Asked about this terminology, Mr. Powell said: "I think patience is the appropriate term." He said low inflation gives the Fed some timedespite the transient effects of cheaper oiland the ability to be patient.

WSJ: Were all a little consumed right now with the word patient in the policy statement, which Im sure really pleases you. What will it mean when the Fed removes patient from its statement?

PLOSSER: It could mean different things to different people. The chair has articulated what she means. I think it is fair to say that once the committee chooses to remove patient that they are making a different statement about the likelihood and timing of rate increases. More precisely what that means, it will depend on economic conditions. We would save ourselves a lot of headaches and you guys writing a lot of words if we didnt use (words like patient). Ive been only marginally successful in reducing our efforts to do that.

Keeping interest rates near zero is not the right interest rate for this economy. We are much closer to our goals than we have been in a long time. Inflation is a little bit low, but it is not low enough to rationalize the zero interest rate policy, Mr. Bullard told Bloomberg TV.

As long as we feel confident that inflation will go back toward target, and right now that is my baseline projection that inflation will go back toward target, I think we are certainly able and willing to raise rates."

From November 2010 through July 201431 consecutive meetingsthe FOMC was in a position to state that longer-term inflation expectations remain stable. Because of the decline in market-based measures of longer-term inflation expectations in the past few months, the Committee has not been able to make this assertion in the past three FOMC statements.

Despite these facts, the FOMC communicated its intention after this weeks meeting to continue gradually removing monetary accommodation. In my assessment, the FOMCs failure to respond to weak inflation runs the risk of creating a harmful downward slide in inflation and longer-term inflation expectations of the kind that we have seen in Japan and Europe. I see this risk to the credibility of the inflation target as unacceptable, given how hard it would be for the FOMC to respond successfully if this eventuality did indeed materialize.

By stating that the new language is consistent with prior guidance, the statement makes no change in forward guidance despite the significant economic progress. I do not view this as appropriately data-dependent policy.

The time-dependent language also risks limiting the Committee's flexibility to act in a more timely manner in response to an improving economy. I am afraid the Committee is not leaving itself the flexibility to respond to the data if we continue to see an improving economy.

Many metrics for assessing the appropriate stance of monetary policy suggest that the federal funds rate should be lifting off from zero soon and should be significantly above zero in June 2015. The Committee's forward guidance strongly suggests that such a policy path is highly unlikely. I believe that waiting too long to initiate a gradual increase in rates could result in the need for more aggressive policy in the future, which could lead to unnecessary volatility and instability.

The failure to adjust forward guidance to reflect the improvement in the outlook for the economy and its continued reliance on the passage of time as a governing factor in the decision to increase rates were the underlying factors warranting my dissent.

What ought to matter in thinking about the stance of policy is what the entire path of interest rates will look like, and I really don't have much for you other than to say that they will be data- dependent, that over time, the stance of policy will be adjusted to try to keep the economy on a track where we see continuing progress toward achieving our goals of maximum employment and price stability.

The federal funds rate has been sitting in this zero to a quarter percent range now for 6 years. And we have a very large balance sheet. We're providing a very highly accommodative monetary policy, and even as we begin to normalize the stance of monetary policy when that becomes appropriate, it's important to remember that monetary policy will still be very accommodative for a long time.

And as we begin to normalize policy, we will be looking at unfolding economic developments, and as the economy strengthens and we come closer to achieving our objectives, I think it's very likely that we will progress on the path of normalizing policy.

But I can't tell you specifically other than saying it will depend on progress, and moves will be data-dependent. I can't say much more than that.

There certainly has been no, you know, decision on the part of the committee to move at a measured pace or to use a language like that.

I think quite a few people looking back on the use of that language -- I can't remember if it was 12 or 16 meetings where there were 25 basis point moves -- would probably not like to repeat a sequence in which there was a measured pace and 25 basis-point moves at every meeting. So I certainly don't want to encourage you to think that there will be a repeat of that.

Many members of the committee -- participants have said that they think policy should be based on the actual evolution of economic activity and inflation, which tends to be variable over time, and that's why I say I anticipate it will be data-dependent.

I believe that the FOMC should consider articulating a benchmark two-year time horizon for returning inflation to the 2 percent goal. (Two years is a good choice for a benchmark because monetary policy is generally thought to affect inflation with about a two-year lag.) Right now, although the FOMC has a 2 percent inflation objective over the long run, it has not specified any time frame for achieving that objective. This lack of specificity suggests that appropriate monetary policy might engender inflation that is far from the 2 percent target for years at a time and thereby creates undue inflation (and related employment) uncertainty. Relatedly, the lack of a public timeline for a goal can sometimes lead to a lack of urgency in the pursuit of that goal. I believe that, if the FOMC publicly articulated a reasonable time benchmark for achieving the inflation goal, the Committee would be led to pursue its inflation target with even more alacrity.

While the Committee retained the "considerable time" language, it added clarity by stressing the fact that the decision to lift the interest rate target would be driven by the data. The Committee explicitly noted that should the economy make faster progress than anticipated toward its goals, liftoff could occur earlier, and if progress was slower than anticipated, liftoff could be delayed. From my perspective, this is the operative language and it makes clear that the Committee intends for policy to be data-dependent.

During the unusual economic circumstances of the past six years, the FOMC has provided forward guidance to help the public better understand the anticipated future path of interest rates. The formulation of the forward guidance has changed over time, from qualitative guidance, to calendar dates, to economic thresholds, and to a blend of state-contingent and date-based guidance. Lets walk through those changes.

In December 2008, the FOMC began with qualitative guidance indicating that it anticipated that weak economic conditions were likely to warrant exceptionally low levels of the fed funds rate for some time. In March 2009, some time became extended period. In August 2011, the FOMC changed its qualitative forward guidance to a calendar date when it said that it anticipated an exceptionally low fed funds rate at least through mid-2013. That date was later extended to late 2014, and then to mid-2015.

The FOMC changed the formulation of its forward guidance from calendar dates to thresholds in December 2012. The Committee said that it anticipated that the 0-to- percent target range for the fed funds rate would be appropriate at least as long as the unemployment rate remained above 6 percent, inflation between one and two years ahead was projected to be no more than a half percentage point above the Committees 2 percent longer-run goal, and longer-term inflation expectations continued to be well anchored.

A year later, in December 2013, the FOMC blended state-contingent forward guidance with an element of calendar-date forward guidance. First, the FOMC indicated that in determining how long to maintain highly accommodative monetary policy, it would consider information in addition to the unemployment rate and PCE inflation, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The FOMC then translated this into time, saying that based on its assessment of these factors, the 0-to- percent target range for the funds rate would likely be appropriate well past the time that the unemployment rate declines below 6 percent, especially if projected inflation continues to run below the Committees 2 percent longer-run goal.

In March of this year, the thresholds were replaced with guidance that linked the path of policy to the Committees assessment of both realized and expected progress toward its dual-mandate objectives. The guidance continued to provide a time element by indicating that based on the FOMCs assessment, the funds rate target will likely remain 0-to- percent for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.

I note that the recent business cycle was not the first time the FOMC has used forward guidance. In August 2003, in the midst of elevated perceived risks of deflation, the Committee indicated that it believed policy accommodation could be maintained for a considerable period. As deflation risks eased and economic conditions changed during that cycle, the forward guidance evolved as well, eventually indicating that the FOMC would be firming policy.

In extraordinary economic times, forward guidance can be thought of as more than a communications device. It is a tool of monetary policy that has the potential to increase the degree of monetary policy accommodation, especially when interest rates are essentially at their zero lower bound. By reducing uncertainty about the future path of policy, forward guidance helps lower interest rates by reducing the premiums investors demand to compensate them for interest-rate uncertainty.

In addition, in theory, if the central bank indicates that the future path of short-term interest rates will be low for a long time perhaps lower and for longer than would have been consistent with the central banks past behavior this can also put downward pressure on longer-term interest rates, thereby spurring current economic activity. According to the theory, if people believe that the central bank will keep rates very low, they will expect higher economic activity and higher inflation in the future. When households, businesses, and market participants are assured of better economic prospects in the future, they should be more willing to make investments in capital and labor today rather than delaying them, and this will help the current economy.

After several years of nontraditional monetary policy, the transition toward a more normal economy is likely to entail some uncertainty about monetary policy setting. I believe clear policy communications can and should play a key role in reducing that uncertainty. To that end, I favor the Committee being as clear as it can be that monetary policy will be contingent on the state of the economy. I favor putting less focus on a particular calendar date for liftoff. This is why I believe the FOMCs addition to its forward guidance last week was an important step in the right direction. It was a clear statement that if incoming information indicates faster than anticipated progress toward the Committees employment and inflation objectives, then increases in the target range for the fed funds rate are likely to occur sooner than the FOMC currently anticipates. And if progress is disappointing, then increases are likely to be later. I think this is an important message to convey to the public.

I was pleased that we dropped the reference to significant in describing the remaining labor-market slack and that wording was included indicating we might well move to raise rates sooner than thus far assumed, should the economy proceed along the trajectory I think we are on. To me, this neutered the adjective considerable in stating the time frame under which we might act. This is why this particular hawk voted yes in support of the statement we released on Wednesday.

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.

Mr Rosengren said Fed asset purchases have achieved their stated goal, the jobs report for September is already in and his economic forecasts have not changed. There has been substantial improvement in labour markets, he said. As a result I would be pretty comfortable [ending purchases] at the end of the month.

However, he suggested recent turmoil in financial markets which led to the US stock market plunging last week before recovering on Friday means there is no rush to change how the Fed phrases its forward guidance on future interest rates.

It has to be contextual. Financial markets are volatile, he said. The October statement will have to balance the desire to highlight data dependence with the concern this might not be a time that you want to further destabilize financial markets.

That suggests the Feds considerable time language could survive past its October meeting, although Mr Rosengren now wants to do away with forward guidance altogether. He says that, with the economy nearing full employment, there is too much uncertainty to lay out firm plans.

If youre pretty close to where you want to go, you cant have nearly as much certainty how long its going to take, said Mr Rosengren, pointing out that unemployment at 5.9 per cent is a full percentage point lower than the Fed forecast it would be just 18 months ago.

I would like to tighten when were one year away from full employment, said Mr Rosengren, which on his current forecast would mean a first rate rise in 2015. But he points out how a forecast error could make guidance based on that estimate completely wrong.

Mr Rosengren said recent volatility in financial markets was not such as to make him change his outlook. The fact that its just volatile doesnt bother me, he said. If we were to start seeing long-term rates trending well below our inflation target, that is a warning signal . . . financial markets dont have confidence were going to hit 2 per cent.