The New York Federal Reserve officials who have been tasked to determine the interest rates have been meeting with bankers and traders to plan their next course of action.

Officials are facing troubles due to uncertainty over how much control interest rate will actually have over short-term lending markets.

Simon Potter and his team of market experts have been assigned with a tough task to assign higher rates using some new and lightly tested tools. They will be operated under the intense market scrutiny that is centered on the prospects of the world's biggest economy. Testing new methods means sweeping up several trillions of dollars of reserves from financial markets, said experts.

According to interviews with Fed officials and market participants, Potter's team is preparing for volatility and to make on-the-fly adjustments when the time comes.

The problem now is that the federal funds market, the intra-bank trading pool traditionally used by the Fed to meet its policy goals, has shrunk to about a quarter of its pre-crisis size after more than six years of unparalleled monetary stimulus.

Joseph Abate, a money-market strategist at Barclays Capital, said, "There is a lot more uncertainty in the mechanical features of the outlook than people admit to".

The Fed wants to avoid the scenario in which yields do not rise sufficient after it lifts the fed funds rate because banks flushed with $2.5 trillion of reserves don't need short-term funding.

The central bank also has risk of being drawn so deeply into money markets that it destabilizes things. This is the reason the New York Fed is taking every precaution to protect its credibility and that of the central bank.