when we do begin to move rates down, we will do so at a gradual pace so that we can continue to manage the risks to both sides of our mandate."

Mester made her remarks as Fed Chair Jerome Powell spoke before a Senate committee in a second day of testimony on the monetary policy and economic outlook. Powell repeated his expectation that the Fed will be able to lower rates later this year if price pressures continue to ebb.

Mester also said in her remarks the Fed will slow before stopping its ongoing balance sheet winddown.