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Does Fed Have Grave Concerns About Economy?

On Tuesday, the Federal Reserve re-affirmed its commitment to using unconventional efforts to stimulate the economy.

In the latest Fed statement, the central bank said it would keep buying $40 billion in mortgage-backed debt per month to push interest rates lower.

The Fed also repeated its vow to keep interest rates near zero until mid-2015.

Although that may seem like the Fed is sending a signal to markets that they're intend to drive the economy, no matter what the cost – that may not be what the Fed is really saying.

According to former Fed Governor Kevin Warsh the move isn't a show of strength – it's something far more ominous.

"I think the Fed revealed in their actions just how grave they think the economy is," he said on The Kudlow Report.

The statement shows, "just how concerned they are about the economy's prospects – just how concerned they are about the 'fiscal cliff' and Europe."

Warsh served as a member of the Board of Governors of the Federal Reserve System from 2006 to 2011.

And he said to Larry Kudlow that his take on the Fed – as someone who was once on the inside – is that the Fed feels they're the only institution standing between the nation and a terrible downturn.


"The central bankers feel their doing it all by themselves – that they're not getting help from Congress or the administration."

It seems Wall Street may share the skepticism expressed by Warsh. Again both theDow and S&P closed lower.

Before his appointment to the board, Warsh had been the special assistant to the president for economic policy and executive secretary of the White House National Economic Council.


Tune in:

"The Kudlow Report" airs weeknights at 7 p.m. ET.

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