My own assessment is that with the economic progress we’ve made and that I expect to continue, the economy can handle an increase in the fed funds rate. In my view, if economic information continues to come in consistent with the outlook, then there will be a strong case that the conditions for liftoff have been met and it would be prudent for monetary policy to take a step back from the emergency measure of zero interest rates. A small increase in interest rates from zero is not tight monetary policy. And while I would expect some reaction in financial markets to the first move in interest rates in over six years, I wouldn’t expect financial conditions to tighten enough to affect the medium-term outlook.

One benefit of a gradual approach to normalization is that it will allow us to recalibrate policy over time as some of the uncertainties surrounding the longer-term level of interest rates, the economy’s potential growth rate, and the longer-run unemployment rate are resolved. But uncertainty about the longer-run destination is not an argument to delay taking the first step. In fact, in my view, given the economic outlook, starting the process to normalize interest rates will help ensure that we can, indeed, take a gradual approach. Delay risks having to move rates up more steeply in order to promote attainment of our goals over time.

While the dollar's appreciation and foreign weakness have been a sizable shock, the U.S. economy appears to be weathering them reasonably well, notwithstanding their large effects on certain sectors of the economy heavily exposed to international trade. Monetary policy has played a key role in achieving these outcomes through deferring liftoff relative to what was expected a little over a year ago. The October 2015 FOMC statement indicated that it may be appropriate to raise the target range for the federal funds rate at the next meeting in December, though the outcome will depend on the Committee's assessment of the progress--realized and expected--that has been made toward meeting our goals of maximum employment and price stability.

Most FOMC participants expect inflation to rise steadily from these low levels, coming in just a shade under the Committee’s 2 percent target by the end of 2017. My own forecast is less sanguine. I expect core PCE inflation to undershoot 2 percent by a greater margin over the next two years than do my colleagues. I expect core PCE inflation to be just below 2 percent at the end of 2018.
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More specifically, before raising rates, I would like to have more confidence than I do today that inflation is indeed beginning to head higher. Given the current low level of core inflation, some evidence of true upward momentum in actual inflation is critical to this assessment. I believe that it could be well into next year before the headwinds from lower energy prices and the stronger dollar dissipate enough so that we begin to see some sustained upward movement in core inflation. After liftoff, I think it would be appropriate to raise the target interest rate very gradually. This would give us sufficient time to assess how the economy is adjusting to higher rates and the progress we are making toward our policy goals.

All future committee meetings -- including December’s -- could be an appropriate time for raising rates, as long as the economy continues to improve as expected.

The public or market perceptions were that we had completely moved off 2015, and I don’t think that was accurate. I think we’re okay now, but I think this is hard. This is going to continue to be hard. Everybody wants clarity.

Addressing whether the Fed should hike interest rates next month, the dovish Fed official acknowledged, "We've indicated that conditions look like they could be ripe of an increase."

"[But] my continued preference for more delay or a shallower path ... [is] my uncertainty over whether ... inflation is going to get up to our 2 percent objective within reasonable amount of time," he said on "Squawk Box."

“In October, the committee removed the key sentence citing global factors and suggested that the zero interest rate policy could be ended soon, depending on incoming data,” Bullard said Friday in St. Louis. “The market-based probabilities of a near-term end to the zero interest rate policy have increased.”

Though my assessment of the Taylor framework elements leads me to the view that liftoff will soon be appropriate, I am not concerned that the FOMC is behind the curve. Liftoff remains a close call. A relatively small adjustment in an estimate of the neutral rate, or revisions in my forecast of how quickly remaining output and inflation-target gaps might close, could quite easily point to a longer period for a zero funds rate.

What the committee has been expecting is that the economy will continue to grow at a pace that's sufficient to generate further improvements in the labor market and to return inflation to our two percent target over the medium term. And if the incoming information supports that expectation, then our statement indicates that December would be a live possibility, but importantly, that we have made no decision about it.

Now, it is as you asked about the timing of such a move. The committee does feel that moving in a timely fashion, if the data and the outlook justify such a move, is a prudent thing to do because we will be able to move at a more gradual and measured pace. We fully expect that the economy will evolve in a such a way that we can move at a very gradual pace and of course after we do so, we will be watching very carefully whether our expectations are realized.

So, when my colleague, Governor Brainard, mentions that inflation is low, if we were to move, say in December, it would be based on an expectation, which I believe is justified, that with an improving labor market and transitory factors fading, that inflation will move up to two percent.

But of course, if we were to move, we would need to verify over time that expectation was being realized, and if not, to adjust policy appropriately. I think I'd also like to emphasize that I know there's a great deal of focus on the initial move. It's been a long time that interest rates have been at zero, but markets in the public should be thinking about the entire path of policy rates over time.

And the committee's expectation is that will be a very gradual path and of course will depend on the actual performance of the economy.

New York Fed President William Dudley, addressing reporters, said he would "completely agree" with Fed Chair Janet Yellen who had earlier said December is in play for a policy tightening if the economic data points to further improvement in the labor market and to a rebound in inflation.

"There are certain aspects of the U.S. outlook that are encouraging. The improvement in the labor market has been extremely steady," said Brainard, who last month argued that the Fed should hold off until it was clear that a global slowdown would not push the U.S. recovery off course.

"There are still margins of slack in the U.S. labor force but we've certainly made some progress there," Brainard told a conference organized by the European Central Bank.

But wage growth has not been in line with the rise in employment, Brainard said, calling this trend puzzling. She noted that core inflation has remained below target and needed to be carefully monitored.

Brainard also singled out the dollar's appreciation over the past year, which has led to a "material" tightening of conditions.

"If you look at the cross currents, and one measure of those is the extent to which the currency has appreciated as expectations of divergence have grown, we have seen about 15 percent broad real appreciation in the exchange rate over the past year, which is a drag on prices and exports. We've already seen by that measure some material tightening in the United States."

At [the October 27-28] meeting, the Fed removed language it had inserted in its September statement expressing concern that global weakness could hinder U.S. growth and further depress inflation. Until China's surprise devaluation of its currency on Aug. 11 sent financial markets into a tailspin, the Fed had been expected to begin raising rates in September.

In his interview with the AP, Williams said the Fed had been correct to note these developments in its September statement. But since then, he said, markets have stabilized.

"What has happened in the last six weeks is that volatility has come down," Williams said. "I think the uncertainties, risks, seem to have ebbed."

When we balance out for the year as a whole, we are continuing on a trajectory of trend growth in this country.

I dissented because I believe that an increase in our interest rate target is needed, given current economic conditions and the medium-term outlook. My assessment is essentially unchanged from the Committee’s September meeting, at which I also dissented. My reasoning was based on my belief that with the steady growth in output and household spending that we have been observing — and expect to continue — the real (inflation adjusted) rate of interest should be higher than its current level of less than negative 1 percent. My assessment was also supported by labor markets that had tightened considerably and my confidence that inflation will return to our 2 percent objective after the temporary effects of low energy and import prices have passed.