Today, The Wall Street Journal reports that the Federal Reserve is looking at a symbolic policy change in light of the sagging recovery -- something designed to
“„The issue: Whether to use cash the Fed receives when its mortgage-bond holdings mature to buy new mortgage or Treasury bonds, instead of allowing its portfolio to shrink gradually, as it is expected to do in the months ahead. Any change — only four months after the Fed ended its massive bond-buying program — would signal deepening concern about the economic outlook. If the Fed’s forecast deteriorates significantly, it could also be a precursor to bigger efforts to pump money into the economy.
“„Moving to stop the Fed’s portfolio from shrinking would prevent monetary policy from slightly tightening in the face of a weakening recovery.
“„Buying new bonds with this stream of cash from maturing bonds — projected at about $200 billion by 2011 — would show the public and markets that the Fed is seeking ways to support economic growth. It could also be a compromise that rival factions at the Fed support, as officials differ about whether and how to address a subpar recovery.
“„The central bank’s $2.3 trillion portfolio has nearly tripled in size since 2007.