The Federal Reserve is likely to maintain its easy money policy for some time despite signs of improvement in the economy and financial markets, chairman Ben Bernanke says.
Bernanke, delivering his semi-annual economic report to Congress on Tuesday, cited "notable improvements" in financial markets and a somewhat brighter economic outlook but considerable risks led by high unemployment.
"In light of the substantial economic slack and limited inflation pressures, monetary policy remains focused on fostering economic recovery," Bernanke said.
He added that "a highly accommodative stance of monetary policy will be appropriate for an extended period," suggesting that the Fed is in no hurry to end its near-zero interest rate policy or special programs to pump money into the financial system.
But Bernanke also maintained the Fed was working on a so-called exit strategy to unwind the trillion-dollar effort once a recovery takes root.
He said the vast effort "can be withdrawn in a smooth and timely manner as needed, thereby avoiding the risk that policy stimulus could lead to a future rise in inflation."
The policymaking Federal Open Market Committee "has been devoting considerable attention to issues relating to its exit strategy, and we are confident that we have the necessary tools to implement that strategy when appropriate," he added.
Bernanke also delivered the Fed's latest economic projections, which were made public last week, which called for a resumption of growth in the second half of 2009 after a brutal recession.
He commented that financial markets, which had been severely strained at the time of his last report in February, "remain stressed," with credit sometimes difficult to obtain, but that "on net, the past few months have seen some notable improvements."
