With few options, Fed turns to 'jawboning'

With little ammunition left in its armory, the Federal Reserve has entered the "jawboning" phase of its campaign to spur stronger economic growth.

Fed Chairman Ben Bernanke and his fellow policymakers emerged from a two-day meeting to declare they planned no major changes in their policy of using low interest rates to get the job and housing markets back on track. In a statement, the Fed pointed to a recent improvement in the outlook but warned that the recovery is still very fragile.

"Economic growth strengthened somewhat in the third quarter," the Fed said in its post-meeting statement. "There are significant downside risks to the economic outlook, including strains in global financial markets."

At least one committee member believes talk alone won’t cure the economy's ills. Charles Evans, president of the Chicago Fed, formally dissented from the decision, saying he thinks his colleagues should be taking further action to revive growth.

So far, the Fed’s strongest artillery has had little apparent impact. Shortly after the Panic of 2008 rocked global financial markets, the central bank flooded the system with cash, slashing to zero the rate banks pay to borrow overnight. That move was followed by a massive program of buying nearly $2 trillion in bonds to force long-term rates sharply lower. But three years after embarking on its easy-money policies, unemployment remains stuck above 9 percent and the housing market is mired in its worst downturn since the 1930s.

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