Hours from now the Federal Reserve will announce its latest decision on monetary policy, and expectations call for more of the same, with a possible twist.

Economists expect the Fed will continue to buy $40 billion worth of mortgage securities every month but replace its Operation Twist with outright purchases of long-term Treasuries. Under Operation Twist the Fed has been selling short-term Treasuries and buying long-term Treasuries but it reportedly is running out of short-term securities to sell.

Related: The Fed Will Keep Printing Until the Dollar Gets Weaker: Jim Rickards

Since the Fed began its latest—and third—round of quantitative easing in September, the unemployment rate has fallen to 7.7%, payrolls have risen to 146,000 in November (they were also revised higher in July & August) and GDP has climbed to a 2.7% annualized rate in the third quarter.

"The Fed is really the only game in town," says Gary Shilling, founder and president of A. Gary Shilling & Co., an economic consulting firm and money manager. "Fiscal policy is pretty much on hold…. so the Fed has to maintain this idea of pumping out money with QE3," Shilling tells The Daily Ticker. He doesn't think QE3 is having much impact.

Related: The Fed is Killing the U.S. Economy: John Tamny

Fiscal policy, unlike Fed policy, is expected to change, but exactly how is not known. The White House and Congress remain deadlocked on how to avoid the massive spending cuts and tax hikes that take effect early next year.

House Speaker John Boehner told House members Tuesday that he's "still waiting" for the White House to identify spending cuts it's willing to make. As Republicans wait for the president to identify additional spending cuts (the president says he's already offered $1.4 trillion in spending cuts including $1.1 trillion that Congress has agreed to) the White House is waiting for Republicans to agree to higher marginal income tax rates on the wealthiest Americans.

Related: Fiscal Cliff Deal Likely But U.S. at Risk of "Looking Ridiculous"

Shilling says he's optimistic a fiscal cliff deal will be reached before the year-end deadline: "Congress doesn't want to be tarred and feathered with creating another recession."

He says Republicans have to "deal with a tax increase for higher income people but they can possibly slide in higher taxes on capital gains or dividends or do other things to satisfy the Democrats." Perhaps that's why Boehner isn't budging on his refusal to raise marginal rates for wealthier Americans.

Even if a deal is ultimately reached on the fiscal cliff, Shilling says the U.S. economy will continue to grow slowly.

"We're only about halfway through" the usual decade-long deleveraging after a major financial crisis, he notes.

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