Federal Reserve Bank of Cleveland Loretta Mester said in an interview with The Nikkei on Tuesday that the U.S. economy can handle a small increase in interest rates this year.

"We can handle a small increase in interest rates, because policy will still remain very accommodative," she said.

Mester noted that she thinks that volatility in financial markets has no impact on the U.S. economy.

"In my view, the trajectory of my outlook didn't change much from those risks, but I did mark them down as downside risks to the forecast," she said.