I feel personally that we are closer to liftoff than we were, people felt we were, the market assumed we were, some time late in 2015... At the last meeting, I felt, as I listened to the discussion at the table, that my views were being digested by more and more participants.

Many financial pundits protest that weaning the markets of ber-accommodation, however gradually, risks wreaking havoc, so dependent on central bank largess have the markets become. As a former market operator, I am well aware of this risk. As I have said repeatedly, a bourbon addict doesnt go from Wild Turkey to cold turkey overnight. But even if we stop adding to the potency of the financial punchbowl by finally ending our large-scale asset purchases in October, the punch is still 108 proof. It remains intoxicating stuff.

I believe the time to dilute the punch is close upon us. The FOMC could take two steps to accomplish this after ending our large-scale asset purchases.

First, in October, we could begin tapering our reinvestment of maturing securities and begin incrementally shrinking our portfolio. I do not think this would have significant impact on the economy. Some might worry that paring our reinvestment in MBS might hurt the housing market. But I believe the demand for housing is sufficiently robust to continue improving despite a small rise in mortgage rates. The economy is improving. An acceleration of income growth that will result will likely buttress a recovery in housing and compensate for the loss of momentum that occurred during the winter freeze. (As a sidebar, I note that according to the National Association of Realtors, overseas buyers and new immigrants accounted for $92 billion, or 7 percent, worth of home purchases in the U.S. in the 12 months ended in March, with one-fourth of those purchases coming from Chinese buyers. As Californians, you might find it of interest that Los Angeles was the top destination for real estate searches from China on realtor.com; San Francisco was second; Irvine was third.)

Importantly, I think that reducing our reinvestment of proceeds from maturing securities would be a good first step for the markets to more gently begin discounting the inevitable second step: that early next year, or potentially sooner depending on the pace of economic improvement, the FOMC may well begin to raise interest rates in gradual increments, finally beginning the process of policy normalization.

Many financial pundits protest that weaning the markets of ber-accommodation, however gradually, risks wreaking havoc, so dependent on central bank largess have the markets become. As a former market operator, I am well aware of this risk. As I have said repeatedly, a bourbon addict doesnt go from Wild Turkey to cold turkey overnight. But even if we stop adding to the potency of the financial punchbowl by finally ending our large-scale asset purchases in October, the punch is still 108 proof. It remains intoxicating stuff.

I believe the time to dilute the punch is close upon us. The FOMC could take two steps to accomplish this after ending our large-scale asset purchases.

First, in October, we could begin tapering our reinvestment of maturing securities and begin incrementally shrinking our portfolio. I do not think this would have significant impact on the economy. Some might worry that paring our reinvestment in MBS might hurt the housing market. But I believe the demand for housing is sufficiently robust to continue improving despite a small rise in mortgage rates. The economy is improving. An acceleration of income growth that will result will likely buttress a recovery in housing and compensate for the loss of momentum that occurred during the winter freeze. (As a sidebar, I note that according to the National Association of Realtors, overseas buyers and new immigrants accounted for $92 billion, or 7 percent, worth of home purchases in the U.S. in the 12 months ended in March, with one-fourth of those purchases coming from Chinese buyers. As Californians, you might find it of interest that Los Angeles was the top destination for real estate searches from China on realtor.com; San Francisco was second; Irvine was third.)

Importantly, I think that reducing our reinvestment of proceeds from maturing securities would be a good first step for the markets to more gently begin discounting the inevitable second step: that early next year, or potentially sooner depending on the pace of economic improvement, the FOMC may well begin to raise interest rates in gradual increments, finally beginning the process of policy normalization.

And I would say even if you consider our forward guidance we put in place in march, the committee indicated that even after we think the time has come to raise rates, that we think it will be some considerable time before we move them back to historically normal levels, and that reflects -- well, different people have different views, but to my mind, it in part reflects the fact that headwinds holding back the recovery do continue. Productivity growth has been slow, and of course, we need to be cautious to make sure that the economy continues to recover.

Even when the economy gets back on track, it doesn't mean that these headwinds will have completely disappeared. And in addition to that, productivity growth is rather low. At least that may not be a permanent state of affairs, but it's certainly something that we have seen in the aftermath. We'll -- we've seen it during most of the recovery. That's a factor that I think is suppressing business investment and will work for some time to hold interest rates down. These concerns and these factors are related to what economists are discussing, including secular stagnation. The committee -- you know, when it thinks about what is normal in the longer run, the committee has recently slightly reduced their estimates of what will be normal in the longer run. It -- the median view on that is now something around 3 and 3 1/4 percent, but we don't really know. But it's the same -- the same factors that are making the committee feel that it will be appropriate to raise rates only gradually, they're some of the same factors that figure in the secular stagnation.

No central bank in the world follows a mechanical, mathematical rule, and I think it would be a terrible mistake to ask the Federal Reserve to specify a mathematical rule

If that's what you mean by your rule, a gold standard, a currency board, yes, that has happened, but given the goals that Congress has assigned to us with respect to inflation and employment, I'm not aware of any -- for example, an inflation- targeting country, of which there are many, that has a mathematical rule.

Nevertheless, it makes perfect sense to behave in a relatively systematic way, looking -- when you have objectives, asking the question, how far are you from achieving those objectives and how fast do you expect progress to be made in determining whether or not -- exactly how much accommodation is needed?

And a number of different factors come into play at different times. If we were following a specific mathematical rule, I really think performance in this recovery would have been dreadful. Most of the rules we would have used, first of all, we couldn't have followed in the depths of the downturn. They would have called for negative interest rates. And if we had tightened monetary policies, as some of those rules would have called for -- given the headwinds we face, the recovery would not be as far advanced as it is.

So there are special factors and structural changes that need to be taken into account that would make me very disinclined to follow a mathematical rule, but I think it is important that a central bank behave in a systematic and predictable way and to explain what it's doing and how it sees itself as likely to respond to future economic developments as they unfold. And that is precisely what we're trying to do with our forward guidance.

Jeffrey Lacker says projections that the central bank will raise the benchmark interest rate next year are "reasonable... Getting the timing right is going to be tricky."

Market expectations are that the Federal Reserve will start to raise short-term interest rates around the middle of 2015... That sounds to me like a reasonable forecast, but forecasts often go astray, so I wouldnt put too much weight on that particular set of forecasts.

The world is highly uncertain. In the current environment its still very, very appropriate to continue to follow very accommodative monetary policy.

Some market participants and commentators have focused on the so-called dot charts and the movement of the implied median funds rate for 201416. I would remind everyone that the dots are not a forecast of what policymakers think the Committee will actually do, but they are a reflection of the policymakers' views of appropriate policy.

Some have noted that the median path steepened ever so slightly. This should not come as a particular surprise as it likely just reveals greater confidence that the economy is improving. The rebound after the bad winter seems to be progressing, the outlook for unemployment is a bit better, and the inflation rate appears to be firming. The changes in the dots thus simply tell us something about individual policymakers reaction to the change in economic conditions. The FOMC statement notes that the Committee will adjust future funds rate decisions based on the progress toward our objectives. So, it is entirely reasonable that the expected path of "appropriate policy" should adjust as we close in on those objectives. Indeed, it would be surprising if they did not behave in such a manner.

I believe that we are closing in on our goals perhaps faster than some people might think. So, while I supported the recent policy statement, I have growing concerns that we may have to adjust our communications in the not-too-distant future. Specifically, I believe the forward guidance in the statement may be too passive, given underlying economic conditions.

Although FOMC participants provide a number of explanations for the federal funds rate target remaining below its longer-run normal level, many cite the residual effects of the financial crisis. These include restrained household spending, reduced credit availability, and diminished expectations for future growth in output and incomes, consistent with the view that the potential growth rate of the economy may be lower for some time.

Let me reiterate, however, that the Committee’s expectation for the path of the federal funds rate target is contingent on the economic outlook. If the economy proves to be stronger than anticipated by the Committee, resulting in a more rapid convergence of employment and inflation to the FOMC’s objectives, then increases in the federal funds rate target are likely to occur sooner and to be more rapid than currently envisaged. Conversely, if economic performance disappoints, resulting in larger and more persistent deviations from the Committee’s objectives, then increases in the federal funds rate target are likely to take place later and to be more gradual.

If you get 3% growth for the rest of this year, if you get unemployment coming down below 6%, if you continue to have jobs growth at 200,000, if you continue to see inflation moving back up toward target, I think if we get to the fall of the year and all of those things are transpiring as Im suggesting they will, that will change the conversation about monetary policy, and there will be more sentiment toward an earlier rate hike.

My concern is that keeping rates very low into late 2016 will continue to incentivize financial markets and investors to reach for yield in an economy operating at full capacity, posing risks to achieving sustainable growth over the longer run.

Despite these issues, I think a return to more-normal economic conditions is on the horizon. At the same time, we must remember normal is a range, and the economy will look different this time around compared to other recoveries.

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Cutting rates is easy when economic activity is slowing and inflation falling, but raising rates can be more difficult as the economy strengthens. This is especially true if the signals of sustainable growth are not entirely clear cut. While some have argued the aggressive easing actions taken during the crisis required courage, both from a policy and political standpoint, I expect the normalization phase will require a great deal more.

We need to get much, much closer to two percent before we even contemplate liftoff, Evans told reporters after a presentation at the Istanbul School of Central Banking today. Whether that's late 2015 or early 2015 or 2016, it'll depend on the economy.

I would like to see short-term interest rates move higher in response to improving economic conditions shortly after completion of the taper. Many of the rules offering policy guidance on the federal funds rate such as the Taylor rule and its variants are already or close to prescribing a policy rate higher than the current funds rate. Second, the path toward the longer-term neutral funds should be gradual. Given the lengthy period of unconventional policy and low rates, the necessary adjustment by financial markets to less central bank intervention and influence could be volatile. In this environment, the pressure to quickly back away from a rising rate policy will be significant; such pressures will need to be resisted. If not, we risk moving into a confusing stop-and-go policy environment.

In terms of the path after liftoff, the FOMC has signaled that it will take a gradual approach toward the longer-run funds rate... So, the funds rate could reach its longer-run level well after the economic recovery is complete and inflation has returned to the 2 percent goal. These signals suggest to banks that they will continue to contend with a low interest rate environment for a few years, even as economic conditions are likely to improve. I see this as a set of conditions ripe for greater risk-taking as firms reach for yield and the imbalances related to such incentives grow.

Gradualism can promote financial stability, as it reduces the incidence of unexpected shifts in interest rates. Even so, the degree of inertia suggested in the median path of the federal funds rate in the FOMCs Summary of Economic Projections goes beyond what is required to achieve a smooth exit. In my view, it will likely be appropriate to raise the federal funds rate at a somewhat faster pace than the median of committee members projections. Low rates into late 2016 will likely continue to provide incentives for financial markets and investors to reach for yield in an economy operating at full capacity and risks achieving our objectives over the longer run.

We are making progress on the full employment goalby some measures, like the rate of civilian unemployment, a lot of progress. The rate of unemployment fell to 6.3 percent last month and is closing in on levels that many believe to be consistent with a practical definition of full employment. But a number of other measures of labor market performance tell me that the economy is still operating well short of full employment. Notably, there remains an unusually high percentage of prime working-age people who are marginally attached to the labor force, who are working part-time jobs when they would prefer to be working full-time, and who are leaving the workforce. These indicators and others suggest to me that fulfillment of our employment mandate is still a ways off.