FORTUNE – Unless you’re closely tied to Wall Street, there isn’t much to cheer about the Federal Reserve’s latest signal that it may take new actions to bolster the economy sooner rather than later.
U.S. stocks and bonds rose on Wednesday after the Fed released minutes from its July 31-Aug 1 policy meeting, which included stronger language that the Fed is preparing to launch new steps to bolster the recovery – either through another round of large-scale bond buying or keeping short-term interest rates super low for much longer. The Standard & Poor’s 500 Index gained on the news, erasing losses at the close of trading in New York Wednesday. It fell on Thursday.
But don’t count on the markets to tell us much about what the Fed is really saying. Indeed, the central bank seems much more anxious to step in, but this comes as officials clear the air over where the economy could be headed months from now. Most members have taken the view that the economy is getting worse, not better.
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To be sure, home sales have been rising for the past few months. In July, retail sales beat expectations and employers added 163,000 jobs – the most in five months. But amid all the noise, many bankers at the Fed’s policy meeting repeatedly raised worries over debt and deficit problems in the U.S. and Europe. If anything, the remarks should signal that these problems are even more dangerous than they were at the start of the year.
The Fed worries that Europe’s ongoing debt crisis could get worse, triggering another financial crisis. And they’re concerned that the U.S. could slide into another recession if Congress doesn’t avert the ‘fiscal cliff,’ a series of tax increases and spending cuts slated to begin in January. Even if the U.S. escapes the cliff, the Fed predicts that the economy would probably grow less than 2% in 2013 and unemployment would stay near 8%.
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If the Fed decides to take up new measures, the actions being considered may not have “any meaningful or lasting impact on the wider economy,” according to Capital Economics, a consultancy. After all, the Fed reduced its key interest rate almost to zero in December 2008. And since then, it has engaged in two rounds of large-scale asset purchases totaling $2.3 trillion.
Aside from a few good days in the stock market, where does the economy stand today? The Fed has at least hinted where it could go months from now.
