by Calculated Risk on 9/07/2011 08:33:00 PM

From Jon Hilsenrath at the WSJ: Fed Prepares to Act

Federal Reserve officials are considering three unconventional steps to revive the economic recovery and seem increasingly inclined to take at least one as they prepare to meet this month.
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One step getting considerable attention inside and outside the Fed would shift the central bank's portfolio of government bonds so that it holds more long-term securities and fewer short-term securities.
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A second step under consideration at the Fed, one getting mixed reviews internally, would reduce or eliminate a 0.25% interest rate the Fed currently is paying banks that keep cash on reserve with the central bank.
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A third step Fed officials are debating would involve using their words to make their economic objectives and plans for interest rates more clear.

"QE3" remains an option, but it appears the first step would be to extend the maturity of the Fed's portfolio. We might get more hints tomorrow when Fed Chairman Ben Bernanke speaks on the economic outlook at 1:30 PM ET.