WASHINGTON – The Federal Reserve is trying again to jolt an economy thats being held back by a weakened job market.
To spur borrowing and spending, its extending a program designed to lower long-term U.S. interest rates.
At the end of a two-day policy meeting Wednesday, the Fed also sharply reduced its forecast for U.S. growth and said its prepared to act further to bolster the economy. It reiterated its plan to keep short-term interest rates at record lows until at least late 2014.
If were not seeing a sustained improvement in the labor market, that would require additional action, Bernanke said at his quarterly news conference later in the day.
Wall Street wasnt impressed by the Feds limited response Wednesday. Stock prices barely budged. And analysts questioned how much benefit the Feds latest economy-boosting effort would have, in part because interest rates are already near record lows.
If the Feds more pessimistic outlook proves accurate, President Obamas chances in an election that will turn on the economy would likely suffer.
Bernanke noted that the economy is under threat from Europes debt crisis and the prospect of sharp spending cuts and tax increases that would take effect at the end of the year without a congressional agreement.
European leaders will be seeking a breakthrough at a summit next week in Brussels.
Bernanke said hes in regular touch with the head of the European Central Bank.
The Fed said in a statement around 12:30 p.m. that it will continue a program called Operation Twist through years end.
Under the program, the Fed has been selling $400 billion in short-term Treasurys since September and buying longer-term Treasurys. It said it will extend the program through December using $267 billion in securities.
But extending Operation Twist might not provide much benefit. Businesses and consumers who arent borrowing now might not do so if rates slipped slightly more.
This move is largely symbolic, said David Jones, chief economist at DMJ Advisors.
Jones estimates Operation Twist will lower long-term rates by only about one-tenth of a percentage point.
At his quarterly news conference later Wednesday, Bernanke said the Fed would consider more aggressive action, such as another bond buying program. The Fed has completed two such programs. It bought more than $2 trillion in Treasurys and mortgage-backed securities, expanding its portfolio above $2.8 trillion.