"Actions such as our purchase of U.S. government securities are driven exclusively by our monetary policy goals,” Dudley said. He added “these policy actions will not continue beyond the moment they become inconsistent with our dual mandate objectives."

Bullard, asked by the audience to respond to criticism of the Fed as too intrusive in financial markets, said, “I want market solutions to all of our problems.”

“You can’t outmarket me,” he said.

Going forward, for the Federal Reserve as well as other central banks, the promotion of financial stability must be on equal footing with the management of monetary policy as the most critical policy priorities.

While difficult work still lies ahead, countries in the euro area have made meaningful progress toward achieving long- term fiscal sustainability.

I do not anticipate further efforts by the Federal Reserve to address the potential spillover effects of Europe on the United States.”

Economic theory and practice teach us that monetary policy works best when it is clear about its objectives and systematic in its approach to achieving those objectives. Granting vast amounts of discretion to our central banks in the expectation that they can cure our economic ills or substitute for our lack of fiscal discipline is a dangerous road to follow.

Our balance sheet should not be viewed as a new independent instrument of monetary policy in normal times. The exit principles also indicated the Committee’s desire to return the Fed’s balance sheet to an all-Treasuries portfolio. This re-establishes the idea that the Fed should not use its balance sheet to actively engage in credit allocations.

The crisis, the recession it sparked, and the subsequent slow recovery, especially in the advanced economies, have demonstrated that we have much to learn about the workings and vulnerabilities of our modern, globalized financial system and its interactions with the broader economy. In responding to these stressful financial and economic developments, the Federal Reserve and other central banks have had to deploy a variety of new tools and approaches to carry out their responsibilities regarding monetary policy and the provision of liquidity, tools about which we still have more to learn.

For me, explicitly acknowledging that monetary policy’s impact on employment is transitory and uncertain is a cardinal event. It signals to the markets that there are limits to the ultimate job-stoking efficacy of Federal Reserve policy. To the extent that inflation is running below 2 percent, the Federal Reserve may have somewhat greater latitude to pursue accommodation. However, the past few years have demonstrated, yet again, that allowing inflation to rise by no means guarantees faster job growth. The message to our nation’s fiscal authorities is that they cannot expect monetary policy to substitute for the need to get their act together, stop their shameful politicking, get on with putting their fiscal and regulatory house in order and do so in a manner that encourages rather than continually undermines job creation and economic expansion.

“The thing that I worry about is waking up and everyone being complacent that” the economy is going to “muddle through,” Evans said. “We do need leadership” and “I have been in a very small manner trying to advance this by saying I think we should be willing to accept slightly above target inflation,” he said.

I would first say that monetary policy is having effects on the economy. We've talked about the effects on asset prices, but we have continued to analyze the effects of changes in interest rates, for example, on decisions like investment or car purchases.

One area where monetary policy has been blunted, the effects have been blunted, has been the mortgage market where very tight credit standards have prevented many people from purchasing or refinancing their homes. And therefore the low mortgage rates that we have achieved have not been as effective as -- as we had hoped.  So monetary policy may be somewhat less powerful in the current context than it has been in the past, but nevertheless it is affecting economic growth and job creation.

If you ask about the accomplishments, I would first of all mention a very important one, which is that we have kept inflation close to 2 percent on average, which both has avoided the problems of high inflation, but also, very importantly, has avoided the risk of deflation...

With respect to growth, I think that our policies, including the cutting rates to zero in December 2008 and the -- the first round of asset purchases in the fall of '08 and in the spring of '09 were very important for helping to explain why the economy stopped contracting and began to grow again in the middle of 2009.  I think there's a lot of evidence that that did promote growth and job creation. I would argue that we've also been successful with some of the later actions that we've taken, although it's early to say, for things like the maturity extension program.

But we always face the problem of asking the question, well, where would we be without these policies?  And our best estimates are that, absent the support of monetary policy, that the economy would be in a much deeper ditch and that unemployment would be much higher than it is.

“I have real concerns about trying to fine-tune and micro-manage the economy when monetary policy is a blunt tool,” Hoenig said today in an interview with Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. Efforts to “redefine yield curves” may “introduce new complexities and risk new unintended consequences,” he said.

“The financial market effects of QE2 looked the same as if the FOMC had reduced the policy rate substantially,” Bullard said. “In particular, real interest rates declined, inflation expectations rose, the dollar depreciated, and equity prices rose. These are the ‘classic’ financial market effects one might observe when the Fed eases monetary policy in ordinary times.”

[E]ven if there were stronger evidence of [an asset] bubble, I’m not convinced that leaning against it is good policy. Even if the Fed could accurately detect a bubble in real time, and even if we decided that a bubble-pricking exercise would be warranted, monetary policy is too blunt an instrument for this task... Our attempts to counter a hypothetical future bubble would end up weakening our efforts to achieve the stabilization benefits embodied in the dual mandate.

With hindsight, I think it is fair to say that policymakers [in the last cycle] overestimated the extent to which high unemployment would keep inflation from accelerating, and as a result, waited too long to withdraw monetary stimulus. Four years of 3 percent inflation may not have been the worst of all possible outcomes, but I do not consider it a success. I hope we do better this time. In particular, I believe we need to heed the lesson of the last recovery that inflation is capable of rising even if the level of economic activity has not returned to its pre-recession trend.

Less than a year ago the prevailing concern was not that inflation was becoming too high but that it was becoming too low. Indeed, some feared that the U.S. economy was on the verge of a deflationary spiral. I was not one of them; nor do I believe that we are in imminent danger of a strong acceleration in inflation. Yet the swing in views does concern me. It suggests that the public’s confidence in the Federal Reserve’s commitment to maintain price stability is not as firmly established as I would like.

“My personal predilection would be to get out of the MBS market as soon as possible,” Lacker said to reporters. “I think the housing finance market can easily withstand a substantial liquidation of our MBS holdings.”