"The markets are not healed, but I believe a lot of progress has been made," Poole said in an interview with Bloomberg Television. "You see a lot of the spreads narrowing, for example, the term Libor is more or less back to normal."

"A lot of banks and others are raising capital. We see the monoline insurance industry raising capital, getting things straightened out there. It's coming along."

As reported by Reuters.

Although a firming in the growth of economic activity after midyear now appears the most likely scenario, the outlook is subject to a number of important risks.  Further substantial declines in house prices could cut more deeply into household wealth and intensify the problems in mortgage markets and for those intermediaries holding mortgage loans.  Financial markets could remain quite fragile, delaying the restoration of more normal credit flows.  As observed in the minutes of its most recent meeting, the FOMC has expressed a broad concern about the possibility of adverse interactions among weaker economic activity, stress in financial markets, and credit constraints.

Financial disruptions have an important impact in terms of lending, and they actually have an impact in terms of spending ... These issues are something that we have to pay attention to and have been paying a lot of attention to.

From Q&A as reported by Reuters 

Kroszner demurred on whether the U.S. economy is in recession.

"There are some challenges in the economy right now," he said.

On signs of inflation, he said, "We have seen some numbers in recent reports that are higher than they were before," but he added that the Fed must be careful to honor its dual mandate that includes ensuring maximum employment along with price stability.

From Q&A as reported by Market News International

We have to be mindful of that fact that we have to create the conditions for employment growth, at the same time be careful that we don't stir the embers of inflation.

As reported by Reuters.

Right now we have a weak economy ... Yes, there is a lowering of expectations for growth but it is positive economic growth. And the forecast calls for the economy to start picking up pace as we go through the second half of this year.

From press Q&A as reported by Market News International

We have to be wary of the fact that we are navigating through an extremely narrow passageway here: with on the one side of us inflationary shoals and on the other the risk of weaker economic growth.

As reported by Reuters

The U.S. economy today is limping along. Some believe recession is at hand; others, and I include myself in this group, believe the economy will skirt recession. The difference in view may not be very large, as an economy growing at a barely positive rate will look and feel about the same as one with output falling slightly.

In present circumstances, monetary policymakers will need to be careful to react to evidence on the state of the economy and likely outlook for employment. The issue is likely developments in the labor market and not merely possible developments. At the same time, policymakers will have to remain conscious of the lessons of history with regard to inflation. Here again, likely developments and not just possible developments must be the focus of attention. Risk mitigation to counter costly possible developments is an important strategy, but taking out insurance against certain risks is not free.

You've got an industry here that's in depression ... But we have to be careful that we have monetary policy that is for the entire economy. We can't allow 5% of the economy to so dominate the monetary policy outcome that we forget about the other 95% of the economy.

From audience Q&A, when asked about the housing and residential construction downturn, as reported by Market News International

The potential for headwinds is integral to thinking about economic prospects over the next year or two. To the extent that these headwinds gain momentum, they suggest relatively modest growth for a time and the likelihood of increases in the unemployment rate. Their implications for inflation are not so clear, although I would note that the pace of inflation diminished in the early 1990s relative to its performance over the preceding several years.

I think there's a lot of inertia to (core) inflation. It's hard to get it to decelerate or
accelerate, ... My own view is core inflation will diminish over the next several years.

From press Q&A as reported by Market News International

We have a big inventory problem in the residential area and until that inventory gets worked out I think activity in that sector is going to be subdued and the financial difficulties will persist.

From audience Q&A as reported by Market News International

I believe that the Federal Reserve has been acting and will continue to act decisively, in the sense that our lowering of the federal funds rate target has reflected the evolution of the balance of risks to the macroeconomy. The disruption in financial markets poses a substantial downside risk to the outlook for economic growth, and adverse economic or financial news has the potential to cause further strains. In that light, the Federal Reserve's policy strategy is aimed at providing adequate insurance to help mitigate the risk of more-severe macroeconomic outcomes.

I think it is important to remember that the Federal Reserve has a dual mandate — working to foster financial conditions that help the economy obtain maximum sustainable employment and price stability. As the Committee noted in the policy statement following the January FOMC meeting, though downside risks to growth remain, we think the policy actions taken in January, in combination with earlier moves, should help promote moderate growth over time and mitigate the risks to economic activity. We also expect that inflation will moderate over time. Looking ahead, my policy views will depend on the evolution of these risks, as well as how developments influence the price stability component of our dual mandate over the medium term.