We are paying attention and we are in the right place [regarding monetary policy.]

I'm comfortable with rates where they are now, but later this year I think it will be a legitimate question about whether we drop ... the 'extended period' language and think about raising rates.

As far as the general question of tightening monetary policy, that depends on the course of the economy.

[A] recovery of the national economy is proceeding but not yet with solid and sustainable underpinnings. Inflation appears restrained. The outlook from here is beset by somewhat more than normal uncertainty. There is a chance of overachieving forecasts of moderate growth and gradual reduction of unemployment, but at the same time there are notable risks. In my view, these circumstances suggest caution in moving away from policies designed to give the economy the best possible prospect of recovery with full employment. Adjustment of monetary policy will be needed eventually, but this is not the time.

Asked if such conditions were robust enough to allow the Fed to alter its repeated commitment to keep borrowing costs at exceptionally low levels for an "extended period," Lacker said: "Not now. Maybe soon."

"I'm comfortable with rates low where they are right now," he said. "I think we're entering a period when, every quarter, it's going to be a legitimate question as to whether to raise rates or not."

Unless events in Europe turn out to be much worse, I think that in the near term, the U.S. is probably a beneficiary of the crisis in Europe... I don’t think it should push back [the date for the Fed to begin tightening].

The latest economic projections of Federal Reserve Governors and Reserve Bank presidents, which were made near the end of April, anticipate that real gross domestic product (GDP) will grow in the neighborhood of 3-1/2 percent over the course of 2010 as a whole and at a somewhat faster pace next year.  This pace of growth, were it to be realized, would probably be associated with only a slow reduction in the unemployment rate over time. In this environment, inflation is likely to remain subdued.

Currently, policy is, appropriately, very accommodative. But, eventually, we will have to return to a more normal stance. Judging the appropriate timing and pace for reducing accommodation poses a significant challenge for policymakers over the next couple years.

"I don't think that time has come yet" to raise rates, and to advocate for such an action in light of current economic circumstances is "premature," Dennis Lockhart said.

I continue to support the current stance of interest rate policy. But the time is approaching when it will be appropriate to consider recalibrating interest rate policy. I do not believe that time has yet arrived. The conditions that require a change of policy are not yet at hand. However, as the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed to promote recovery and will become inconsistent with maintaining price stability.

The implication is that the policy rate may have to begin to rise even while unemployment is considerably higher than before the recession. I'm very concerned about unemployment, and certainly employment trends should be a critical consideration in setting policy. But I accept that good policy, even in circumstances of unacceptable levels of unemployment, may incorporate higher interest rates.

[I] wouldn't be surprised [if the Fed's policy of keeping rates low] gets extended just a little bit.

[I]t's true that things could happen that could change the pace of the exit strategy but I don't see them happening yet.  How the crisis in Europe develops will dictate how we respond.

Coupled with the benign outlook for inflation, these headwinds to growth and employment explain why the Federal Reserve is keeping short-term interest rates unusually low. We want to do all we can to support more rapid economic and employment growth, subject to keeping inflation low and stable, and inflation expectations well anchored... But we are still far from where we want to be.

For the next couple of years, I expect employment levels to remain well below what I would consider full employment. Similarly, I expect inflation to only gradually drift up from its currently low level but nonetheless remain subdued. In my view, this outlook warrants exceptionally low levels of the federal funds rate for an extended period of time. That said, there is more uncertainty than usual around my outlook, so it will be critical to monitor incoming information and respond as necessary to promote economic recovery and price stability.

Currently, policy is, appropriately, very accommodative.  But, eventually, we will have to return to a more normal stance. Judging the appropriate timing and pace for reducing accommodation poses a significant challenge for policymakers over the next couple years. On the one hand, removing too much accommodation prematurely could inhibit the recovery. On the other hand ... if the Fed leaves the current level of accommodation in place too long, inflationary pressures will eventually build.