I don't think policy is restrictive, and in fact I see that policy is, if anything, somewhat accommodative.

In a Market News interview

Poole, who is on the voting panel of the Federal Reserve this year, again raised the prospect that the Fed's target rate could remain steady at 5.25% for some time to come, if growth remains on the expected path of 3%, and inflation continues to moderate.

"If that comes to pass," he said, the current target rate could be judged as "neutral." 

Nevertheless, Poole reiterated he would be ready to raise rates again to curb a rebound in inflation.   "I'm prepared to lean on the side of raising rates to make sure that inflation comes back convincingly in the 1-2% range [for core PCE].

As reported by Dow Jones News

It is a truism in economics that the primary source of persistent inflation is monetary policy, and clearly monetary policy was accommodative for the period from 2001 through 2005. It is an open question whether our current monetary policy is sufficiently restrictive to return the economy to price stability over a reasonable horizon.

Let me be clear that I do want inflation to move down, but I believe policy may now be well-positioned to foster exactly such an outcome while also giving due consideration to the risks to economic activity.

I came to this conclusion by considering a variety of metrics that help assess the stance of policy. These measures include the forecast I have outlined today, as well as the recommendations from commonly used Taylor rules for monetary policy, named after John Taylor, a professor at Stanford who first suggested them. They give an estimate of an appropriate setting of the funds rate given where inflation is relative to an assumed target and a measure of tightness in goods or labor markets.

Taken as a whole, a variety of these rules indicate that the funds rate is currently within the moderately restrictive range that appears appropriate. Current conditions in goods markets generally suggest that the current policy stance is sufficient to bring inflation down to more acceptable levels.

Perhaps the most intractable problems surround the measurement of such key concepts as the equilibrium real interest rate, trend productivity, and potential output.  We never observe these variables, which often figure prominently in our deliberations, but can only infer them from the behavior of other variables that are themselves subject to mismeasurement...

These revisions may or may not also have implications for the level of the real federal funds rate consistent with longer-run macroeconomic stability.

The stance of policy can be assessed by a variety of metrics. These measures include the forecast I have outlined today, as well as the recommendations from commonly used monetary policy rules. Taken as a whole, such rules—often referred to as Taylor rules—indicate that the funds rate is currently within the moderately restrictive range that appears appropriate.

Monetary policy must be forward-looking because policy influences inflation with long lags.  Generally speaking, a change in the federal funds rate may take an estimated 12 to 18 months to affect inflation measures. 

The existence of lags in monetary policy has two important implications.  First, the Federal Reserve should only respond to high current inflation to the extent that it is expected to be highly persistent.  if inflation pressures are seen to be temporary and policy is currently restrictive, maintaining the current policy stance may be consistent with a reduction in inflation over time.  Second, given the existence of policy lags, the actions that the Federal Reserve took over the past year in raising the federal funds rate have not yet had their full effects on the economy or inflation.

We have moved policy from a very accommodative level of a 1% fed funds rate to 5.25%.  This I judge as modestly restrictive.  It's not tight, but modestly restrictive.

From the Q&A session, as reported by Bloomberg News

To say that policy is data dependent means that policy changes will depend on the incoming news about the state of the economy, both real growth and inflation. That the policy setting is data dependent is a good sign. It means that policy is in a range than can be considered neutral—that is, thought to be consistent with the Fed’s longer-run policy objectives.

I have said in the past that I thought the policy stance was slightly restrictive.  I think policy can be characterized in recent months as mildly restrictive, not restrictive in any draconian sense.

In comments to reporters after his speech, as reported by Bloomberg News

     One convenient way {to calculate a neutral real funds rate} that's very popular and easy to use is to take the Federal Funds rate target and subtract trailing 12-months core CPE inflation and using that - use that essentially as a proxy for expected inflation going forward. If you have on hand expected measures of sort of inflation over a one year horizon you can use those as well...

    Well, we've been growing rapidly, taking slack out of the economy, and we're now making a transition to a period of sustained growth around trend. The last period of sustained growth around trend that we experienced was '95 to 2000. During that period measured the way I suggested, real rates were between three-and-a-quarter and five percent. Measured that way the real rate's current about just over two-and-three-quarters. So we're under three and some distance away from the bottom end of {the earlier range}.

One Greenspanian innovation that surely can (and, we believe, will) survive Greenspan’s reign is his choice of monetary policy instrument. Greenspan focused—or perhaps we should say refocused—the Fed on setting the federal funds rate. More important, however, he has made it clear since 1993 that he thinks of the Fed as trying to set the real federal funds rate and, more particularly, the deviation of that rate from its “neutral” level...

The concept of the neutral (real) rate of interest dates back to Wicksell (1898), who called it the “natural” interest rate, meaning the real rate dictated by technology and time preference. In modern New Keynesian models of monetary policy, it often appears as the real rate of interest that makes the output gap equal to zero, which makes the difference between r and r* a natural indicator of the stance of monetary policy.  As with the natural rate of unemployment, there are also many ways to estimate the neutral rate of interest. Some propose measuring the neutral interest rate as the rate at which inflation is neither rising nor falling (Blinder, 1998); others use low-frequency movements in output and real interest rates (Laubach and Williams, 2005); and still others prefer to “back it  out” of an economic model as the real rate that would obtain under price flexibility (Neiss and Nelson, 2003). 
 

[1]  This concept first appeared in his July 1993 Humphrey-Hawkins testimony (Greenspan, 1993), and was controversial at the time. There, Greenspan referred to judging the stance of monetary policy “by the level of real short-term interest rates” and noted that “the central issue is their relationship to an equilibrium interest rate,” which he defined as the rate that “would keep the economy at its production potential over time.”

It appears to me that the federal funds rate currently lies in a vicinity that is roughly appropriate for the Fed to attain its key objectives over the medium run...

In the present circumstances, I would consider it appropriate for the actual rate to be a bit above the neutral rate—in other words, I'd like it to be modestly restrictive—to promote price stability, especially given that the economy may be operating with labor and product markets that are a bit on the tight side.

Since June 2004, the Federal Reserve has systematically raised its federal funds target from 1% to its current level of 5 1/4%.  Over this period, as credit costs have increased, the stance of monetary policy has moved from being extremely accommodative to a setting I would characterize as somewhat restrictive.

This desirable trajectory appears to be within reach at a time when the Fed's key policy interest rate—the federal funds rate—is close to a neutral stance, one that neither stimulates the economy nor restrains it.