Speaking at a news conference, Bernanke walked a fine rhetorical line: He signalled that the Fed would act more aggressively to reduce unemployment if needed — but not at the cost of high inflation.
Bernanke spoke after Fed policymakers ended a two-day meeting by reiterating their plan to keep interest rates near zero through at least late 2014. The officials said the economy is growing moderately and that the pace will likely pick up.
But they also cautioned that unemployment won't fall sharply anytime soon and that risks from Europe's debt crisis remain.
In a statement, they noted that inflation has risen, mainly because of higher gasoline prices, but said they expect the spike to be temporary.
Since the financial crisis struck, the Fed has pursued two rounds of purchases of Treasury bonds and mortgage-backed securities to try to push down long-term interest rates. The goal has been to encourage borrowing and spending.
Bernanke told reporters that more bond purchases, or other steps by the Fed, are still an option if the economy weakens.
"Those tools remain very much on the table," Bernanke said.
Its decision to leave its policy unchanged had been widely expected, and reaction in financial markets was muted. The yield on the 10-year Treasury note edged higher, and the dollar rose slightly against other currencies. Stock indexes didn't move much.
David Jones, chief economist at DMJ Advisors, said he thinks the Fed will keep another round of bond buying as an option through the rest of this year. But with the economy slowly improving, Jones said, the Fed is unlikely to implement such a program this year.
Critics have expressed concerns that the central bank has raised the risk of higher inflation with its campaign to push rates down as long as it has.
In a recent opinion piece in Fortune magazine, Shelia Bair, former chairman of the Federal Deposit Insurance Corp., argued that the central bank might be creating a bond market bubble similar to the housing bubble.
The "Fed should declare victory and not intervene" by making further purchases of bonds, Bair said.
Asked about this criticism, Bernanke countered it's "a little premature to declare victory" in the Fed's drive to stimulate the economy and lower unemployment. Bernanke has frequently pointed to the chronically weak housing market and the more than 5 million Americans who have been unemployed for more than six months.
At the same time, Bernanke sought to show that he is mindful of the risks of high inflation. He said the Fed would shape its policy to keep inflation no higher than its target of 2 per cent over the long term.
The Fed's decision to keep its current easy-credit stance was approved on a 9-1 vote of the central bank's policy committee, composed of Fed board members in Washington and five regional bank presidents.
As he has at the past two meetings, Jeffrey Lacker, president of the Richmond Fed, opposed the late-2014 target date. The statement said Lacker didn't think economic conditions warrant a record low rate late for that long.
After their policy meeting in January, Bernanke and his colleagues had hinted that they were edging closer to a third round of bond buying. But since then, signs have suggested that the U.S. economy has strengthened.
The Fed first set its late 2014 target at the January meeting. That target date represented a move from last August when it announced a mid-2013 target for the first Fed rate move.
The Fed's benchmark funds rate has been kept near zero since December 2008. That means consumer and business loans tied to that rate have also remained at super-low levels. The lower those loan rates, the more likely people and companies are to borrow and spend and invigorate the economy.
After its bond-buying programs expired, the Fed in September began a $400 billion program dubbed Operation Twist. Under this program, the Fed is not expanding its portfolio but instead selling shorter-term securities it owns and buying longer-term bonds to keep their rates down. That program is scheduled to end in June.
On Friday, the government will issue its first estimate of economic growth for the January-March quarter. Many economists are predicting an annual growth rate of 2.5 per cent — better than they had expected when the year began.
But analysts are concerned that growth could weaken in the current quarter, reflecting payback from an unusually warm winter that boosted economic activity in the first quarter.