“I would say the flight to safety is a bullish factor for the U.S. Increased global uncertainty might be a bearish factor,” Bullard told reporters after delivering a speech in St. Louis on Tuesday. “They roughly offset so it would not change the timing of any rate hike. I would say September is very much still in play.”

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“Every meeting is in play depending on the data. Whether we would get enough positive data to push the committee to make a decision in July, I don’t know,” said Bullard, who next votes on the FOMC in 2016. “The tone of the data has been stronger in recent weeks. We are staying data dependent.”

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’’I would like more evidence that the second quarter is rebounding. I have seen some evidence. I would like to see more,’’ said Bullard, before adding “I have not become a dove.”

As we consider the decision of policy rate normalization, we are mindful of possible spillovers to other economies, including emerging market and developing economies. In an interconnected world, fulfilling the Federal Reserve's objectives under its dual mandate requires that we pay close attention to how our own actions affect other countries and how developments abroad, in turn, spill back into U.S. economic conditions.

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In order to minimize the likelihood of surprises and thus avoid creating unnecessary market and policy volatility, we are striving to communicate our policy strategy clearly and transparently. Beyond communicating our intentions, we also emphasize that monetary policy normalization in the United States will occur in the context of a strengthening U.S. economy, which should benefit the emerging market and developing economies.

Still, one feature of the era after the first increase of the federal funds rate will, in all likelihood, be higher U.S. and global interest rates compared with their extraordinarily low levels of recent years. The increase in global interest rates could cause investors to adjust their portfolios, triggering capital outflows from emerging market and developing economies.

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Once we begin to remove policy accommodation, the Committee's assessment is that economic conditions will likely warrant raising the federal funds rate only gradually. Thus, we expect that the target federal funds rate will remain for some time below levels viewed as normal in the longer run. But that is only a forecast, and monetary policy will, in practice, be determined by the data--primarily data on inflation and unemployment.

The Fed likely would raise rates at a gradual pace, Mr. Powell said, in part because inflation is expected to continue undershooting the central bank’s 2% annual target. The precise timing and pace of rate increases will depend on incoming economic data, he said, and officials don’t want to “fall into a pace of mechanical increases.”

Mr. Powell said his forecast “calls for liftoff in September and for an additional increase in December” and further increases of about one percentage point a year are likely. But he cautioned that rate forecasts are accompanied by great uncertainty.

First, the actual pace is going to be dependent on the path of the economy. The chair has been clear, and I certainly agree, that it is not our intention, is not my intention, to fall into a pace of mechanical increases at predictable intervals.

That happened for, I guess, 17 consecutive meetings of 25 basis point increases in the last tightening cycle. It’s not our intention to repeat that, but rather to be more responsive to incoming data.

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[I]t depends on the data and I would say, you know, my own forecast calls for liftoff in September and for an additional increase in December.

I would want to stress that, as I said, I think September liftoff for me is close to a coin flip. It depends on the data. It will depend on how labor market data, growth data, inflation data, global events unfold. And December is even more, you know, even more uncertain given where we are.

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So, markets have been doing that {pricing in a more gradualist path than implied by the dot plot} for a while. The market has been pricing at a lower path and continues to do so, although I think we’re getting into closer alignment. I assume that we will get into pretty close alignment by the time of lift-off. We’re trying to be as transparent as possible about how we’re thinking about interest rates and the economy in all the factors we consider.

There’s so much attention paid to this I think it’s unlikely the FOMC would reach a point of seriously considering a rate increase, and that that wouldn’t be widely understood in the markets. And certainly, it is our design is to be as transparent as possible. That’s the part of it that we control. We have to make these decisions, and, you know, we control our communication and our transparency, and I think we’re in a pretty good place on that right now.

Speaking to reporters, Cleveland Fed President Loretta Mester cited recent labor market improvement, wage gains, stability in the dollar and oil prices, and expectations that inflation will start to rise as reasons for confidence.

"All those things together paint a picture to me that the economy can withstand a small rate increase," said Mester, who has long called for an earlier tightening than many of her colleagues.

"I do think the economy can support a 25-basis-point increase in interest rates," she added. "However I also understand the argument that getting a little more confirming data is reasonable as well."

A Bloomberg News story added that she said that she thought the long-run level of the funds rate was likely to be 3.75%.

“Definitely my own forecast would be having us raise rates two times this year, but that would depend on the data," San Francisco Fed President John Williams told reporters at the bank's headquarters.

"I still believe this will be the year for liftoff, and I still believe that waiting too long to raise rates poses its own risks," Williams said in a speech earlier. "I see a safer course in starting sooner and proceeding more gradually."

Let me emphasize that the importance of the initial increase should not be overstated. The stance of monetary policy will likely remain highly accommodative for quite some time after the initial increase in the federal funds rate in order to support continued progress toward our objectives of maximum employment and 2 percent inflation.

[W]e continue to anticipate that it will be appropriate to raise the target range for the federal funds rate when the committee has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term... On both of these fronts, as I noted, we have seen some progress. Even so, the committee judged that economic conditions do not yet warrant an increase in the federal funds rate. While the committee views the disappointing economic performance in the first quarter as largely transitory, my colleagues and I would like to see more decisive evidence that a moderate pace of economic growth will be sustained, so the conditions in the labor market will continue to improve and inflation will move back to 2 percent.

The median projected rate in 2017 remains below the 3.75 percent or so projected by most FOMC participants as the longer-run value of the federal funds rate, even though the central tendency of the unemployment rate by that time is slightly below its estimated longer- run value and the central tendency for inflation is close to our 2- percent objective... Participants provided a number of explanations for the federal funds rate running below its normal longer-run level at that time. These included, in particular, the residual effects of the financial crisis, which are likely to continue to constrain spending and credit availability for some time.

But I want to emphasize sometimes too much attention is placed on the timing of the first increase in the federal funds rate. And what should matter to market participants is the entire trajectory, the entire expected trajectory of policy.

[W]e communicated in our minutes that the committee has an intention to make sure that ... overnight repos are available in large quantity at liftoff to ensure that we have a smooth liftoff, that there'll be an elevated level of provision of overnight RRP. However, it is our expectation and plan that fairly quickly after liftoff, we will reduce the level of the overnight RRP facility, and we have a variety of ways in which we can do that.

The burden is still on the data, and if oil prices stabilize, tepid inflation data will likely abate and help open the door to central bank action, he said. Oil prices are the main reason for inflation weakness and it is likely the strong declines seen in recent months wont continue, which means the strong drag they have imposed on headline inflation, which is well below the Feds 2% target, will almost certainly abate over time, [Bullard] said.

These labor markets are improving so rapidly that I think unemployment will be down below 5% in the second half of this year so if you're sitting around and you haven't even come off zero and the unemployment rate has come down below 5% that seems a little bit extreme to me.

Mr. Plosser, speaking to reporters, again argued in favor of the Fed raising short-term rates off of their current near zero reading sooner rather than later. He also said the Fed needs to remove from its official policy statement its current commitment to be patient on the timing of rate rises.

Mr. Plosser also told reporters that he could see the Feds overnight target rate rising to 1% to 1.5% by years end. He noted that it would be better to get started on rate rises soon so that they can be gradual.

WSJ: Can you describe the economic setting that will convince you it is time to start raising rates?

MESTER: OK. So Ill just say right off, I want June to be a viable option. Were close to our goals. I do think that monetary policy needs to be forward- looking. I think were going to have to move before we reach our goals. And I think monetary policy is very, very accommodative. And so starting to move interest rates up makes sense.

The exact timing is going to depend on the data. Membership of the committee is going to make a decision about that. But I would be comfortable moving rates up in the first half of the year.
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WSJ: If you want June to be a viable option, then patient has to be altered in some way in the March statement.

MESTER: It is a natural conclusion.