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From the wsj

By Paul Vigna


Associated Press
The next big QE3 guessing game is “when?”

Fed Chairman Ben Bernanke left almost no doubt this morning that he’s leaning toward another bond-buying program, quantitative easing,  a so-called QE3. He offered a studied defense of everything the Fed’s done so far, and he isn’t sold on economic growth. Inflation’s only a ghost, so the deck’s are clear on that front.

From our reading of the speech, it appears that Bernanke has given up on the idea of Congress stepping up and taking care of its business, which means he thinks the “fiscal cliff” will remain an issue through the November election and likely right up to the end of the year. The drag on the economy will only get worse the longer that hangs around, and that’s apparently unacceptable to the Fed chieftain.

“Fiscal policy, at both the federal and state and local levels, has become an important headwind for the pace of economic growth,” he said, sounding like a man who wants to counter that headwind.

So now the question is when. When does he let loose with another program? The Fed, could, of course, announce a program at any time, but that’s something they’d do only in an emergency. Most likely, it will come at a meeting of the Fed’s rate-setting committee, the FOMC. Their next meeting is Sept. 12-13. The key for this meeting might be the August nonfarm payrolls report.

“Next Friday’s employment report is likely to decide whether anything is done at the September meeting,” FTN economist Chris Low wrote. “Remember, too, that not taking action in September does not rule it out later.”

After September, the next meeting comes Oct. 23-24; many think that’s too close to the Presidential election for the Fed to do anything (albeit, even if they announce a program, there wouldn’t be any discernible effect on the economy for some time after).