I said a couple months ago I was comfortable with [the "extended period" language]. I'm still comfortable with it, but my comfort is diminishing somewhat over time. And it's something that I'm not be comfortable with forever. I think it's important to recognize that extended period is not a time period with a fixed number of months or a fixed number of meetings attached to it. And we're gonna have to choose policy as the data comes in.

It depends on how the economy is looking going forward and we don't want to get ourselves in a box that we're going to take a particular action on a particular calendar date.

As you know, monetary policy is highly accommodative. And I think this stance is appropriate at present. I continue to support the substance of the policy the FOMC articulated in recent meetings. That is, economic conditions warrant a low federal funds rate target for an extended period. Markets are highly interested in the meaning of "extended period." I don't think it is appropriate to talk in terms of a specific timeframe or number of meetings.

Pressed by reporters, Evans said he was "quite comfortable" with the current Fed policy language that rates can stay low for an "extended period." He said this translates into steady policy for 3 or 4 meetings or roughly six months.

As reported by MarketWatch

I’ve never been a big fan of ‘extended period.’ I don’t like that language. I would rather have language that is more conditional on the state of the economy, and less upon some arbitrary time frame. At some point we’re going to have to get rid of it. We’ve had it for over a year now. Different people interpret it differently. We are certainly thinking hard about how would you extricate yourself form this language at some point. I’m not sure it’s the right language. That is why two or three statements ago we did have this language where we talked about interest rates could stay low as long as the economy was weak, unemployment was high, inflation was low and inflation expectations were contained. That’s a much better way to begin to communicate what matters.

The Federal Reserve's pledge to keep interest rates near-zero for an extended period remains "appropriate right now," said Jeffrey Lacker, the president of the Richmond Federal Reserve Bank on Monday. Going forward, the Fed will "continually" review whether the wording should be softened, he said. "When we take it out, when we start thinking about withdrawing monetary stimulus is obviously going to depend on how the news breaks over the next year or two."

Obviously, the Federal Open Market Committee, which meets next week, will continue to look at the economy.  We'll have to try to update our outlook, look at financial conditions and move from there.  But right now, we are still looking at the extended period, given that conditions remain -- low rates of utilization, subdued inflation trends and stable long-term inflation expectations.  
That remains where we are but we're going to have to continue to look at the economy. Obviously, there've been some signs of strength recently; we'll want to factor that in as we talk about this next week.

In response to a question about the outlook for policy in the Q&A period

The Federal Open Market Committee continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. Of course, significant changes in economic conditions or the economic outlook would change the outlook for policy as well. We have a wide range of tools for removing monetary policy accommodation when the economic outlook requires us to do so, and we will calibrate the timing and pace of any future tightening to best foster maximum employment and price stability.

One important tool is policy communication.  Even if the overnight rate is close to zero, the Committee should be able to influence longer-term interest rates by informing the public's expectations about the future course of monetary policy.  To illustrate, in its statement after its December meeting, the Committee expressed the view that economic conditions are likely to warrant an unusually low federal funds rate for some time.²  To the extent that such statements cause the public to lengthen the horizon over which they expect short-term rates to be held at very low levels, they will exert downward pressure on longer-term rates, stimulating aggregate demand.  It is important, however, that statements of this sort be expressed in conditional fashion--that is, that they link policy expectations to the evolving economic outlook.  If the public were to perceive a statement about future policy to be unconditional, then long-term rates might fail to respond in the desired fashion should the economic outlook change materially.

An extensive literature and some recent experience suggest that central bank communications may also play a helpful role in addressing the constraints relating to the zero-bound... [T]he FOMC can work around the zero lower bound on the overnight interest rate by lowering interest rate expectations in the future, thus pushing down longer-term interest rates to stimulate private spending. The Fed employed such an approach between 2003 and 2005, and has taken an important step along the same path in its December announcement by stating that "exceptionally low levels of the federal funds rate" are likely to be warranted "for some time" due to "weak economic conditions." I believe that such statements can play a useful role in more clearly indicating to markets the Committee's own expectations concerning the federal funds rate path, conditional on the Committee's economic forecast.

Communication also can be important in the Fed's efforts to anchor long-term inflation expectations. As I mentioned at the outset, the odds are high that over the next few years, inflation will decline below desirable levels. It is especially important in such circumstances for the Fed to emphasize its commitment to returning inflation over time to the higher levels that are most appropriate to the attainment of its longer-term objectives. A decline in inflationary expectations when economic conditions are weak is pernicious, especially so when the federal funds rate has reached the zero bound, because any downdrift in inflation expectations leads to an updrift in real interest rates and a tightening of financial conditions.

One of the biggest innovations came in 1994 when the FOMC began to disclose what its policy decision was after each meeting. The communication since then, however, has sometimes been a bit muddled. I don’t think there is a settled view in the FOMC about the value of essentially forecasting policy, or trying to give hints about where you’re going to go. I’ve become skeptical of that approach because I think the correlation between where you go and where you can see yourself going in advance is very low. … I also think that there is unfinished business with regard to clarity of objectives. I’ve been an advocate since the first day I came here of a formal inflation target, and that issue is still unresolved. There is a huge amount of unfinished business in trying to define and communicate the Fed’s reaction function.

The principal challenge for policy is to provide an adequate degree of insurance against the downside risks that still confront the economy as a whole, without adding to concerns about inflation over the medium term. We cannot know with confidence today what level of the short-term real funds rate will be consistent with our objectives of sustainable growth and low inflation, but if turbulent financial conditions and the associated downside risks to growth persist, monetary policy may have to remain accommodative for some time.

As a consequence of observing this process for 10 years, I have concluded that an FOMC attempt to provide forward guidance in the policy statement causes more communications difficulties than it solves.  A key reason is that the economy is subject to more shocks and reversals than one might think. ... Directional language tends to remain in the FOMC policy statement beyond the time it applies and removing the language creates the possibility of miscommunication.  Every change in the policy statement leads naturally to market questions as to what the change means and whether the change is meant to provide a hint about the future direction of policy.  To my mind, every time new language is inserted into the policy statement, there needs to be as much thought given as to how to exit from the language as to the rationale for inserting it. 

Indeed, the management of expectations about future policy has become a central element of monetary theory, as emphasized in the recent synthesis of Michael Woodford (2003).

It is important to emphasize that what is odd is not that there was a risk of rising short-term interest rates, as there always is, but that the market clearly expected an increase, as indicated by the shape of the yield curve. This expectation, in turn, was encouraged by the Fed’s Open Market Committee. The policy statement issued at the conclusion of the FOMC meeting of May 4, 2004, said that “the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.” A similar phrase appeared in subsequent FOMC policy statements until December 2005, when the language was changed slightly to “the Committee judges that some further measured policy firming is likely to be needed.” At its next meeting, in January 2006, the language changed from “is likely to be needed” to “may be needed,” and somewhat similar language remained in the policy statement through the FOMC meeting in January 2007.

Given these widely held expectations of rising interest rates, it is difficult to avoid the judgment that these ARM loans were poorly underwritten at the outset. It was imprudent for mortgage brokers and lenders to approve borrowers who likely could not service the loans when rates rose, and it is surprising to me that sophisticated capital-market investors willingly purchased securities backed by such poorly underwritten mortgages.