NPR : News

Filed Under:

Fed's 'Twist' Not Enough To Keep Markets Happy

Stocks around the world fell sharply on news that Fed Chairman Ben Bernanke was cutting already-low interest rates in an attempt to avoid a second recession and boost the economy.
Stocks around the world fell sharply on news that Fed Chairman Ben Bernanke was cutting already-low interest rates in an attempt to avoid a second recession and boost the economy.

The Federal Reserve can't seem to win.

Stocks around the world fell sharply Thursday, a day after Chairman Ben Bernanke and his Fed colleagues announced their latest plan to cut already-low interest rates in an effort to boost the economy. Analysts said the Fed's "Operation Twist" was actually a signal that the central bank is still extremely worried about the prospects for recovery.

European stock indexes were down as much as 5 percent, while the Dow Jones industrial average and other U.S. indexes were down as much as 2.7 percent in early morning trading.

(Update at 3:25 p.m. ET: Indexes are now down nearly 4.5 percent. The Dow is off about 485 points.)

In a statement after its two-day meeting Thursday, the Fed said growth "remains slow," "the unemployment rate will decline only gradually" and there are "significant downside risks to the economic outlook."

"The Fed's warning of significant downside risks to the economic outlook rattled markets, as did a report that China's factory output shrank for the third straight month in September," NPR's John Ydstie reported.

Analysts said that the central bank's move may not be enough to stop the economy from slowing further, and there are continuing fears of another recession in the U.S. and Europe — which is struggling to stem a growing debt crisis. The International Monetary Fund this week cut its outlook for U.S. economic growth to just 1.5 percent this year — down a full percentage point from the IMF's June forecast.

"The storyline is that global growth is decelerating," Mike Ryan, chief investment strategist at UBS Wealth Management Americas, told Bloomberg. "Financial stresses are rising and policymakers are finding few viable options to stabilize the real economy."

That leaves Bernanke and company in a bind.

"The Fed can only do so much," Greg McBride of the financial website, told NPR's Scott Horsley. "Their most effective tools are things that they have used up already. At this point, they've got a few options left, but none of them is a surefire way to either jump-start the economy or get people to borrow or get banks to lend. There's still a demand problem. And that is not something that the Fed alone can fix."

(Avie Scheider is's business editor.)

Copyright 2011 National Public Radio. To see more, visit


'Not Without My Daughter' Subject Grows Up, Tells Her Own Story

"Not Without My Daughter" told the story of an American mother and daughter fleeing Iran. Now that young girl is telling her own story in her memoir, "My Name is Mahtob."

Internet Food Culture Gives Rise To New 'Eatymology'

Internet food culture has brought us new words for nearly every gastronomical condition. The author of "Eatymology," parodist Josh Friedland, discusses "brogurt" with NPR's Rachel Martin.

Proposed Climate Change Rules At Odds With U.S. Opponents

President Obama says the U.S. must lead the charge to reduce burning of fossil fuels. But American lawmakers are divided on limiting carbon emissions and opponents say they'll challenge any new rules.

Payoffs For Prediction: Could Markets Help Identify Terrorism Risk?

In a terror prediction market, people would bet real money on the likelihood of attacks. NPR's Scott Simon speaks with Stephen Carter about whether such a market could predict — and deter — attacks.

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.