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."

[The Fed] “opened the floodgates” and “it worked,” the regional bank chief, who votes on monetary policy this year, said during a speech today in Dallas. “We re- liquefied the economy. In my opinion, we might have done too much."

Signs that inflation expectations are beginning to rise or that growth rates are accelerating significantly would suggest that it is time to begin taking our foot off the accelerator and start heading for the exit ramp. I would add that we should not be too sanguine in believing that such a time is a long way off or that the process will only be gradual. A stronger rebound in the economy or inflation than some now expect could require policy actions to be taken sooner and more aggressively than many observers seem to be anticipating. Allowing monetary policy to fall behind the curve can only result in greater inflation and more economic instability in the future.

With the potential for inflation expectations to be more volatile in the face of energy and commodity price shocks, I think it could be an opportune time for the FOMC to be more specific and publicly announce an explicit numerical inflation objective. Establishing an explicit inflation objective would clearly communicate our policy intentions and affirm our resolve to achieve price stability. It would also help the public to better evaluate the effectiveness of our actions as events unfold.

As the United States continues to ease policy into its recovery, once again there are signs that the world is building new economic imbalances and inflationary impulses. I would suggest also that the longer policy remains as it is, the greater the likelihood these pressures will build and ultimately undermine world growth.

[L]ke my colleagues on the FOMC, I continuously monitor performance against our price stability objective. This involves monitoring not just inflation today but importantly the course of inflation expectations, whether derived from surveys or pulled from financial market prices. I am prepared to support a change of policy if evidence accumulates that the low and stable inflation objective is at risk.

No amount of forthcoming accommodation... will help the process which is afflicting the United States right now and may well make it worse. The problem afflicting the United States right now is that Americans are out of work.

It is important to emphasize that we at the Federal Reserve have been expecting the economy to strengthen. We provided additional monetary policy stimulus via the asset purchase program to help ensure that the recovery regained momentum. A stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course.

I really want to take away the punch bowl before the room gets drunk, because this punch is, I think, a little bit spiked.  I’m not for tight monetary policy, I’m for non-zero monetary policy.

It is also worth pointing out in passing that a failure to raise short-term interest rates at the appropriate moment based on our dual mandate objectives would also be a losing strategy with respect to net income. Inflation would climb, bond yields would rise and the Fed would ultimately be forced to raise short-term rates more aggressively, or to sell more assets at lower prices to regain control of inflation. This would almost certainly result in larger reductions in net income than a timelier exit from the current stance of monetary policy.

The improvement in the growth outlook has been noticeable enough to tilt the case further against QE2... To my mind, it was a close call to begin with.

Bullard stated that ahead of the November FOMC meeting, the policy change had been largely priced into markets, and the financial market effects were conventional. In particular, he said, “real interest rates declined, inflation expectations rose, the dollar depreciated, and equity prices rose.” Bullard added, “These are the ‘classic’ financial market effects one might observe when the Fed eases monetary policy in ordinary times.” Bullard concluded that “quantitative easing has been an effective tool, even while the policy rate is near zero.”

Since QE2 was announced, the economic outlook has improved, Bullard noted. “The natural debate now,” he said, “is whether to complete the program, or to taper off to a somewhat lower level of asset purchases.”

Q: There is an undercurrent of anti-Fed sentiment among the freshman Republicans. Support for the gold standard, anti-fiat currency… How do you respond to it?

A: I say I understand. I say gold is a very legitimate monetary system. However it will not end crises. It will not end credit bubbles. And it can be just as disruptive as a fiat currency – as an example the Great Depression when gold was hoarded and we had a very serious deflationary experience. Yes, the Fed contributed to it, but also governments contributed to it with their hoarding issues.

Q: But end the Fed?

A: I don’t see that a modern economy would function better without a central bank. We might have stable prices, but that is on average. In the meantime, we would have very strong deflationary pressures and very high inflationary pressures. The average is zero. That is the problem with that. It is not going to solve the world’s problems.

When I joined the Federal Reserve four-and-a-half years ago, I do not recall the phrase “managing financial crises” being anywhere in my job description.