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Barely two months have passed since the Fed rolled out QE3 and already the markets are abuzz with talks of QE4. Blame it all on the FOMC’s October 23-24 meeting minutes!

The minutes, which were released on Wednesday, showed that “a number of participants” believe the economy could use another boost next year. Apparently, more than a couple FOMC members would like to see the Fed increase its bond purchases after the expiration of Operation Twist next month. If you recall, under Operation Twist, the Fed swaps about $45 billion of short-term Treasuries for longer-term debt, effectively lowering longer-term interest rates without bloating its balance sheet.

What this renewed dovishness from the Fed tells us is that U.S. policymakers don’t really have much faith in the current strength of the economy’s recovery. They want to do everything they can to make sure the economy gets back on its feet, even if it means pumping more money into the economy just months after QE3.

It also tells us that the central bank is playing it safe and that policymakers weren’t carried away by the economic improvements we saw in September. After all, judging by recent reports, it seems like those gains were nothing but a fluke.

Just take a look at the horrendous retail sales data we saw earlier this week. October recorded a 0.3% drop in sales, marking the first negative figure in four months. Considering that consumer spending has been the main driving force behind the economy’s growth, this comes as a huge downer.

The FOMC meeting minutes also revealed that Vice Chairman Janet Yellen is gaining support in her call to link the country’s benchmark interest rates to economic performance. Rather than simply specifying a time period through which interest rates will remain low, Yellen wants interest rates to adjust only when certain economic targets are achieved.

Chicago Fed President Charles Evans added hard numbers to Yellen’s idea, saying that the central bank should aim for a 7% unemployment rate and a 3% core CPI before changing its zero-rate policy. You could say that Yellen’s proposal is kinda like rewarding children with cookies whenever they get good grades.

EUR/USD Daily Chart

How does this all of this affect the outlook for the dollar?

Given the issue surrounding setting rates, weaker economic data, the recent dovishness of the Fed, and the U.S. Fiscal Cliff, it’s hard to justify further dollar strength. Also, any more signs that the Fed may pump more money into the economy may stoke another case of risk-taking and result in a dollar sell-off, as previous quantitative easing measures have done.