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.

I dissented because I believe that an increase in our interest rate target is needed, given current economic conditions and the medium-term outlook. Household spending, which has grown steadily since the recession, has accelerated in the last couple of years. Labor market conditions have steadily improved as well and have tightened considerably this year. With the federal funds rate near zero and inflation running between 1 and 2 percent, real (inflation-adjusted) short-term interest rates are below negative 1 percent. Such exceptionally low real interest rates are unlikely to be appropriate for an economy with persistently strong consumption growth and tightening labor markets.

Market-based measures of longer-term inflation expectations have fallen recently to unusually low levels, a decline that I believe reflects that kind of increased downside risk.

There are a number of possible actions that I would have seen as responsive to the evolution of the data. Let me describe two in particular. First, the Committee could have continued to buy $15 billion of longer-term assets per month. Second, it could have committed to keeping the target range for the federal funds rate at its current level at least until the one- to two-year-ahead inflation outlook has risen back to 2 percent, as long as risks to financial stability remain well-contained. These actions would have put upward pressure on the demand for goods and services and on prices. Just as importantly, these actions would have communicated that the Committee is determined to do what it takes to push inflation back to 2 percent as rapidly as is possible.

Well, I think it's very natural that the committee should have a range of opinion about a decision as crucial as what is the right time to begin to normalize policy. And we do have a range of views in the committee. I don't consider two dissents to be an abnormally large number. Presidents Plosser and Fisher have been quite clear in all of their speeches recently in stating that they think the time has come to begin normalizing policy. I think they perhaps have some concerns that, if we don't begin to do so soon, that inflation will pick up above levels we -- that they would consider desirable or that they have some financial stability concerns. But the committee adopted today's statement by an overwhelming majority. And I don't consider the level of dissent to be surprising or very abnormal.

Asman: So is Richard Fisher becoming a dove because he didn't dissent? Let's ask him.

Richard Fisher is Federal Reserve Bank of Dallas CEO and president -- you're not often called a dove, you have to admit that. But people were surprised that -- that you weren't the dissenting voice. And, in fact, here's what Mr. Plosser said about why he was a dissenter. He said, "The funds rate setting remains well behind what I consider to be appropriate given our goals."

Do you disagree with President Plosser on that?

FISHER: Well, first, David, just so you know, ornithologically speaking, doves are members of the pigeon family. I'm nobody's pigeon.

ASMAN: OK. There you go.

FISHER: I'm not, OK? So we've got to make that clear.

“Pulling back on accommodation as inflation is sinking is not the right combination,” Bullard, who votes on monetary policy this year, said today in a Bloomberg Television interview with Michael McKee to air July 15. “I’d like to see us do more” to ensure inflation doesn’t continue to slow.

Bullard last month dissented against a pledge by the Federal Open Market Committee to maintain its current level of bond buying, saying the panel should “signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings.”

Price gains have been “very low,” Bullard said today. “I’d at least like to see inflation tick up a little or get some kind of reassurance” that it “will come back toward our target.”

I dissented from these Committee actions and have expressed my concerns at length elsewhere. Briefly, as I’ve touched on today, I think that further monetary stimulus is unlikely to materially increase the pace of economic expansion, and that these actions will test the limits of our credibility. At some point, we will need to withdraw stimulus by raising interest rates and reducing the size of our balance sheet, and the larger our balance sheet, the more vulnerable we will be to seemingly minor miscalibrations in policy. Accordingly, I see an increased risk, given the course the Committee has set, that inflation pressures emerge and are not thwarted in a timely way.

In my view, the supply of bank reserves is already large enough to support the economic recovery, and the benefits of further asset purchases are unlikely to be sizeable. The effects on longer-term interest rates are uncertain and likely quite small, and the potential to boost job creation seems quite limited, given the fundamental impediments that appear to be restraining growth now. At the same time, it’s important to recognize the potential costs of additional asset purchases. A larger Fed balance sheet will increase the risks associated with the timely and appropriate withdrawing of monetary stimulus by raising interest rates and selling assets.

My assessment was that the costs associated with additional asset purchases outweighed the expected benefits, and thus, I dissented.

"It should be pretty clear that this committee is straining to provide as much stimulus as possible without endangering our price-stability credibility,” Lacker told CNBC in an interview. “My worry, and the reason I dissented on this and the asset purchases, is that we seem to be willing to test the very limits of that credibility."

 Like many private sector forecasters, the FOMC has overestimated the strength of the recovery over the past two years. Some have suggested that the unexpected slowness of the recovery is a justification for the FOMC’s increasing the level of monetary accommodation over the past couple of months. But I disagree with this argument. I’ve just described why the FOMC should respond to improvements in economic conditions and outlook with a reduction in the level of monetary accommodation. Logically, if the economy recovers much more slowly than expected, then the FOMC should respond by reducing the level of monetary accommodation much more slowly than expected. The FOMC should only increase accommodation if the economy’s performance and outlook, relative to the dual mandate, actually worsens over time.

I believe that the FOMC’s ultimate effectiveness relies critically on its communication and the credibility of that communication. I’ve dissented at the last two meetings because I believe that the Committee’s decisions at those meetings diminish that requisite credibility.

In response to [improvement] in economic conditions, the Committee should have lowered the level of monetary accommodation over the course of the [past] year. Instead, through actions taken at its last two meetings, the Committee has raised the level of monetary accommodation. In this sense, the Committee’s recent actions in 2011 are inconsistent with the evolution of the economic data in 2011.

I dissented from these decisions because I believe that they will do little to improve the near-term prospects for economic growth or employment and they do pose risks. Policy actions should never be considered free and should be evaluated based on the costs and benefits. Based on our experience with Operation Twist in the 1960s and with last year’s QE2, the reduction in long-term rates is likely to be less than 20 basis points for the 10-year Treasury yield, which is currently only 2 percent. The pass-through to the rates at which consumers and businesses actually borrow is likely to be much less. Thus, I am skeptical that this will do much to spur businesses to hire or consumers to spend, given the ongoing structural adjustments occurring in the economy and the uncertainties posed by the fiscal challenges both here and abroad.

Well, there's a reason why it's a committee. I mean, there are -- there are 19 people around the table when we meet to discuss monetary policy. And my attitude has always been, if two people always agree, one of them is redundant.

(LAUGHTER)

So the reason we have a committee is to bring different points of view and different analytical approaches, different perceptions of the economy, different views on -- on communication and on strategy. And I have always tried -- I think this is the best way to make policy -- I've tried to encourage, both inside and outside, debate and discussion about what is the right approach.

Now, one thing that's certainly evident is that, you know, currently we are in a situation which in many ways is unprecedented. The problems afflicting our economy, the nature of monetary policy -- given that we've already reduced the short-term interest rate close to zero and we've been looking at alternative ways to stimulate the economy -- different views on, you know, what the problem is, in some sense.

So it's natural to have some disagreement, and we have had different points of view. There's obviously no hiding that, and I have no desire to hide it.

But, again, I think it's ultimately constructive, and I encourage debate, discussion. And I would add -- and I think this is very important -- that when we have these discussions internally, it's always with the highest level of collegiality and mutual respect. Conversations are extremely cordial. And I think that represents the best that a policymaking committee can do, which is to bring all the points of view together and try to fashion as best we can a consensus. But it won't always be available, but we will do our best to -- to find a middle ground.

In response to a question about the increase in dissension within the FOMC

Given the extraordinary economic environment and the extraordinary actions taken, we find ourselves operating outside the usual and comfortable policy framework, with less consensus among economists about the right actions to take to promote sustainable growth and price stability. As a result, it is not surprising that debates about policy have been robust, with bright and talented people on every side. Thus, it should not be surprising — indeed, it should be reassuring — that debates within the FOMC are similar to many that are carried out in more public forums.

I stumbled upon a quote by the not-so-well-known French essayist Joseph Joubert from two centuries ago, but since I liked the quote, I thought I’d share it with you even if he isn’t a household name: “It is better to debate a question without settling it than to settle a question without debating it.”

Debate serves to enhance the Fed’s credibility and transparency as an institution. We should acknowledge the debate as a healthy process that analyzes the costs and benefits of various policy choices and ultimately leads to more informed and well-thought-out decisions. Communicating the thoroughness of those discussions is a vital part of the accountability we owe the public.

The entire FOMC knows the history and the ruinous fate that is meted out to countries whose central banks take to regularly monetizing government debt. Barring some unexpected shock to the economy or financial system, I think we are pushing the envelope with the current round of Treasury purchases. I would be very wary of expanding our balance sheet further; indeed, given current economic and financial conditions, it is hard for me to envision a scenario where I would not use my voting position this year to formally dissent should the FOMC recommend another tranche of monetary accommodation. And I expect I will be at the forefront of the effort to trim back our Treasury holdings and tighten policy at the earliest sign that inflationary pressures are moving beyond the commodity markets and into the general price stream. I am a veteran of the Carter administration and know how easily prices can spin out of control and how cruelly markets can exact their revenge. I would not want to relive that experience.