I really want to take away the punch bowl before the room gets drunk, because this punch is, I think, a little bit spiked.  I’m not for tight monetary policy, I’m for non-zero monetary policy.

 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.

MR. KERNEN: I remember before QE2 started we were with you in St. Louis, and you gave us a little bit of a head fake here and there about whether it would actually -- that it was a done deal, that it was going to happen, when I think it was going to happen all along.

Now I feel like you're giving us a little bit of a notion that "We might end early" when, in fact, there's no intention of ending early.

MR. BULLARD: I'm telling you what I think. I'm just one guy on the --

MR. KERNEN: I know.

MR. BULLARD: -- one guy on the committee. You can talk to anyone else and see what they say.

MR. KERNEN: There won't be any QE3, though.

MS. QUICK: We did have a guest who sat here last week and said higher oil prices means we're looking at QE3. Is that --

MR. BULLARD: Well, I don't think we're in that position yet.   This has not gone on long enough. You'd have to see if the shock is really persistent. Also it doesn't strike me that it's really big enough at this point. You're talking, if I've had the numbers right, 98 bucks on West Texas Intermediate this morning. That's up. You know, it's certainly a concern, but it's not so high at this point.

Last November, after considerable deliberation, the FOMC decided to purchase an additional $600 billion of longer-term Treasury securities. This asset purchase program has been commonly referred to as QE2. Based on my reading of the economic outlook and challenges that the economy faces, I have expressed some doubts that the benefits outweigh the costs of this policy. However, I supported continuation of the policy in January because it is generally a good practice for a central bank to do what it says it is going to do unless circumstances significantly change. To do otherwise would undermine the institution’s credibility.

When the asset purchase program was adopted, the Committee also said that it would review its planned purchase program on a regular basis, and I take that promise to review seriously. Policy, after all, must also be dependent on the evolution of the economy so when the outlook for the economy changes in an appreciable way, so should policy.

Should economic prospects continue to strengthen, I would not rule out changing the policy stance to bring QE2 to an early close. Thus, I will continue to look at the data and consider revising my forecast and preferred policy path as we gain more information on economic developments in the coming months. If the growth rates of employment and output begin to accelerate or if inflation or inflation expectations begin to rise, then it may be time to begin taking our foot off the accelerator.

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 The question is not can we do it, but will we do it at the right time and at the right pace. Since monetary policy operates with a lag, the Fed will need to begin removing policy accommodation before unemployment has returned to acceptable levels. Will we have the fortitude to exit as aggressively as needed to prevent a spike in inflation and its undesirable consequences down the road?

The message that comes out of what I think of as high-quality research on this subject is that policy ought to remain accommodative for really quite a while, even a while after conditions start to improve.

The Fed has done its job... It’s now up to fiscal authorities to make it work.

To put it bluntly, with unemployment too high and inflation too low — and both forecasted to stay that way over the next two years — we have missed on both of our policy objectives. There is currently no policy conflict between improving the employment and inflation outcomes. This leads me to conclude that accommodative monetary policy continues to be beneficial for achieving each of these goals.

I'm pretty confident we have the mechanism under command on our command. I think we know what to do. We know how to do it.

The timing and the pace are the key swing variables. Those are the things that are just really hard to get. When back - when we were just operating with interest rates, you saw the last expansion. We raised rates at a very steady rate and a very gradual rate. Back in '94, we raised rates a little more herky-jerky - big moves, pause for a while, big moves. We got a greater increase -- so getting the timing right when you start raising rates or start withdrawing monetary stimulus, and then getting the pace right, those two things are both very important.

On whether the timing or the mechanism of the exit strategy is a greater challenge

Once the economy has a self-sustaining -- you know, once it's sort of reached escape velocity, so to speak, then that monetary fuel can be withdrawn. And usually that would involve raising short-term interest rates. In this case, it would involve both raising short-term interest rates and reducing the size of the balance sheet.

So, yes, as the economy begins to get stronger and develops its own momentum, then it needs less monetary policy support and we have to begin to withdraw it. Otherwise, we would risk inflation, as Chairman Ryan was concerned about.

The Committee recognized that the provision of further monetary stimulus at this point in the business cycle is not without risks, and therefore committed to regularly review the pace and overall size of the asset-purchase program in light of incoming information and adjust the program as needed. The distinct improvement in the economic outlook since the program was initiated suggests taking that re-evaluation quite seriously. That re-evaluation will be challenging, because inflation is capable of accelerating, even if the level of economic activity has not yet returned to pre-recession trend.

You can never say never, but I cannot imagine a convincing argument for further quantitative easing after this round, given what is developing now in the economy.

I'm looking for GDP over the course of 2012 and 2013 to be only about 3%. Which is a little above trend-- it's not an outrageous forecast by any stretch of the imagination. Many people are a little below that, maybe at 2.5%, but you know, frankly the difference between 2.5% and 3%, our ability forecast with that degree of accuracy is pretty poor.

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We've seen unemployment fall almost a full percentage point in the last year. The last time that happened was 1995. And it never fell a full percentage point in a year after the 2001 recession. So I'm a little more optimistic I mean, I think we we will be by the end of 2012 and I think unemployment will be close to 8% and on my better days maybe even a little shy, little below that.

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While the outlook may not have improved enough yet to warrant adjusting our purchase plans in the near-term, I anticipate earnest re-evaluation as economic developments unfold in the months ahead.

While the outlook may not have improved enough yet to warrant adjusting our purchase plans in the near-term, I anticipate earnest re-evaluation as economic developments unfold in the months ahead.

{Bullard} still expects unemployment to decline “only slowly” and said he’s not ready to push changes to the Fed’s program of buying $600 billion of Treasuries through June, dubbed QE2 for the second round of quantitative easing.

“It’s too early to make a judgment on that,” said Bullard, 49, who voted in favor of the program in November and rotates into an annual non-voting position this month. “We really only have about two months, and in the macroeconomic world that’s not enough data to go on. So I’d like to see fourth-quarter results in particular and more of the data from 2011.”

From a personal interview, as reported by Bloomberg News