JUDY WOODRUFF: We turn to two different economic stories.
First, the Federal Reserve says the economy slowed down in the first half of the year, but stopped short of taking new action.
Jeffrey Brown picks up that story.
JEFFREY BROWN: How bad? And what to do? As pressure in some quarters has grown on the Federal Reserve to act, the Fed today gave its latest answers.
Jon Hilsenrath, chief economic correspondent for The Wall Street Journal, tells us more.
Jon, first of all, another gloomy portrait of the state of the economy, right? What is the Fed seeing?
JON HILSENRATH, The Wall Street Journal: Right.
The Fed is seeing an economy that slowed down in the first half of the year, which we all knew about. But what is important is also what the Fed is signaling, which is that it's patience is running out for this and that it's preparing to take new actions to bolster growth if it doesn't see a pickup pretty soon.
They used pretty blunt language -- well, blunt as central bankers go -- to signal in their statement today that they are going to take new steps to try to accelerate the economy and bring down unemployment if they don't see some improvement fairly soon.
JEFFREY BROWN: Well, blunt as in central bankers, that language -- there was some Fed-speak that you could interpret for us. They said it will -- quote -- "provide additional accommodation as needed."
That's great Fed-speak.
JON HILSENRATH: Right.
JEFFREY BROWN: What does that mean?
JON HILSENRATH: Well, you know, what is important there is that they said they will provide.
In the past, they have used more wishy-washy terms like they're prepared to act and more conditional statements. By saying they will provide, I mean, there was some conditionality there, but they were signaling to the public very clearly that they're moving towards action.
They also used the term -- again this is central banker-speak -- they use the term "closely monitor," which kind of suggests that they're on the edge of their seat. They have used that phrase in the past when they were moving towards action. And they took it out of their record books today and put it back in their statement.
It had not been in there for a while.
JEFFREY BROWN: Well, so what...
JON HILSENRATH: You know, I think where they're going with all of this is a new program to go out and buy bonds, mortgage-backed securities potentially in September.
It's going to be very controversial thing because it's going to -- if it happens -- and it looks like it will -- it's going to happen in the heat of a political election. And Republicans and Democrats have very different opinions about whether the Fed should do anything.
JEFFREY BROWN: Well, that's what I wanted to get to, I mean, a lot of talk about what ammunition does the Fed still have. So, first, you're suggesting that that's more of what we have called the quantitative easing.
JON HILSENRATH: Right.
JEFFREY BROWN: That's the kind of action you're talking about?
JON HILSENRATH: Yes.
So what happens here is the Fed prints money. It has the capacity to print money. It uses the money to go out and buy mortgage-backed securities from investors in the private sector. The hope is that, when they buy these mortgage-backed securities, they're going to drive up the price of the securities and drive down the interest rate.
So, mortgage rates right now on a 30-year conventional mortgage are about 3.75 percent. The Fed hopes it could get it down to 3.5 or lower. And it hopes that by doing that, it could spur more refinancing to help households who haven't been able to refinance yet and maybe get some people off the fence to go out and buy new homes.
They see a housing sector that is actually improving a little bit, so maybe they think that if they blow a little extra wind in that sail, it will get the economy going.
JEFFREY BROWN: But you're suggesting of course this comes amidst a political campaign, so pressures on the Fed from both sides really to act or not to act.
JON HILSENRATH: And we saw lawmakers today putting out their competing statements.
Basically, the Democrats are pushing Bernanke to move. Republicans are urging him to be cautious. They each -- each set has its own agenda. In some ways, it's a favor for Bernanke, because he knows that no matter what he is going to do, he is going to be criticized by one side or the other.
He is an individual who only has 15 -- 18 months maybe left in his own term as Fed chairman. His term ends in January 2014. At the end of the day, I think he is more worried about what the history books are going to say, and he's determined to go out having tried to make the best decisions before he is done.
And I think he has basically sent the signal today that he is going to do what he needs to do, regardless of the election.
JEFFREY BROWN: Jon...
JON HILSENRATH: But it's not going to be pretty for him politically.
JEFFREY BROWN: Yes, Jon, just in our last minute, I did want to ask you quickly before we let you go about the other strange event of the day on the markets. The New York Stock Exchange called irregular trading this morning...
JON HILSENRATH: Yes.
JEFFREY BROWN: ... that sent the markets into some real volatility. Do we know what happened?
JON HILSENRATH: Well, it looks like there was a software glitch among a brokerage firm called Knight -- Knight trading, which caused trading to happen based on -- when no orders were placed for actual trades.
It looks like there was a software glitch that caused some unusual activity. And some of these trades are going to have to be unwound. I think the big story here is, this is happening after the unusual activity with the Facebook IPO and what was known as the flash crash a couple years ago, where the market just kind of collapsed inexplicably.
The problem here is that this undermines the public's confidence that the stock market is behaving in a way that people can count on. And, you know, it undermines people's willingness to go into equities, which holds down the value of stocks and makes capital more expensive, basically.
JEFFREY BROWN: All right. All right, more signs of vulnerability on the stock market.
JON HILSENRATH: Yes.
JEFFREY BROWN: Jon Hilsenrath of The Wall Street Journal, thanks so much.
JON HILSENRATH: Sure thing.