From this commentary by Liam Halligan at the U.K. Telegraph comes a good summary of what the Federal Reserve faces in the months ahead as they restart the “taper talk” that ended so badly over the summer while a new round of debate begins in Washington over the nation’s budget woes and elected officials on the Senate Banking Committee prepare their questions for Fed Chair nominee Janet Yellen.

In its September statement, the Fed had said that “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labour market”. In the October minutes, that sentence was gone – causing some to argue that tapering is now more likely, because the economy is improving.

Yet, the only reason “that tightening of financial conditions” has gone is because, since early September, when it lost its nerve, the US central bank has stopped talking about tapering. This illustrates the Fed’s Catch-22. If Bernanke starts preparing the world for tapering again, yields will start to spiral, choking off recovery and robbing the Fed of its resolve to taper. So US policymakers are caught in a trap – a seemingly inescapable dilemma that stems directly from the massive scale of QE.

These issues will come to a head, and in full public gaze, during Congressional hearings into the nomination of Janet Yellen as Bernanke’s replacement.

The title “The Fed is locked in a QE prison of its own making” is pretty good too.