Mixed impact on consumers from Federal Reserve’s ‘Twist’

Operation Twist doesn’t give consumers much to shout about.

The Federal Reserve’s latest effort to boost the economy by driving down long-term interest rates won’t have a big impact on home and car buyers, savers or credit card users.

Any noticeable changes from the central bank shuffling $400 billion of its portfolio are likely to be mixed. Although borrowers may benefit from lower rates on mortgages and other fixed-rate loans, savers holding long-term bonds are likely to see their interest income dip.

The stock market’s skeptical reaction reflected the limited outlook for the program’s impact. If the Fed’s move spurs the economy, investors could see their portfolios climb. But the initial response of investors was a sell-off Wednesday and Thursday, partly because of the Fed’s suggestion the economic slump could last for years.

Prospects for sustained improvement are still significantly hindered by the shaky job and housing markets as well as Europe’s spreading debt crisis.

If the initiative succeeds in helping the economy regain momentum, Operation Twist may be as important for what consumers don’t experience — another recession — as for what they do.

“The impact on consumers is pretty minimal,” says Greg McBride, senior financial analyst at Bankrate.com.

Some put it more bluntly. For consumers, the new plan is “a big snore,” says Glenn MacDonald, professor of economics and strategy at Washington University in St. Louis.

Nonetheless, some rates that affect consumers may see changes in the months ahead as a result of the decision.

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