12.30pm ET: The Fed is about to release the latest statement from the Federal Open Markets Committee (FOMC), which sets interest rates and makes decisions about the United States' money supply.

There has been a lot for the committee to digest since their last statement in April when Fed chairman Ben Bernanke and his crew last outlined their views on the US economy. Europe's economic woes have entered a darker phase, there are worries about Spain's position in the union now that dwarf earlier concerns about Greece. Closer to home the recovery in the US jobs market has slowed dramatically.

None of this is good news and investors are betting the Fed will act. Earlier this month Bernanke told Congress: "The situation in Europe poses significant risks to the US financial system and economy and must be monitored closely." He said there was scope for the Fed to act if necessary.

Most economists are betting on a plan called Operation Twist, which the Fed tried last summer. Operation Twist is a Fed bond-buying programme that aims to lower rates on mortgages and other loans and was first tried in the '60s and named after the Chubby Checker song.

Wall Street expectations are high that the Fed will act, if it doesn't then expect a sell-off.

"Come on let's twist again like we did last summer. Yea, let's twist again, twistin' time is here," as Chubby Checker put it.

12.42pm ET: As had been expected, the Fed has extended Operation Twist. The committee expressed heightened worried about the economy and said they were "prepared to take further action" if needed.

The committee "anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook."

So, pretty miserable then.

Eleven out of 12 Fed officials voted to keep the central bank's easy-money policies in place. Short-term interest rates will be kept at "exceptionally low levels" at least through late 2014.

12.47pm ET: The Dow is now negative. But the real action is likely to come later after Bernanke gives his press conference at 2:15pm ET.

12.55pm ET: Oil prices are falling – crude oil futures are down 3.14% to $81.39 a barrel. That suggests traders are betting on lower demand for oil, as you would expect if the economy slows further. Better news at the pumps, worse news at the mall.

1.06pm ET: Gus Faucher, macro-economist at PNC Bank, gave a cautious welcome to the move, which was slightly larger than he'd been expecting.

"The last twist was about $400bn, and we were thinking this one would be about $200bn, so that [the $267bn announced by the Fed] is a plus. This will help to keep pressure on 10-year rates, and it shows the Fed is still on the case."

Faucher said he was keen to hear more details on the plan and for Bernanke to give more details of what data in particular had let to the committee sounding more gloomy about the economy.

The initial selloff on Wall Street has reversed and the Dow is now up, slightly.

1.19pm ET: The Fed is a cautious beast, and the changes in its statement are so subtle they can be easy to miss.

The Wall Street Journal has done a great job of parsing FOMC statements past and present.

The key to today's tonal shift is in the excising of "Labor market conditions have improved" from April's statement to "growth in employment has slowed."

The jobs market will recover "only slowly" to acceptable levels according to this month's statement whereas in April it was "gradually" improving.

1.42pm ET: The FOMC's comments on the job market are not surprising. Bernanke was the first to warn that this winter's strong growth in the jobs market might be illusory – at it proved to be. So it will be interesting to hear what he has to say about the employment situation today.

The next set of jobs figures – the non-farm payroll numbers – are out on July 6. They have become a political football as we head into the election, so anything Bernanke says on the subject will be closely watched.

The other key issue for the US economy is the housing market. For some reason Bernanke rarely gets asked about it at the press conference, maybe those journos are all renters. Analysts had been expecting the Fed to say that the latest operation twist would buy mortgage backed securities – a move to keep mortgage rates down and perhaps even, gulp, encourage buyers. So far we have heard nothing about that, so expect questions.

1.52pm ET: Studies of the impact of the last Operation Twist suggest that it reduced the cost of borrowing only marginally, about 0.15% to 0.2%. And on top of that lenders are still fighting shy of making new loans after the credit crisis. If the Fed had not acted, the old Operation Twist would have expired next month. This extension suggests Helicopter Ben is still too worried about the recovery to let it go play on its own. So – and how depressing is this – Operation Twist isn't so much a stimulus as a backstop to make sure things didn't get worse. "Round and round and up and down we go again," indeed.

2.12pm ET: This will be the last but one Bernanke press conference before the election in November. The next FOMC meeting is July 31-August ,1 but there is no presser after that and you'll have to wait until September 13 to see Bernanke in action again.

With the economy the central battleground for Obama and Romney, anything Bernanke says can and will be used in evidence. Sadly for Romney in particular Bernanke has shown an amazing ability to survive even the most fractious questioning without passing on a single memorable phrase. No "irrational exuberance" for Ben.

He will be up momentarily. He's probably in the back getting camera-ready, giving his beard a final trim. Want to make a bet on tie/shirt combo? I'm going for white shirt and green tie.

2.16pm ET: The Fed's new projections are now out and they have downgraded their forecasts for growth and inflation over the next three years. The jobless rate is projected at 8% to 8.2% at the end of this year compared with the projection of 7.8% to 8% from the April forecast. That suggest the Fed is not expecting the monthly jobs numbers to rise dramatically any time soon.

2.17pm ET: Bernanke is in the house. White shirt and yellow tie – perhaps you could even call it gold. I lose.

Fed chairman Ben Bernanke. Photograph: Saul Loeb/AFP/Getty Images

2.20pm ET: He is reading the statement from earlier today. The Dow is flat at the moment at 12828.17, so let's see what the stock markets make of his comments. The real meat will come in the Q&A.

2.25pm ET: So far the questions seem to be about Ben's modesty. "Given this weaker outlook, why such a modest programme?" he is asked.

There's been a lot of economic news since the last meeting, not least from Europe. "The step we took … is a substantive step," he says. He says additional steps could be taken if necessary.

"Modest Ben" – I think that should be his new nickname.

2.29pm ET: Mitt Romney said QE2 had little effect on the economy, says a man whose name I missed but whose chubby cheeks and curly head of hair will live on in my mind. Not really, says Ben, refusing to get dragged into a political debate.

2.33pm ET: Now we are on to jobs. Given that today's predictions see unemployment going on at these rates untill 2014, how long can this go on? Is it like the Great Depression?

"People are finding jobs, just not at the rate we would like to see," says Bernanke. The Fed is prepared to do more if it thinks necessary. But those actions have consequences, and "I don't think they should be launched lightly," he says.

2.35pm ET: And now to the Euro-zone. What can/should the Fed be doing. "We try to provide any support and help we can," says Ben. "We are prepared to work together if that can be done constructively." But its for the Europeans to make their own moves, says Modest Ben.

2.39pm ET: And now the Fiscal Cliff. No easy questions for Ben. The Fiscal Cliff Cliff Notes: On December 31 the Bush era tax cuts will expire and massive spending cuts will be imposed unless the Dems and Republicans can reach an agreement. Odds on that before an election? Slim.

It's not a can that can be kicked down the road, says Ben. Markets don't like uncertainty "particularly uncertainty of this magnitude".

2.47pm ET: You clearly seem to be waiting on the labour market. What exactly are you looking for? What's the "gestalt" he's asked. Nice word.

Sadly Ben isn't going to give us a figure or his opinion of gestalt theory. "It's not a month-to-month proposition," he says. We've had good months (in the winter) and bad months (in the spring). "The question is is the improvement sustainable."

2.55pm ET: The Twitter feedback seems to be: here's a man who wants to do more. Here's one from PIMCO, the world's biggest bond investors.

2.58pm ET: Bernanke masterfully avoids mentioning the name JP Morgan while be asked about the Volcker rule. He is asked: should regulators move more quickly given what happened at JP Morgan? The "event you are referring to" he calls it, before offering: "It's been a very difficult process with the amount of work that has to be done, the amount of coordination that has to be done."

That's a full sentence that means absolutely nothing. A genius at work.

3.01pm ET: Europe again. There have been rumors that the Fed could buy European countries' debt. Are there any countries that the Fed would not buy? Nice try, but this is Ben. "The Federal Reserve isn't going to be buying European sovereign debt."

3.09pm ET: Bernanke has left the building. The Dow is down a bit but not much (0.53%) so it doesn't look like Ben has scared the markets. Surprising really, given that the Fed is clearly more gloomy on the economy and hasn't given them all that much more in the way of stimulus.

In summary:

• The jobs market is worse than we thought. Unemployment will be about 8%-8.2% at the end of the year, about what it is now. That's bad news for Obama.

• Europe is a big worry.

• Washington needs to get its act together before we all plunge off the Fiscal Cliff.

• The Fed is ready to act should the situation deteriorate further.

• Once again nobody asked a good question about the housing market.