I believe as we move into the second half of the year with economic activity growing at trend or slightly above trend, the unemployment rate below its natural rate, and price pressures starting to assert themselves, policy can truly normalize. I mean this in the sense that we can move away meaningfully from the zero lower bound and that our reaction to incoming data can return to a more historical pattern.

That would not necessarily imply an overly aggressive path for policy. Thus, it will take fewer rate hikes to attain neutrality in policy than it would have 15 years ago. By historical standards, that in itself implies a somewhat shallower path for interest rates than was typical of past recoveries.

The move in December I think was the right move, but I think we are going to have to be slow and patient – doesn't mean standing still – and I think we will make another move sometime in the not too distant future if GDP recovers in the way I expect. But I think people should expect it is going to be a slow, patient, gradual normalization. And so, no, I don't think December is a mistake.

“There is a point at which I will be advocating to take the next step, but it's not now, by the way.”

"We'll know soon enough. We're not going to know by April though," he said, arguing that either the jobs figures in the quarter will be revised lower or the gross domestic product (GDP) growth estimates will be revised higher, from less than 1 percent now.

Asked whether tightening policy at a June 14-15 meeting is an "open question", he agreed. "I wouldn't be moving today if you ask me," Kaplan said. "But I'm certainly very open-minded to make a judgment in advance of June and I will."

Given my outlook and risk assessment, I judge that a cautious and gradual approach to policy normalization is appropriate. Moreover, caution is also called for because of our limited ability to reduce the policy rate to respond to adverse developments, recognizing that we could also use forward guidance and balance sheet policies to provide additional accommodation if that proved warranted.

“I certainly don’t regard it as a mistake,” she said during the panel discussion at the International House in New York. “We took one step.”

[Yellen said] that the committee is not aiming for a level that will drive inflation above the Fed’s 2 percent target.

“But it’s also the case that 2 percent is our goal, and it’s not a ceiling," she added.

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.

Although estimates vary both quantitatively and conceptually, the evidence on balance indicates that the economy's "neutral" real rate--that is, the level of the real federal funds rate that would be neither expansionary nor contractionary if the economy was operating near its potential--is likely now close to zero...

If these headwinds gradually fade as I expect, the neutral federal funds rate will also rise, in which case it will, all else equal, be appropriate to gradually increase the federal funds rate more or less in tandem to achieve our dual objectives. Otherwise, monetary policy would eventually become overly accommodative as the economy strengthened.

“You get another strong jobs report, it looks like labor markets are improving, you could probably make a case for moving in April,” Bullard said in a Bloomberg interview in New York Wednesday, in which he criticized the Fed’s practice of publishing officials’ projections on the path of interest rates. “I think we are going to end up overshooting on inflation” and the natural rate of unemployment, he said.
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“We’re in reasonably good shape” with regard to monetary policy but “the odds that we will fall somewhat behind the curve have increased modestly,” Bullard said. “We are going to get some overshooting here in the relatively near term” on unemployment “that might cause the committee to have to raise rates more rapidly later on.”

Bullard said there was a “credible case” to be made to move in March. “We didn’t do it -- so now we can look at April and see what the data looks like when we get to April,” he said.

Philadelphia Fed President Patrick Harker, a relatively new addition to the U.S. central bank, said that while he supported last week's decision by his colleagues to leave policy unchanged, "there is a strong case that we need to continue to raise rates."

"I think we need to get on with it," said Harker... "This economy is really quite resilient to a lot of the headwinds (including the strong dollar), so if that continues I would be supportive of another 25 basis point rise."

"I am not a two (rate) rise person. I'd rather see (more hikes this year)," he added.

That puts Harker in the hawkish camp of Fed officials, even though last month he urged patience and said more hikes could come in the second half of the year.

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"Barring some unforeseen headwinds which are always possible, then I think it's appropriate to consider every meeting live ... and to consider another 25 basis-point rise" if employment and job growth improves and core inflation rises as they recently have, he said.

I am not a two rate-hike person. I'd rather see more (this year).

"I used to sort of look at these dots and think that they were a bit too restrictive for what I thought was appropriate," Evans said, referring to a chart of Fed officials' individual rate-hike forecasts, each represented by a dot. "I now think that those dots is really a pretty good setting" for monetary policy."

In my opinion, the outlook for 2016 and into 2017 swings on the question of whether domestic demand will in fact hold up.

Overall, I see the recent data as positive. I believe a forecast of sustained moderate growth momentum is realistic and remains the likely scenario. In my opinion, there is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April.

Prudent policy suggests edging the policy rate and the balance sheet toward more normal levels.

In today's circumstances, policy could usefully follow two simple guidelines. First, we should not take the strength in the U.S. labor market and consumption for granted. Given weak and decelerating foreign demand, it is critical to carefully protect and preserve the progress we have made here at home through prudent adjustments to the policy path. Tighter financial conditions and softer inflation expectations may pose risks to the downside for inflation and domestic activity. From a risk-management perspective, this argues for patience as the outlook becomes clearer.