Fed signals modest effort to juice the economy*

Noting a slowdown in employment, the central bank plans to buy about $267 billion in longer-term Treasury securities over the next six months. It's an incremental expansion of the so-called Operation Twist strategy, which hasn't done that much good up to now. Still, it's the first time since September that the Federal Reserve has announced a new round of asset purchases. The Fed also said it's prepared to do more. Investors don't know what to make of it - the Dow has been bouncing up and down in the past hour. From the NYT:

The decision reflects growing concern that the economy once again is stumbling into the summer months after the false promise of a relatively strong winter. Fed officials also have indicated a desire to insure against looming risks to the recovery, including problems in Europe and the stalemate in domestic fiscal policy. The statement concluded with the Fed's standard affirmation, under the leadership of the Fed chairman, Ben S. Bernanke, that it remains "prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."

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Studies of the first installment of Operation Twist, which began last fall, have concluded that it reduced interest rates by around 0.15 to 0.20 percentage points. But its impact, like those of earlier purchase programs, has been muted by the inability of many businesses and consumers to obtain loans. The Fed has reduced borrowing costs for businesses and consumers through a range of measures. It has kept short-term interest rates near zero since late 2008, and said that it planned to maintain that policy until at least late 2014. It has bought more than $2.5 trillion in Treasuries and mortgage securities to further reduce long-term interest rates. And in the program that was scheduled to end this month, it shifted the composition of its portfolio to bear down even harder on long-term rates.

*Here's Ben Bernanke's press conference.