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If the market had not been so stretched yesterday, the minutes of the Fed's last meeting - released yesterday afternoon- would have created a celebration amongst those who worship at the altar of Fed assistance. While there were 3 dissents from any further action, there are already 2 members voting for more aggressive action than already taken (Operation Twist) ... hint: outright bond purchases (we can bet one of those was VP "Easy Money" Yellen). Talk about a wide divergence.

As the composition of the voting board changes Jan 1st - apparently one more dove should join the bloc - we'll see better clarity of how the 2012 version of the Fed votes soon enough. In the past the Fed was apt to stand pat during election years, for fear of being seen as favoring one party or another but in this cycle it seems it's all steroids, all the time.

As always we will go with the media mouthpiece for the Fed - the WSJ's John Hilsenrath

  • Federal Reserve officials weighed several options for boosting the economy when they met in September and could revisit those measures — including more bond purchases — if the recovery continues to flounder.
  • Minutes of the Sept. 20-21 meeting of the policymaking Federal Open Market Committee, released Wednesday after the customary lag, showed officials had conversations — in which they disagreed often — about what to do next.
  • The committee agreed on a plan to shift the Fed's $2.65 trillion portfolio of securities toward longer-term securities and more mortgage debt than previously planned in an effort to bring down long-term interest rates. The hope is that lower rates will spur more spending and investment.
  • Three officials dissented because they didn't want the Fed to act — Richard Fisher, president of the Federal Reserve Bank of Dallas, Charles Plosser of the Philadelphia Fed and Narayana Kocherlakota of the Minneapolis Fed.
  • Two others, who weren't named in the minutes, wanted even more aggressive action to bring down high unemployment. They didn't dissent in part because the Fed wasn't ruling out additional steps at future meetings. Chicago Fed President Charles Evans, currently a voting member, has publicly advocated more aggressive efforts to aid the economy. But his spokesman declined to confirm he was one of the two officials urging a bolder move.
  • More Fed bond-buying is controversial in and outside the central bank. Opponents object because it potentially weakens the dollar and they believe it could cause higher inflation. Supporters say it could help the economy by lowering long term interest rates and boosting stocks, and that a lower dollar would help exports.
  • The measure isn't a foregone conclusion. "A number" of Fed officials at the meeting thought buying more securities would be "a more potent tool that should be retained as an option in the event that further policy action to support a stronger economic recovery was warranted," the minutes showed.
  • Others argued that the Fed should take this step only if a Japan-style deflation — marked by falling consumer prices and economic stagnation — threatened to take hold. For now, it doesn't look as if deflation is a threat. "Inflation had yet to come down as much as participants had expected earlier this year," the minutes noted.
  • Officials debated other steps to help the economy. One idea was to lower the 0.25% rate the Fed pays banks on their cash deposits at the central bank. Lowering the rate could help stimulate bank lending, some argued. But others feared the move would disrupt short-term lending markets because investors and banks are making so little in those markets now. Those fears won out.
  • Some officials want the Fed to say how much inflation would need to rise or how much unemployment would need to fall to spur the central bank to raise interest rates. Although they took no action, the minutes showed they held out the possibility of providing more guidance on this front when they release their quarterly economic projections. The next batch is due in November.
  • Fed officials generally were downbeat about the economy. While most didn't anticipate a recession, several noted that, with growth slow, the recovery was vulnerable to shocks. They cited "significant" risks, including persistent debt reduction and spending restraint by households, tighter U.S. fiscal policy and potential spillover of Europe's financial troubles.

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Source: Do Yesterday's Fed Minutes Indicate QE3 On Horizon?