Washington - The Federal Reserve acted Wednesday to lift an economy that's being held back by a weakened job market. It's extending a program designed to spur borrowing and spending through lower long-term U.S. interest rates.

The Fed also reiterated its plan to keep short-term rates at record lows until at least late 2014. And it said it's prepared to act further if the economy deteriorates.

The central bank noted that Europe's debt crisis threatens the economy. Fed officials will be watching for any breakthrough during a summit of European leaders in Brussels next week.

The Fed also sharply lowered its outlook for U.S. growth. It now thinks the economy will grow no more than 2.4 percent this year. That compares with its forecast in April that the economy could grow up to 2.9 percent. And it thinks the unemployment rate, now 8.2 percent, won't fall much further in 2012.

After a two-day meeting, the Fed said in a statement around 12:30 p.m. EDT that it will continue a program called Operation Twist through year's 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. Long-term U.S. rates have already touched record lows. Businesses and consumers who aren't borrowing now might not do so if rates slipped slightly more.

David Jones, chief economist at DMJ Advisors, said he expected the extension of Operation Twist to have only a slight effect on long-term rates, perhaps lowering them by about one-tenth of a percentage point.

At his quarterly news conference later Wednesday, Chairman Ben Bernanke said the Fed is open to another bond buying program if the job market doesn't improve. The Fed has completed two such programs. Through those programs, it bought more than $2 trillion in Treasurys and mortgage-backed securities, expanding its portfolio above $2.8 trillion.

Investors seemed unimpressed with the Fed's plans to help the economy through an extended Operation Twist. Stocks were little changed for most of the day, and the yields on Treasury bonds were trading about where they were before the announcement. And during Bernanke's news conference, stocks began falling.

John Canally, investment strategist at LPL Financial, says the Fed delivered just what investors expected and offered a hint at further easing.

"If there's another misstep somewhere - in Europe ... more weak data - the Fed's going to do more," Canally said.

For now, he said, the Fed wants to keep "some powder dry" in case there's a meltdown in Europe. Canally also suggested that the Fed may be reluctant to be aggressive in an election year out of concern it could be seen as affecting the election.

But in a comment on Twitter, Justin Wolfers, an economics professor at the University of Pennsylvania's Wharton Business School, suggested that the Fed might be on the cusp of going further.

Wolfers characterized their view as: "One more bad jobs report and we'll do more."

Operation Twist

Here are some questions and answers about Operation Twist:

Q. How does the program work?

A. The Fed sells Treasury securities it owns that mature in less than three years and buys longer-term bonds that mature in six to 30 years. The Fed will also reinvest the proceeds from its mortgage-backed securities that mature into new ones.

Q. What's the goal?

A. By buying longer-term Treasurys, the Fed intends to lower longer-term rates and encourage more borrowing and spending. Lower rates could also lead more investors to shift money into stocks because they'll receive less return on their investment in Treasury bonds. And by reinvesting proceeds into new mortgage-backed securities, the Fed supports the housing market. Without those purchases, banks might issue fewer mortgages.

Q. When did Operation Twist start?

A. In September. That's when the Fed said it would sell $400 billion of its shorter-term securities to buy longer-term holdings to try to lower Treasury yields.

Q. Has it worked?

A. It's impossible to know for sure. Many economists think Operation Twist has helped keep rates on mortgages and other consumer and business loans near record lows. But given how low rates already are, few think the extension of Operation Twist will lead to much more borrowing.

Q. Where does the name come from?

A. The Fed took similar steps in 1961, soon after the inauguration of President John F. Kennedy. It first called the program Operation Nudge, because it was intended to nudge long-term interest rates lower. But at the time, Chubby Checker's record “The Twist” was popular, hitting the No. 1 spot in late 1960, and the name “Operation Twist” stuck instead.

— The Associated Press