There is in the marketplace a lingering fear that the Fed has already expanded its balance sheet to its stretching point and that an exit strategy, though articulated, remains theoretical and untested in practice. And there is a growing sense that we are unwittingly, or worse, deliberately, monetizing the wayward ways of Congress. I believe that were we to go down the path to further accommodation at this juncture, we would not simply be pushing on a string but would be viewed as an accomplice to the mischief that has become synonymous with Washington.

Some Fed officials had started lobbying for more action before Friday's report that the unemployment rate rose in May to 8.2% and job growth slowed. Others have hesitated to move, but have held the door open to doing more if the economic outlook deteriorates.

One big question they face: Is the outlook actually worsening or have jobs data turned sour temporarily after stronger-than-expected improvements early in the year possibly driven by unseasonably warm weather?

"It could be that these weaker numbers could also be part of the seasonal adjustment pattern in the data," Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, said in an interview with The Wall Street Journal.

Pianalto said she was still updating her forecasts for the economy. But she said Friday's report taken by itself wasn't likely to lead to "a substantial change" in her outlook and thus didn't change her view that the Fed should stand pat. She is in the camp of officials open to doing more if the outlook deteriorates, but not yet ready to do so.

My outlook for both economic activity and inflation relies on monetary policy remaining accommodative. Therefore, I have voted in favor of the FOMC's policy statements and actions, including the statement that economic conditions "are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014." This date is not a commitment; rather, it conveys the FOMC's collective judgment of when economic conditions would warrant an increase in the federal funds rate. If there is a substantial change in the economic outlook, or risks to the outlook, then the guidance would change appropriately.

I believe monetary policy should remain accommodative at this time and indeed that we should be looking for ways that monetary policy can foster more rapid growth, to bring down the unemployment rate more quickly. I believe further monetary policy accommodation is both appropriate and necessary.

I would be willing to consider tightening policy at a somewhat earlier stage if growth strengthened sufficiently to materially improve the medium-term outlook and substantially reduce tail risks, or if there was evidence of a genuine threat to medium-term inflation, including a rise in inflation expectations. In such a case, I would anticipate that the first step would be to bring in the late 2014 date of the policy guidance.  This would effectively tighten financial conditions not only by changing the expected path of short-term interest rates, but also by bringing forward the expected start of balance sheet normalization.

"I don't hear any business people and job creators saying, 'I need more liquidity, I need more money,'" Dallas Fed President Richard Fisher told reporters after a speech here. Even though inflation is not currently a threat, "I don't see what we would accomplish with further accommodation."

As long as the U.S. economy continues to grow sufficiently fast to cut into the nation’s unused economic resources at a meaningful pace, I think the benefits from further action are unlikely to exceed the costs.

“Circumstances today in the United States call for continued measured efforts to quicken the pace of recovery and shrink unemployment, while keeping inflation controlled and close to the FOMC’s official target of 2 percent,” Lockhart said. “Those efforts for the time being should fall in the realm of communications.”

“As popular as it might be in some quarters to rule out” a third round of so-called quantitative easing, “I do not think this option can be taken off the table,” Lockhart said today in Tokyo. “QE3 will work under the right circumstances. But I don’t believe such circumstances prevail at this time.”

“Generally speaking, the U.S. economy has done better than expected in the first part of 2012,” Bullard said today in Louisville, Kentucky. “My own forecast has rates going up a little sooner” than other central bankers, or “late 2013.”

As long as we continue to go along in the current mode, which is moderate growth, continuing improvement in labor markets, inflation above target but coming down toward target, in that kind of situation we can stay on pause.

Inflation was distinctly higher in 2011 than in 2010 and continues to run above the FOMC’s target of 2 percent.

Even core measures of inflation, which strip out energy goods and services, and food, went up notably. I see these changes as a signal that our country’s current labor market performance is much closer to “maximum employment” than the post-World War II U.S. data alone would suggest. As I’ve argued in the past, appropriate policy should be responsive to such signals.

Six to nine months down the road, we should be thinking about initiating our exit strategy.

"I'm not yet ready to advocate an exit strategy," Dallas Federal Reserve Bank President Richard Fisher told reporters after a speech on the Texas economy in Dallas. "We have to stop accommodating first."

There is in the marketplace a lingering fear that the Fed has already expanded its balance sheet to its stretching point and that an exit strategy, though articulated, remains theoretical and untested in practice. And there is a growing sense that we are unwittingly, or worse, deliberately, monetizing the wayward ways of Congress. I believe that were we to go down the path to further accommodation at this juncture, we would not simply be pushing on a string but would be viewed as an accomplice to the mischief that has become synonymous with Washington.

It’s important to recognize that our forward guidance language is a forecast of how monetary policy will turn out, not an unconditional promise. Future monetary policy decisions will depend on future economic data — and the future economic outlook. As new data arrive, the outlook for future economic conditions will change, and the outlook for the future of monetary policy should change as well.

I dissented in January because I did not believe that economic conditions are likely to warrant low interest rates all the way through 2014. (I was not a voting member last year.) My projection is that if we want to keep inflation at 2 percent, we will likely need to raise rates in 2013. Incoming data could change my assessment in either direction.