The official told reporters after his remarks to the conference that “I don’t comment on the number” of rate increases he thinks is likely for this year, saying forecasts that the Fed will release at the June FOMC meeting would convey that information.

Kaplan said he’d be looking for continued progress on the Fed’s dual mandate for price stability and full employment to support hiking next month. “I just want to see continued progress,” he told Kathleen Hays in an interview on Bloomberg Radio. “What I don’t want to see is deterioration in either of those measures. That would give me pause.”

“If we [raised rates] aggressively, we would be setting the brakes on the economy,” he said. “You will see us move when the data allows.”

San Francisco Federal Reserve President John Williams said that he would support an interest-rate hike in June as long as he sees continued progress on the economy, inflation and jobs.

If inflation keeps rising toward the Fed's 2-percent target, economic growth rebounds toward his 2-percent forecast for the year, and job gains continue to be strong, "it would be appropriate" to raise rates in June, Williams said in an interview on Bloomberg Radio.

The United States could see two further interest rate rises this year but uncertainties abound including the impact on the U.S. economy should Britain vote to leave the European Union, Atlanta Fed President Dennis Lockhart said on Tuesday.

"Two rate hikes are certainly possible. We have enough (Fed policy) meetings remaining but it depends entirely on how the economy evolves," Lockhart told reporters in Amelia Island, Florida.

Based on what I have seen, I am not going to be advocating a move in April -- I have changed my view.

Hays: Let's talk about the Fed's reaction function broadly, but also specifically to Dennis Lockhart. You also said not too long ago you were forecasting you said two rate hikes this year, the possibility of three.

So let's start with what do you have to see, Dennis Lockhart, to be on board for the next rate hike?

Lockhart: I am -- let me put it this way -- I am framing my decisions related to let's say April, June, and thereafter on four principal criteria.

• The first is the growth numbers, and how growth seems to be trending. Most importantly, are we sustaining momentum in terms of growth?
  
  
• The second would be the employment numbers. And I would be using a kind of threshold of 200,000 payroll jobs a month as a good indicator of a continuing, strong job picture, employment picture.
  
  I would say at the same time that as we move forward, if we continue to make progress in the economy, you would expect naturally that that jobs number would decline. But for the moment, I'm saying 200,000 a month as a kind of threshold number.
  
  
• The third aspect would be inflation. And I'm paying particular attention right now to core inflation and trimmed mean cuts of inflation to try to understand the underlying strengths of upward price pressure. So that's the third.
  
  
• And the fourth would be inflation expectations. And the direction that inflation expectations apparently are going or the explanation for break evens that seem to be declining.

When the Fed has delayed needed policy adjustments in the past, it has often been in response to financial market developments that turned out, with hindsight, to be false signals. The record shows that if we delay too long or raise rates too slowly, we run the risk of needing to make larger, potentially more disruptive rate increases in the future. Given the extent to which global risks to the United States have subsided, prudence suggests staying the course with a gradual sequence of rate increases.

Mr. Kaplan said the feedback loop between Fed policy and moves in foreign-exchange markets was one reason “normalization” would be very challenging for the central bank. The best way for the Fed to approach “normalization” would be gradually and patiently, he said.

One of the challenges for monetary policymakers is making low-frequency policy in a high-frequency world. We need to extract the signal about where the economy is headed from economic and financial market information that can often be noisy.

My own forecasts tend to have some consistency over time because I try to stay focused on underlying fundamentals and the medium-run outlook.

I do not think the FOMC is behind the curve, but while there are risks to moving too soon, there are also risks to waiting too long to take the next steps on the normalization path given the lags with which monetary policy affects the economy. We live with uncertainty and one could always make the case that we should wait to act until we gather more information.
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As we've seen over this expansion, things can take unexpected turns, and we want policy to appropriately react to changes in the medium-run outlook. The policy path I foresee as appropriate today is slightly more gradual than the path I foresaw in December, partly because of the slight downward revision to my growth forecast but mainly because I now estimate a lower longer-run equilibrium interest rate. But these are small changes. The important point is that the economy has shown considerable resiliency, and in my view, the outlook and risks around the outlook will likely support gradual reductions in the degree of accommodation this year.

Liesman: But the markets right now just pricing in one [hike in 2016], and it's consistently been below. The guidance seems to be, you know, you start a normalization process which makes people think that you're heading up towards something that's higher than zero and perhaps higher than the 37 base points where you are now but right now it seems like all bets are off that you could be in this permanent neutral here.

Evans: Well, so look, the dot charts give the current best assessment of what we think the economy is doing and the appropriate monetary policy. You're right. We've used the term "normalization, renormalization" to kick things off and eventually we certainly want to get the funds rate up to a normal level, that 3% 3.5% rate, but look I have got to tell you I thought the chair was terrific yesterday when she said, you know, the dots aren't set in stone. There's a lot of conditionality that will depend on how things play out. We did use this term normalization, I think that's still correct but that doesn't mean we're going to get there tomorrow.

In comments to reporters Kaplan declined to rule out a rate increase at the Fed's next meeting on April 26-27.

"I would make the point generally, I think it is a good practice to assume that all eight Fed meetings are live," he said.

Financial market participants appear to recognize the FOMC's data-dependent approach because incoming data surprises typically induce changes in market expectations about the likely future path of policy, resulting in movements in bond yields that act to buffer the economy from shocks. This mechanism serves as an important "automatic stabilizer" for the economy. As I have already noted, the decline in market expectations since December for the future path of the federal funds rate and accompanying downward pressure on long-term interest rates have helped to offset the contractionary effects of somewhat less favorable financial conditions and slower foreign growth. In addition, the public's expectation that the Fed will respond to economic disturbances in a predictable manner to reduce or offset their potential harmful effects means that the public is apt to react less adversely to such shocks--a response which serves to stabilize the expectations underpinning hiring and spending decisions.

Such a stabilizing effect is one consequence of effective communication by the FOMC about its outlook for the economy and how, based on that outlook, policy is expected to evolve to achieve our economic objectives. I continue to strongly believe that monetary policy is most effective when the FOMC is forthcoming in addressing economic and financial developments such as those I have discussed in these remarks, and when we speak clearly about how such developments may affect the outlook and the expected path of policy. I have done my best to do so today, in the time you have kindly granted me.

"We've been missing our 2 percent inflation goal for three and a half years or so, global disinflationary factors are still holding inflation down...The data to me isn't so much about the labor market continuing to improve, I'm very positive on that, it's more about inflation moving back to 2 percent in the context of very strong headwinds," he explained, citing the strong dollar and low commodity prices.