Personally, I want to see these inflation expectations mitigated, and I need to think through, in terms of my input into the process, whether and when it makes sense to argue for increases as opposed to just stopping the cutting.

That's a personal thing, and I'm just one of 17 people, and that depends on how -- to me -- whether or not we see some mitigation of inflation pressures and expectations without seeing an intensification of the economic anemia I spoke of earlier,

Gold is down, and I consider that to be a sign -- just one of a jillion, and I wouldn't overweight it -- that the marketplace considers the Fed serious about inflation -- not just me or somebody else -- but the Committee.

It may be that the recent statements made by the Open Market Committee and the recent actions are engendering greater confidence in the dollar. We'll see over time.

... [Currency markets are] manic depressive ... they overshoot. We've had some volatility there, and I'd like to remind people that a lot of people made a mistake by selling the U.S. economy short for a long time.

[Fisher said he is] entertained when I read that today the dollar was weak or yesterday the dollar was weak because the U.S. economy is showing slower growth, then the next day it says it's because inflation was reported higher. I always feel like screaming, "Guys, make up your mind!" So I"m not surprised that the dollar strengthened. The question is what is the trend over time. ... You have to keep in mind that these are manic depressive mechanisms that overshoot on both sides. They're very emotional.

A widespread shortfall in liquidity could cause assets to trade at prices that do not reflect these fundamental valuations, impairing the ability of the market mechanism to efficiently allocate capital and risk. Furthermore, reduced availability of credit could reduce both business investment and the purchases of consumer durables and housing by creditworthy households.

We clearly must be vigilant about these risks to economic growth. However, overly accommodative liquidity provision could endanger price stability, which is the second component of the dual mandate. After all, inflation is a monetary phenomenon. Indeed, one of the many reasons for the Fed's commitment to low and stable inflation is that inflation itself can destabilize financial markets.

I used to think of monetary policy as dealing with generally normal periods interrupted by shocks. I’ve decided that it’s really the other way around. In fact, the Fed has had to face a whole series of shocks interrupted by occasional periods that we call “normal.” If you were to take the 10 years as a whole and divide it between periods of shocks or the threat of shocks vs. the “normal” periods, I think you’d find a lot more months in the first category.

You have to put into perspective the way I behaved on fed funds in the context of how the system works or does not work. When we got to 3.5% [at January’s unscheduled policy meeting] and were starting to go below that, my personal bias was to make sure we got all of the plumbing working. The question really is about the efficacy of the system. Will consumers and small businesses benefit from these rate cuts?

When asked about his "strong reluctance" to further easing.

t’s really a question of, are we getting the bang for the buck? And clearly we’re not. The system was sputtering. And I began to feel that at 3.5%. After that, that’s when I dissented. Obviously for this next go-around, I have to watch to see if there is any change in signals. I’m just starting my briefings now for this.

What I’m hearing from CEOs is … the first quarter may have been positive, the second quarter’s probably not. There are real concerns about small businesses. Why? Because they’re not getting access to credit. … The credit system strikes me as being at the heart of the problem. And obviously the Fed has worked very hard on this. I’ve been in favor of every one of these [liquidity] initiatives. To me that’s where the priority is. To get the other to work the way we’re used to it working, it just strikes me that that has to get back to its efficient transmission mechanism.

I don’t know. You’re injecting your view into a roomful of views and depending on how you argue your viewpoint, and whether it has merit or not, and I think that’s very important. And so if it has merit, yes other people may listen. … The job of the 17 participants on the FOMC is to give an honest view. I honestly believe every one of my colleagues does that. Now, they might do it more forcefully in a certain area because they want to draw the attention of the committee to that area. A “negative feedback loop” – I won’t mention the name of the individual – on the economy or in my case inflationary pressures that are building. So you might emphasize saying more than the rest.

I think every single person on the committee basically is pursuing the truth. It’s the only place in government you can do it. People don’t dislike you for it. When [Richmond Fed President] Jeff Lacker was dissenting last year, we’d sit down at lunch afterward and pat him on the back – “Good try, pal” or “I hadn’t thought about that” or “That’s an interesting viewpoint.” … There’s no enmity. And it’s an honest intellectual debate. I don’t think anybody’s trying to sway anybody else. I think they’re trying to just get what they feel out on the table. And it’s up to the group to decide if it’s valid or not.

…I think the market should look at what the group decides. Even if you have dissents. It’s what was decided as a group and what signals are being sent.

When asked whether dissents have a cumulative effect

Taking expected inflation into account, the level of the federal funds rate in real terms — what economists call the real rate of interest — is now negative. The last time the level of real interest rates was this low was in 2003-2004. But that was a different time with a different concern — deflation — and monetary policy was intentionally seeking to prevent prices from falling. Recently, we have had reason to be worried about rising inflation, not declining prices. Thus, comparing the nominal funds rate today with the stance of policy in 2003–2004 is like comparing apples and oranges.

The current turmoil in financial markets has led to a tightening of credit that has affected the broader economy and has the potential to continue to restrain economic growth going forward. The risk that the financial turmoil could become more severe and further adversely affect the functioning of financial markets suggests to some that short-term interest rates need to be lower than they would be otherwise in order to provide a form of insurance. However, determining the appropriate extent of such extra accommodation is difficult to quantify.

In sum, the Federal Reserve has been acting on several fronts to address the recent turmoil in financial markets. Some of those actions are intended to stem the immediate problems. Others are intended to have longer-term benefits in helping to prevent future financial problems. But let me also add some words of caution about expecting more from the Fed than it has the ability to deliver. 

I think it is particularly important, for example, to recognize that monetary policy cannot solve all the problems the economy and financial system now face. It cannot solve the bad debt problems in the mortgage market. It cannot re-price the risks of securities backed by subprime loans. It cannot solve the problems faced by those financial firms at risk of being given lower ratings by rating agencies because some of their assets are now worth much less than previously thought. The markets will have to solve these problems, as indeed they will. But it will take some time. 

Unfortunately, the public perception of what monetary policy is capable of achieving seems to have risen considerably over the years. Indeed, there seems to be a view that monetary policy is the solution to most, if not all, economic ills. Not only is this not true, it is a dangerous misconception and runs the risk of setting up expectations that monetary policy can achieve objectives it cannot attain. To ensure the credibility of monetary policy, we should never ask monetary policy to do more than it can do.

The same could be said of the Fed’s lender of last resort function. All of the special lending facilities I described can be interpreted as part of that responsibility.  Traditionally, in times of financial crisis, a central bank is supposed to lend freely at a penalty rate against good collateral.  The experience of the past nine months suggests to me that we need to better understand how to apply this lender of last resort maxim in the context of today’s financial environment

[N]ow we must do what we can to remedy the situation. One thing, however, is clear. The answer, to be curt, is not to compound the bad by repeating the oft-prescribed remedy of inflating our way out of our predicament with a wing-and-a-prayer promise that it can always be reined in later. It is for this reason that I have maintained a strong reluctance to further general monetary accommodation. At the same time, I have been an advocate of using our various discount window facilities, within reason, to bridge the financial system’s structural problems as the credit markets correct themselves and run the long course of contrition.

Clearly you can't get interest rates below zero ... but we actually have interest rates now at 2-1/4 percent and clearly there is some room to lower them if it's needed.

... Furthermore, we are continually looking at steps to make the markets function better and I think we've been quite creative in terms of the steps we've taken so far, but in fact we will continue to look at the steps that we can take to in fact make the functioning of the financial markets get back to a more normal situation

From Q&A as reported by Reuters

If you have monetary policy that's too accommodative for too long, you generate inflationary pressures. Now what does too accommodative for too long mean in terms of actually time dimensions? It's a tougher question, people have different judgments. Monetary policy is currently accommodative. It's below the inflation rate

From press q&a, as reported by Market News International

Over the past year, inflation has been elevated by rising food, energy and other commodity prices and declines in the value of the dollar that have boosted import prices. However, several developments suggest that inflation is likely to moderate over the next couple of years. For example, broad measures of compensation have expanded quite modestly over the past year, and productivity growth has been fairly robust. In addition, futures markets point to a leveling out of energy and other commodity prices. Furthermore, the weakening in economic activity should put somewhat greater downward pressure on inflation going forward.

The Federal Reserve cannot, however, be complacent about inflation. Most survey measures of longer-run inflation expectations have remained reasonably well behaved. But measures of inflation compensation derived from the differential between nominal and real Treasury yields have moved up for the period of five-to-ten years ahead. Such measures are an imperfect indicator of inflation expectations, because they are affected by inflation risk and illiquidity. Nevertheless, these movements highlight the risk that our attempts to deal with problems in the real economy could lead to higher inflation expectations and an erosion of our credibility.