by Calculated Risk on 3/04/2012 06:03:00 PM

I always read Jon Hilsenrath's articles on the Fed very closely. Right now the Fed seems uncertain about QE3, and the decision remains data dependent (as always) ... from Hilsenrath at the WSJ: Fed Takes a Break To Weigh Outlook

Fed officials meeting next week are unlikely to take any new actions to spur the recovery, and they are likely to emerge with a slightly more upbeat—but still very guarded—assessment of the economy's performance.
...
A big question is whether the Fed will launch a new bond-buying program in an effort to push down already low long-term interest rates.
...
Mr. Bernanke signaled to Congress last week that he had doubts about the sustainability of the employment gains. Fed officials aren't inclined to move while they try to solve the puzzle. "In light of the somewhat different signals received recently from the labor market than from indicators of final demand and production," he said, "it will be especially important to evaluate incoming information to assess the underlying pace of economic recovery."

Several economists still expect QE3 to be announced at one of the two day meetings in April or June - or maybe in Q3.

Goldman Sachs economists wrote on Friday:

We expect that the Fed will ultimately announce a return to balance sheet expansion sometime in the first half of 2012, likely including purchases of mortgagebacked securities (MBS).

And Merrill Lynch noted last week:

In our view, it is wishful thinking to believe the Fed will do QE when the data flow is healthy. We expect renewed QE only after Operation Twist ends in June ... only if the economy is slowing ... Under our growth forecast ... QE3 comes in September.

If the economy slows, and key inflation measures start falling again - then QE3 is very likely. But right now, with most data a little better than expected, and inflation a little higher than the Fed's target, the Fed is back to "wait and see". The next FOMC meeting is on Tuesday March 13th.

Yesterday:
• Summary for Week ending March 2nd
• Schedule for Week of March 4th