“I would have dissented [at the September meeting],” he said. “The case for policy normalization is quite strong since the committee’s objectives have essentially been met.”

“Why do the committee’s policy settings remain so far from the normal when the objectives have essentially been met?” Mr. Bullard said. “The committee has not, in my view, provided a satisfactory answer to this question.”

Based on my current assessment of the outlook and the risks around the outlook, I believe the economy can handle an increase in the fed funds rate and that it is appropriate for monetary policy to take a step back from the emergency measure of zero interest rates. A small increase in interest rates from zero is not tight monetary policy. Indeed, I anticipate that beyond liftoff, economic developments will likely mean it will be appropriate for monetary policy to remain very accommodative for some time to come, supporting continued expansion and providing some insurance against downside risks, with rates expected to move up only gradually to more normal levels and with the decisions about that path dependent on incoming information on the economy’s performance and risks to that performance. Given the outlook, delaying the start of liftoff for too long risks having to move rates up more aggressively later on, but I see benefits of our being able to take the gradual path.

“The die has been cast. We are going to have extremely accommodative policy for two to three years,” assuming a gradual increase in the federal funds rate towards more normal levels, Bullard said. “The risk is that you stay with emergency settings way beyond the time emergency settings are required, with unknown consequences. So the simple thing to do is edge your policy back to normal.”

Steve Liesman: Would you put yourself in the camp of one expecting a rate hike this year?

Dan Tarullo: I would -- you know, I do want to orient towards how I think about the economy. Based on what I just said and based also on what one might call a risk management approach of being concerned that a premature rise might be harder to deal with than waiting a little bit longer, right now my expectation is given where I think the economy would go I wouldn't expect it would be appropriate to raise rates. But I want to hasten to add that is an outlook that changes based on developments in the economy and our being forward looking about it. i do think there's been too much focus on a particular meeting and a particular date and not enough on the overall conditions of the economy.

There is a risk that the intensification of international cross currents could weigh more heavily on U.S. demand directly, or that the anticipation of a sharper divergence in U.S. policy could impose restraint through additional tightening of financial conditions. For these reasons, I view the risks to the economic outlook as tilted to the downside. The downside risks make a strong case for continuing to carefully nurture the U.S. recovery--and argue against prematurely taking away the support that has been so critical to its vitality.
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Although the outlook for domestic demand is good, global forces are weighing on net exports and inflation, and the risks from abroad appear tilted to the downside. Our economy has made good progress toward full employment, but sluggish wage growth suggests there is some room to go, and inflation has remained persistently below our target. With equilibrium real interest rates likely to remain low for some time and policy options that are more limited if conditions deteriorate than if they accelerate, risk-management considerations counsel a stance of waiting to see if the risks to the outlook diminish.

Now I would like to emphasize that while I favor a somewhat later lift off than many of my colleagues, the precise timing for the first increase in the federal funds rate is less important to me than the path the funds rate will follow over the entire policy normalization process. After all, today’s medium- and longer-term interest rates depend on market expectations of the entire path for future rates, not just the first move. In turn, these medium- and longer-term rates are key to the borrowing and spending decisions of households and businesses.

Accordingly, when thinking about the initial stages of normalization, I find it useful to focus on where I think the federal funds rate ought to be at the end of next year given my economic outlook and assessment of the risks. And right now, regardless of the exact date for lift-off, I think it could well be appropriate for the funds rate to still be under 1 percent at the end of 2016.

“I can’t anticipate whether in the committee’s judgment there is enough data in October” for a move at that gathering of the FOMC, he said. “I think October is a live meeting. Clearly, there is the potential that the data coming in advance of the October meeting will be sufficient. And as I said in my remarks, and I repeated, we will have a lot more in December.”

I don’t see raising the target range for the fed funds rate above its current low level in 2015 or 2016 as being consistent with the pursuit of the kind of labor market outcomes that we are charged with delivering. Indeed, I would be open to the possibility of reducing the fed funds target funds range even further, as a way of producing better labor market outcomes.

There is, of course, a risk that inflationary pressures could build up more rapidly than I (or others) currently anticipate. But the solution to this scenario is relatively simple: Raise interest rates. Given my current outlook, I believe that it would be appropriate to wait until 2017 to initiate liftoff and then raise the fed funds rate at about 2 percentage points per year.

There are risks, as there always are in life. And there’s always the possibility of what British Prime Minister Harold Macmillan said when asked what worried him most: “Events, dear boy, events.” But all in all, things are looking up, and if they stay on track, I see this as the year we start the process of monetary policy normalization.

Based on central bank orthodoxy, the most prudent course of action is to begin to normalize the policy rate slowly and gradually, under the interpretation that the Committee will still be providing considerable monetary accommodation to the economy to guard against potential pitfalls and risks as the quarters and years ahead unfold. By adopting this prudent approach to monetary policy strategy, policy tools will eventually be returned to the toolbox, and the Committee may be able to lengthen the expansion longer than it may otherwise extend.

I have set up this simple classic view because I think that, on balance, this view suggests the best path forward for U.S. monetary policy.

"On the global side, I’m not seeing any obvious signs that those risks that were on my mind and the minds of others, I don’t see signs that those have gotten worse,” Williams, a voting member on the Fed’s policy committee this year, said in Salt Lake City on Thursday. He was answering questions from the audience after delivering a speech.

“There’s always going to be risks, there’s always going to be uncertainties,” he said. Even so, “we’re going to have to take actions that we think are the appropriate ones given our goals.”

Before raising rates, I would like to have more confidence than I do today that inflation is indeed beginning to head higher. Given the current low level of core inflation, some evidence of true upward momentum in actual inflation is critical to this assessment. I believe that it could well be the middle of next year before the headwinds from lower energy prices and the stronger dollar dissipate enough so that we begin to see some sustained upward movement in core inflation. After liftoff, I think it would be appropriate to raise the target interest rate very gradually. This would give us sufficient time to assess how the economy is adjusting to higher rates and the progress we are making toward our policy goals

“If the economy continues on the same trajectory it’s on...and everything else suggests that’s likely to continue...then there is a pretty strong case for lifting off” before 2015 ends, he said in a Wall Street Journal interview.

"I think the conditions are there" for the Fed to begin to lift rates from near zero, George said in Omaha, Nebraska at the Aksarben Stock Show and Rodeo. "Waiting for perfect conditions is not a realistic approach to making decisions about interest rates ... You cannot afford to get into a state of paralysis around looking for data that might continue to reassure you. So when conditions warrant, as I believe they do today, I think interest rates need to adjust."

Policy will remain exceptionally accommodative through the medium term no matter how the Committee proceeds.