I happen to believe that the Federal Reserve is exhausting the limits of prudent monetary policy. The programs popularly known as QE2 and Operation Twist are, to my way of thinking, of doubtful efficacy, which is why I have not been able to support them. I suspect that, at least in the case of Operation Twist, they have so far been of greater benefit to traders and large monied interests than to job-creating businesses. But even if you believe, as the majority of my learned colleagues do, that the benefits of QE2 and Operation Twist outweigh their costs, you would be hard-pressed to now say that still more liquidity, or more fuel, is called for given the $1.5 trillion in excess bank reserves and the substantial liquid holdings businesses are hoarding above their normal working-capital needs.

The estimated effects [of LSAPs on asset prices] typically lie in the neighborhood of 15 to 20 basis points. Generally, the estimates are reasonably precise. Although some might argue that 15 to 20 basis points is small, keep in mind that the typical response of the 10-year Treasury yield to a 75 basis point cut in the federal funds rate is also about 15 to 20 basis points. I’ve never heard anyone argue that a 75 basis point cut in the funds rate is small potatoes!

Rosengren said reducing the interest rate on excess reserves–which is the rate banks get for keeping money in cash–to zero would “make sense.”

The Boston Fed president, who is among the more dovish of Fed officials, said the Fed might need to go beyond the unconventional measures now being considered to spur economic growth.

One idea that might deserve consideration if there is a new shock to the economy or if it fails to pick up, he said, would be setting a ceiling on U.S. Treasury borrowing rates for securities with durations of as long as two years.

“You could peg medium-term Treasurys out for a fixed period of time,” he said. “You could say any security maturing between now and the end of 2013, we won’t allow [the yield] to get above a certain amount of basis points.”

 Note:  Rosengren's view had been different one year earlier.  [Link]

“The worst outcome of all would be for the Fed to continue monetizing the debt,” Fisher, 62, said today during a speech in Dallas. “We’ve been doing that since November.”

For the Federal Reserve, pursuing the dual mandate of full employment and price stability allows us to make an important contribution to global stability and growth. Ensuring low and stable inflation preserves the purchasing power of the dollar and sustains its attractiveness as a medium of exchange. Supporting maximum sustainable employment means that we have an important growth mandate.

This remains the case even when we are at the so-called zero bound with respect to short-term rates. In this context, I believe that our large-scale asset purchase programs were fully consistent with our global responsibilities.

Based on econometric analysis and model simulations, I estimate that these longer-term securities purchase programs will raise the level of GDP by about 3 percent and add about 3 million jobs by the second half of 2012. This stimulus also probably prevented the U.S. economy from falling into deflation.

The standard response to {a projected 0.7% increase} in core PCE inflation would be to raise the target interest rate by a larger amount—that is, by at least 70 basis points. For example, the widely known rules associated with John Taylor of Stanford University would recommend that the response should be to raise the target interest rate by 1.5 times the increase in core inflation—that is, by 105 basis points...

“There’s a very high bar [for another round of assets purchases] in my opinion” for a new program, Lockhart said.

“A high bar doesn’t mean totally impossible,” he said. “The way the economy is evolving simply suggests to me that further stimulus of any large magnitude, along the lines of what you would imagine a QE3 program would be like, is simply not going to be necessary.”

“They turned on the printing press and are buying state bonds -- financing the government by using a printing press -- scattering money across the dollar zone, that is, the entire world,” Putin told lawmakers in Moscow today. “We don’t have the same opportunity to make trouble.”

As translated and reported by Bloomberg News

“Look at their trade balance, their debt, and budget. They turn on the printing press and flood the entire dollar zone — in other words, the whole world — with government bonds. There is no way we will act this way anytime soon. We don’t have the luxury of such hooliganism,” {Putin} said.

As translated and reported by the Wall Street Journal

I don’t think we reverse that commitment [to complete our asset purchase program by the end of June] or change that commitment without some very compelling reasons to do so. I don’t see those conditions existing at this time. My outlook also doesn’t anticipate such a rapid change in conditions that a change in policy is required at this time.

It’s quite likely that $600 billion could be about the right number.  I thought going into the asset-purchase program that we might need to do more than $600 billion eventually, but $600 billion was a good start.

"My view is QE2 was unnecessary,” Hoenig said of the plan to purchase $600 billion in Treasuries in a second round of quantitative easing, during a Bloomberg Television interview in London. “My concern would be if there were any further easing into a recovery is that you do accelerate imbalances that then cost you dearly later."

I don’t think tinkering with the timing [of the end of the current LSAP campaign] is nearly as important as the amount.

Indeed, as a voting member of the FOMC this year, I have made clear within the meeting room and in public speeches that, barring some frightful development, I will vote against any program that might seek to extend or enlarge the substantial monetary accommodation we already have provided, just as I argued against the $600 billion extension the voters on the Committee approved last November. And I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it. As I said, the liquidity tanks are full, if not brimming over. The Fed has done its job. What is needed now is for business to be incentivized to commit that liquidity to creating American jobs. This is the task of the fiscal authorities, not the Federal Reserve.

I want to highlight the analogous character in practical effect of traditional monetary policy using interest rates and the less familiar asset-purchase tools we have employed since the federal funds rate hit its lower bound. Though some have argued otherwise, I believe the FOMC hasoperated for at least a decade with a consistent and fairly well understood rules-based framework. It is within this framework that I think about the desirability of both LSAP3 and the inevitable exit to a less accommodative policy stance.

...

Even though I personally am not expecting an immediate need to implement an exit, I think it's fully appropriate to revisit the implementation assumptions and tools readiness. As I contemplate an exit, two basic and obvious questions come to mind—when will it be appropriate to undertake an exit, and how to implement the exit.

...Since I think passive unwinding is probably not feasible, we will have to decide when to actively implement an exit strategy. And though the answer to when to do this is clear in concept, it is not straightforward in practice. Lags in the effects of monetary policy mean that action generally needs to be taken in advance of definitive changes in the path of economic activity and prices. That is why the policy framework I am describing emphasizes a forward-looking rule-like construct to which the FOMC would simply react.