Will the Fed Scale Up QE2?

I often feel caught between two complementary, yet seemingly contradictory narratives regarding the US economy, one that sounds very optimistic while the other, in my opinion, pessimistic. Nevertheless, I think both narratives can be embraced, at least to a certain extent. And which narrative the Federal Reserve embraces will determine the dominate monetary policy question: Will the Fed scale up quantitative easing, or scale down?

It is reasonable to conclude that the US economy possess the basis for sustained growth in the quarters ahead. Indeed, the signs of a cyclical upturn are all over the data - manufacturing, investment, retail sales, inventories, take your pick, they are generally moving in the right direction. And my take on the recent spate of data is that economic conditions firmed somewhat as we entered the fourth quarter.