The recovery remains moderate and we still have a considerable way to go to meet the Fed's dual mandate of full employment and price stability.

[W]e still have a considerable way to go to meet the Fed’s dual mandate of full employment and price stability.

Lockhart, who has voiced support for the central bank’s plan to buy the $600 billion of Treasuries, said that so far “the economy seems to be absorbing that higher cost [of oil prices] without severe reaction.” If oil prices top $150 a barrel for a sustained period, “it could have a more serious effect,” and “we could be in recessionary territory,” he said.

“I’ll be surprised if I’m advocating a tightening in policy” this year, Federal Reserve Bank of Chicago President Charles Evans said. “I certainly think strong policy accommodation continues to be appropriate because the unemployment rate is 8.8% and inflation continues to be low, certainly on an underlying basis,” the official said.

He added “as long as year-over-year underlying inflation, core inflation, is 1.5% or lower, I am extremely doubtful we need an adjustment in monetary policy.” He noted 2% is where he believes inflation should be, and explained “as we get up toward 2%, we would want to make some adjustments to policy.”

As reported by Dow Jones

MR. LIESMAN: Teach us a little bit about your outlook on the economy. We've had a lot of first-quarter weakness here. It started off robustly. People thought it was going to be a 4 percent first quarter. And now it feels like we'll be lucky to hit 2. What happened?

MR. PLOSSER: Well, I think the first quarter is going to be weaker than a lot of people sort of thought it was. My forecast had been for about 3. But I still think that three and a half percent is not out of the range of possibility over the course of the year. So, yeah, there's been some weakness. But I still think the underlying fundamentals of the economy that's been the basis of this sort of gradual recovery are still kind of in place. We've just got some, I think, short-term weakness, but I think the fundamentals are still there.

MR. LIESMAN: What's the source of the short-term weakness?

MR. PLOSSER: Well, we certainly had a bad winter in terms of January. We know that affected the numbers. We've had uncertainty about Japan and the Middle East and the consequences for oil prices and so forth and how will the turmoil and the tragedy in Japan affect supply chains. And I think -- so I think a lot of that will work itself out. It'll take some time. But I think those are the major reasons why there's a little less confidence and a little less certainty about what's going to happen this first quarter.

MR. LIESMAN: Do you think higher oil prices are already hitting the economy?

MR. PLOSSER: Well, I think they are somewhat, surely.  Individuals and companies are having to pay more for oil and gasoline.  They do hit the economy. But again, I think that we haven't yet gotten to where we were in 2008, and so I think there are some reasons to be optimistic that they won't dramatically affect the economy.

“Core inflation is a much better signal of where inflation is going to go in the future,” Kocherlakota said in response to audience questions after a speech today in Helena, Montana. “There’s really not much signs of inflationary pressures building up.”

While credit availability seemed to improve for large companies throughout the past year, small businesses still complained of difficulty in gaining access to credit. Recent anecdotes lead me to believe that conditions are improving for small businesses.

We’re probably going to have excess slack in the U.S. labor market at least through the end of 2012, and that’s one reason that colored my view that we shouldn’t be overly enthusiastic about tightening monetary policy too early.

As reported by Bloomberg News

Dudley said that while the effect of higher oil prices on monetary policy depends on the circumstances, the rise in those prices had led to the U.S. economy losing "a little bit of momentum over the past two months."   The rise in oil prices is "a negative for the growth outlook because it does crimp real incomes and it will probably have some effect on consumer confidence," Dudley added.

As reported by Dow Jones Newswires

While short-term measures of inflation have accelerated in the last few months, I hold to the view that this trajectory will not continue. I continue to see the Federal Reserve's inflation objective I just outlined as attainable.

That said, like my colleagues on the FOMC, I continuously monitor performance against our price stability objective. This involves monitoring not just inflation today but importantly the course of inflation expectations, whether derived from surveys or pulled from financial market prices. I am prepared to support a change of policy if evidence accumulates that the low and stable inflation objective is at risk.

It is important to emphasize that we at the Federal Reserve have been expecting the economy to strengthen. We provided additional monetary policy stimulus via the asset purchase program to help ensure that the recovery regained momentum. A stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course.

Not many weeks ago I was ready to say—as regards growth prospects—that I could be pleasantly surprised to the upside. The economy might grow faster than my assumed moderate pace, with unemployment coming down more quickly. I still hold to the view that I could be pleasantly surprised but with a touch more caution... The range of plausible scenarios is widening. A sober assessment of prospects for continued economic progress has to factor in not only the risk of a sustained oil shock but also risks associated with fiscal policies and politics both here and in Europe.

I conclude that the current accommodative stance of monetary policy is appropriate. However, the Federal Open Market Committee will need to remain vigilant to the possibility of changes in the gap between the unemployment rate and [the natural jobless rate].

WSJ:  How will you judge when it will be the right time to begin tightening policy?

LACKER: Tough, tough question. It is really hard to write down a recipe or a check list about this. The growth rate matters, more than the overall magnitude of slack in the economy. I would again emphasize that we need to be sure we act before inflation expectations shift. We need to act in a way to prevent inflation expectations from shifting.

See Chairman Bernanke's comments on the same topic earlier in the week.

 More recently, however, we have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold. Notably, real consumer spending has grown at a solid pace since last fall, and business investment in new equipment and software has continued to expand.

...

Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.

Commodity prices have risen significantly in terms of all major currencies, suggesting that changes in the foreign exchange value of the dollar are unlikely to have been an important driver of the increases seen in recent months.

The rate of pass-through from commodity price increases to broad indexes of U.S. consumer prices has been quite low in recent decades, partly reflecting the relatively small weight of materials inputs in total production costs as well as the stability of longer-term inflation expectations. Currently, the cost pressures from higher commodity prices are also being offset by the stability in unit labor costs. Thus, the most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation--an outlook consistent with the projections of both FOMC participants and most private forecasters.