Posted by The FT’s Robin Harding interviewed SF Fed’s Williams and came away more convinced that the Fed is on the verge of doing QE3.
Williams supports open ended balance sheet expansion – rather than an IOER cut (from 25bps to 0bps) or a UK style funding-for-lending scheme – with a focus on MBS.
This Friday’s Q2 GDP report is shaping up as the key to the August meeting’s outcome. It seems that the sensible centre of the FOMC is very close to voting for more action.
ricardian ambivalence 
Open ended. Now we’re talking.
I knew you’d like this. I think that Bernanke has a eye on his academic peers now he’s decided that he is going back into their ranks – and that’s what they’d like to see.
I don’t know if it will work, or work out as effectively as they would like, but it’s worth a try. I think Lulu Wang raises a valuable and cautionary point about non-linearities in monetary policy impulse:
http://synthenomics.blogspot.com.au/2012/07/monetary-policy-blunt-club-or-surgeons.html
The San Francisco FED put out some impressive stuff.
This is consistent with the Rudebusch approach as one might expect.
I agree – i subscribe to their letters for this reason. They also put out the note about MBS basis widening undermining monetary policy – which has really turned the heat up on the subject of MBS purchases.
“The pace of economic growth has been frustratingly slow and the recovery has lost momentum in recent months. The economy is weighed down by the ongoing European sovereign debt crisis and fiscal tightening in our own country. In these circumstances, it is essential that the Federal Reserve provide sufficient monetary accommodation to keep our economy moving towards the central bank’s maximum employment and price stability mandates.”
From Williams’ introduction to his economic letter (the bulk of which was a pre-July meeting speech), posted on the same day. Seems he’s gearing up to push hard at the next meeting…
http://www.frbsf.org/publications/economics/letter/2012/el2012-22.html