Cleveland Fed President Loretta Mester said yesterday, “I believe it will be appropriate to move the funds rate up in March and follow with further increases in the coming months.”

“If by mid-year, I assess that inflation is not going to moderate as expected, then I would support removing accommodation at a faster pace over the second half of the year,” she added.

Mester still expects inflation to remain above 2% this year and next. Moderation in inflation is “conditioned on the FOMC taking appropriate action to transition away from the current emergency levels of accommodation.”

“We will need to convey the overall trajectory of policy and give the rationale for our policy decisions based on our assessment of the outlook and risks around the outlook, which are informed by economic and financial developments,” Mester said. “This change in communications will provide a better sense of the FOMC’s policy reaction function and should not be interpreted as the FOMC backing away from transparency.”

St. Louis Federal Reserve President James Bullard warned during a panel talk at Columbia University, “we’re at more risk now than we’ve been in a generation that this (inflation) could get out of control.”

One scenario would be, “a new surprise that hits us that we can’t anticipate right now, but we would have even more inflation,” he said. “That’s the kind of situation that we want to … make sure it doesn’t occur.”

“Overall, I’d say there’s been too much emphasis and too much mindshare devoted to the idea that inflation will dissipate at some point in the future,” Bullard said. “We’re at risk that inflation won’t dissipate, and 2022 will be the second year in a row of quite high inflation. So that’s why given this situation, the Fed should move faster and more aggressively than we would have in other circumstances.”

Minneapolis Fed President Neel Kashkari said yesterday that it’s “appropriate” to start normalizing policy. However, he cautioned “let’s not overdo it”. “If we raise rates really aggressively, we run the risk of slamming the brakes on the economy, putting the economy into recession, which would then — we’d be crashing back down into this low inflation environment,” he warned.

Kashkari also revealed that he and his family had COVID earlier this year, and “a lot of families are experiencing what we just experienced.” He added “this will be a while” before people can be comfortably living with the coronavirus.

The minutes of the January FOMC meeting contained little surprises. Fed acknowledged that ” recent inflation readings had continued to significantly exceed the Committee’s longer-run goal and elevated inflation was persisting longer than they had anticipated.” And, ” elevated inflation was a burden on U.S. households, particularly those who were least able to pay higher prices for essential goods and services.”

Most participants noted, “if inflation does not move down as they expect, it would be appropriate for the Committee to remove policy accommodation at a faster pace than they currently anticipate.” But, “the appropriate path of policy would depend on economic and financial developments and their implications for the outlook and the risks around the outlook.”

Fed officials “will be updating their assessments of the appropriate setting for the policy stance at each meeting.”

Meanwhile, ” in light of the current high level of the Federal Reserve’s securities holdings, a significant reduction in the size of the balance sheet would likely be appropriate.”

Full minutes here.