 "Wall Street dips as Sept rate hike back on the table")
U.S. inflation will likely rebound as pressure from the dollar fades, allowing the Fed to raise interest rates gradually, Fischer said at the global central banking conference in Jackson Hole, Wyoming.
Fischer's remarks suggest the Fed could look beyond a week of stock market turmoil brought on by persistent fears that China's economy is faltering.
"The market turmoil will continue in the near future. China is the catalyst, but the real reason for the selloff is the nervousness about the first U.S. rate hike," KBC senior economist Koen De Leus said.
A decade of near-zero interest rates has helped the U.S. stock market stage a spectacular bull-run since the financial crisis.
But fears about the health of the Chinese economy buffeted global stock markets this month and pushed prices of oil and other commodities lower.
The S&P 500 and the Nasdaq composite look set to post their biggest monthly loss since May 2012, while the Dow Jones industrial average is on track for its worst monthly loss since 2010.
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Wall Street closed flat on Friday after a tumultuous week in which the Dow slumped more than 1,000 points at one point last Monday. The market subsequently rallied, posting its biggest two-day gain since the financial crisis.
The CBOE Volatility index - known as Wall Street's fear gauge - rose about 7 percent to 27.80 on Monday, above its long-term average of 20.
In China, stock markets had another volatile session. The Shanghai Composite lost 0.8 percent, while the blue-chip CSI300 index ended up 0.7 percent. Both were down more than 4 percent at one point.
At 9:45 a.m. ET (1345 GMT), the Dow was down 156.87 points, or 0.94 percent, at 16,486.14, the S&P 500 was down 14.94 points, or 0.75 percent, at 1,973.93 and the Nasdaq Composite was down 23.20 points, or 0.48 percent, at 4,805.12.
All of the 10 major S&P sectors were lower with the energy index's 1.81 percent fall leading the decliners as oil prices resumed their downward spiral after last week's 10 percent gain. Exxon Mobil was the biggest drag on the S&P, with a 1.8 percent fall.
Investors will be keeping a sharp eye on economic data again this week, especially the monthly jobs report on Friday, the last one before the Fed meets on Sept. 16-17.
The U.S. central bank has said it will raise rates only when it sees a sustained recovery in the economy. While the job market has improved steadily, inflation has remained below the central bank's 2 percent target for more than three years.
Twitter was up 4.4 percent at $27.92 after SunTrust Robinson raised its rating to "buy" from "neutral".
Netflix fell 1.6 percent to $115.81 after the company said it chose not to renew its agreement with cable network Epix.
United Technologies was down 2.8 percent at $90.64 after several brokerages cut their price target and rating. The stock was the biggest drag on the Dow.
Phillips 66 was up 2.3 percent at $78.99 after Warren Buffett's Berkshire Hathaway disclosed a $4.48 billion stake in the oil refiner.
Declining issues outnumbered advancing ones on the NYSE by 2,092 to 612. On the Nasdaq, 1,462 issues fell and 874 advanced.
The S&P 500 index showed no new 52-week highs and no new lows, while the Nasdaq recorded nine new highs and eight new lows.