Acknowledging that financial conditions in the U.S. have improved considerably in the past year, Federal Reserve Board chairman Ben S. Bernanke yesterday warned that “significant economic challenges remain,” which is why the Federal Open Market Committee sees the Fed funds rate target remaining “exceptionally low” for a long time.

“The Federal Open Market Committee continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” Bernanke told the Economic Club of New York, according to prepared text of his remarks released by the Fed.

“Of course, significant changes in economic conditions or the economic outlook would change the outlook for policy as well,” he said. “We have a wide range of tools for removing monetary policy accommodation when the economic outlook requires us to do so, and we will calibrate the timing and pace of any future tightening to best foster maximum employment and price stability.”

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