The Monetary Base has been flat for the past couple of quarters - causing the year over year change to drop to 2%. Does the Fed need to print more money?
Not really - over 50% of the Monetary Base is Excess Reserves held by banks at the Fed. During QE1, there was only a 1% increase in the Monetary Base without Excess Reserves for every 10% increase in the Total Monetary Base. After QE2 and Operation Twist, the relationship has been a 1% increase in the Monetary Base without excess reserves for every 2-2.5% increase in the overall Monetary Base. In other words, Banks have been passing through a higher percentage of the Fed Money Printing as loans to Corporations and Consumers and the growth in the Monetary Base less Excess Reserves is still a healthy 10% year over year. There are plenty of Excess Reserves for Banks to increase lending without any more increases in the Federal Reserves Balance Sheet.