At the End of his String

Said Bernanke: "I wish we could bask
In the glow of achieving our task
That the jobless plateau
And inflation stay low,
But at this point, it's too much to ask."

"It's likely no difference at all if I
Induce mortgage interest to fall, if I
Have no guarantees on
The prospects who seize on
Cheap funding, but can't really qualify."

The Federal Open Market Committee wraps up its latest two-day meeting this afternoon and, as always, releases a statement at 2:15. Reuters' Pedro da Costa writes that economists expect the Fed to indicate a "readiness to act" in support of flagging US economic growth. Eric Green of TD Securities, for example, says: "We do not expect any new initiative from the Fed. A dovish statement signaling willingness to do more will manage frustrated expectations for more (monetary easing)." One such heretofore unrequited expectation is that of a third round of quantitative easing ("QE3"), in which the Fed would likely buy long-term mortgage bonds. This would help to lower long-term interest rates, making it cheaper to borrow, and also "breathe fresh life into a housing sector that is finally showing some signs of healing," as Mr. da Costa writes. One problem with such a move is that, as previously noted in this space, US households have been trying to reduce their excessive debt levels, while many who might like to exploit cheaper mortgages cannot qualify to get one.