To those of us who think that the Fed's neutral strategy--the "do nothing" strategy--is to buy bonds for cash-$100 billion/month should do--whenever the market expects nominal GDP growth to fall further behind its trend growth path of 5.5%/year and to sell bonds for cash whenever the market expects nominal GDP growth to shoo have its trend growth path of 5.5%/year, right now the Federal Reserve is not "doing nothing": it is actively engaged in a most extraordinary and comprehensive experiment of deflationary austerity. Risk aversion and model uncertainty should have greatly militated against its current policies.
But Noah Smith does not agree. I will leave him to the tender mercies of Scott Sumner:
Noahpinion: Reasons for "apparent status quo" bias at the Fed: Asymmetric model uncertainty… applies specifically to the Fed's reluctance to engage in quantitative easing…. [H]istory has seen many changes in the Federal Funds rate, but not many instances of QE, so it's more difficult to select a model to give you guidance when contemplating QE than when contemplating routine open-market operations. Therefore, to do QE, you have to take a much bigger leap of modeling faith. This will bias the Fed toward apparent inactivity when short-term nominal interest rates are at the Zero Lower Bound, as they are now.