The Federal Open Market Committee “will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” it said today in a statement at the end of a two-day meeting in Washington. “Economic activity decelerated somewhat over the first half of this year.”

Stocks fell on disappointment Fed Chairman Ben S. Bernanke refrained from taking action even as consumer spending flagged, job growth slackened and manufacturing cooled. Before its next meeting Sept. 12-13, the FOMC will assess unemployment reports for July and August, and the European Central Bank may take steps to ease Europe’s debt crisis at a meeting tomorrow.

“They were as blunt as you can get without actually pulling the trigger,” said Dan Greenhaus, chief global strategist at BTIG LLC in New York. “They’re saying, ‘Hey, things are not good and we’re an inch away from easing.’”

The Standard & Poor’s 500 Index (SPX) erased gains after the statement, falling 0.3 percent to 1,375.32. The yield on the 10- year Treasury note rose to 1.52 percent from 1.47 percent yesterday. Gold futures for December delivery slid 0.7 percent to $1,603.10 an ounce in electronic trading at 4:47 p.m. in New York. The dollar rallied 0.7 percent to $1.2226 per euro.

‘Accepting’

“The best news we got is the Fed doing nothing and the market accepting that,” Michael Shaoul, the chairman of New York-based Marketfield Asset Management, whose $2.29 billion Marketfield Fund has outperformed 96 percent of rivals in the past five years. “It shows that the market is more resilient than we would have expected going into today.”

The FOMC said in today’s statement that “household spending has been rising at a somewhat slower pace than earlier in the year.”

The Fed said it will continue swapping $667 billion of short-term debt with longer-term securities to lengthen the average maturity of its holdings, an action dubbed Operation Twist. The central bank will also continue reinvesting its portfolio of maturing housing debt into agency mortgage-backed securities.

‘Late 2014’

The Fed left unchanged its statement that economic conditions would likely warrant holding the benchmark Fed funds rate near zero “at least through late 2014.” The committee said it “will closely monitor incoming information on economic and financial developments.”

Under former Fed Chairman Alan Greenspan the phrase “closely monitor” was sometimes used before the Fed took action between its regular schedule of meetings, according to Eric Green, head of global foreign exchange and rates research at TD Securities in New York, and a former New York Fed economist.

“We still have to think the odds are low for intermeeting ease, they’re just higher than they otherwise would be,” said Green. “What would get the Fed to move I think is if conditions deteriorate in Europe to the point that stocks begin to get hit hard.”

Policy makers said inflation would run “at or below” their goal of 2 percent for the personal consumption expenditures index, the same as in the last statement.

Consumer prices in June rose 1.5 percent from a year earlier, the Commerce Department reported yesterday. Excluding food and energy, prices increased 1.8 percent.

Fifth Dissent

Richmond Fed President Jeffrey Lacker dissented for the fifth consecutive meeting, saying he preferred to omit the 2014 time horizon. Lacker opposed the FOMC’s June decision to extend Operation Twist through the end of the year and has said he expects interest rates will need to be raised in 2013.

Twelve percent of economists surveyed by Bloomberg News predicted that the FOMC would announce a new round of large scale asset purchases today, while 48 percent forecast such purchases would be announced at the Fed’s Sept. 12-13 meeting.

At the September meeting, policy makers will update their forecasts for growth, unemployment, inflation and interest rates before Bernanke holds a press conference. He doesn’t plan a press conference today.

Bernanke in congressional testimony last month said the central bank may ease further should U.S. employment fail to steadily improve. A Labor Department report on Aug. 3 will probably show that the economy added 100,000 jobs in July, while the jobless rate was unchanged at 8.2 percent, according to the median estimate in a Bloomberg News survey of economists.

Steady Progress

“It’s very important that we see sustained progress in the labor market and avoid deflation risk,” Bernanke said in July. “Those are the things we’ll be looking at as the committee meets later this month and later this summer.”

The Fed is also watching “two main sources of risk,” Bernanke said. The first is the so-called fiscal cliff, about $600 billion of spending cuts and tax increases that will go into force in January and impair growth unless Congress acts.

Congressional leaders said yesterday they will vote in September on a $1.047 trillion, six-month stopgap measure that would keep the government operating after the start of the fiscal year on Oct. 1. The extension would give lawmakers more time to debate how to avoid the fiscal cliff.

The second risk is that the European debt crisis will create turmoil in global financial markets, Bernanke said.

Build Consensus

ECB President Mario Draghi is attempting to build consensus among governments and central bankers for a plan to ease borrowing costs in Spain and Italy before policy makers convene tomorrow. Also tomorrow, the Bank of England in a statement will probably maintain its bond purchase program.

Draghi sparked a global market rally last week with a pledge to do “whatever it takes to preserve the euro.” Last month, the ECB cut its benchmark interest rate to a record low of 0.75 percent.

U.S. stocks rose before today on speculation the Fed will continue to add stimulus and as corporate earnings have beaten estimates. The S&P 500 has rallied 9.4 percent this year and remains near a three-month closing high of 1,385.97 on July 27. All 10 industry groups have advanced.

The U.S. two-year interest-rate swap spread, a measure of stress in bond markets, traded today at about 20.25 basis points, about the lowest in a year and down from 2012’s high of almost 60 basis points in October. The gauge, which dropped 4.4 basis points in July for the second straight monthly decline, widens when investors seek the perceived safety of government securities and narrows when they favor assets such as corporate bonds.

Global Demand

Treasuries are benefiting from global demand for U.S. debt as investors flee troubled European nations from Spain to Italy. The yield on the 10-year Treasury note declined to an all-time low of 1.3790 percent on July 25.

U.S. consumers are cutting back as Europe’s debt crisis and looming tax-policy changes dent confidence. Household consumption, which accounts for about 70 percent of the economy, rose at a 1.5 percent rate from April through June, down from a 2.4 percent gain in the prior quarter, according to Commerce Department data.

Manufacturing in the U.S. unexpectedly contracted for a second month in July, a report today from the Institute for Supply Management showed. The ISM’s factory index was 49.8 last month, close to the three-year low of 49.7 reached in June. Fifty marks the dividing line between expansion and contraction.

Profit Outlook

FedEx Corp. (FDX), the Memphis, Tennessee-based operator of the biggest cargo airline, gave a smaller profit forecast than analysts estimated for the fiscal year ending in May 2013. “Weaker global economic conditions,” such as Europe’s debt crisis and slowing growth in Asia, will impair performance, Chief Financial Officer Alan Graf said on a June 19 earnings call.

The slowdown in consumer and business spending is hurting growth. The economy expanded at a 1.5 percent annual rate in the second quarter after a revised 2 percent gain in the first quarter, the Commerce Department said July 27. Economists estimate that gross domestic product will rise 2.1 percent this year, according to the median of 72 forecasts in a Bloomberg survey.

United Parcel Service Inc. (UPS), the world’s largest package- delivery company, cut its full-year earnings forecast July 24 amid a drop in international package sales. Chief Executive Officer Scott Davis said the Atlanta-based firm predicts the economy will expand 1 percent in the second half of the year.

More Uncertainty

“Our macro concerns start with the fact that we saw lousy numbers in the last couple of months,” Davis said on a call with analysts and investors, citing declines in gauges of retail sales and manufacturing. “There’s just more uncertainty out there than ever.”

While many U.S. companies face headwinds from slowing growth, others are surpassing Wall Street estimates for quarterly earnings. Of the 353 companies in the S&P 500 Index that have reported results, 253 beat analyst estimates, data compiled by Bloomberg show.

“We’re in a real muddle-through economy that’s very disappointing in the rate of job creation,” said Michael Dueker, a former St. Louis Fed economist who is now chief economist for Seattle-based Russell Investments, which oversees $152 billion.

“There’s been a real drop-off in demand in the economy from the first to second quarter,” he said. “I don’t think the economy is in danger of recession but it is unacceptably slow.”

Seventy-four percent of economists in the Bloomberg Survey said the Fed wouldn’t change its statement that it expects low interest rates through at least 2014. Ninety-six percent said the central bank would not lower the interest rate paid on reserves that banks keep with the Fed, with 74 percent never expecting such a move.