Bernanke reasserts need to keep rates low

Federal Reserve chair Ben Bernanke said record low interest rates are still needed to foster U.S. economic growth asthe country recovers from its worst battering since the Great Depression of the 1930s.

In making his semi-annual monetary policy report to the U.S. Congress, Bernanke said short-term rates willremainlowfor some time yet.

The Fed "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period," he said.

"Although the federal funds rate is likely to remain exceptionally low for an extended period, as the expansion matures, the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures."

Theprepared textBernanke read offered no new hints about when the Fed would tightenmoney supply by increasing its key overnight rate, but most observers saythat's not likely tohappen for many months.

The target range for thefederal funds rate has beenzero to 0.25 per cent since December 2008.

Bernanke warned that economic recovery would remain sluggish and said the "job market remains quite weak." Bernanke noted that more than 40 per cent of the unemployed have been out of work for more than six months. That's almost twice the rate of a year ago. The U.S. unemployment rate was 9.7 per cent in January.

Last week, the Fedraised the rate U.S. banks pay for emergency loans the discount rate by a quarter of a percentage point. Bernanke said thatshould not be interpreted as a sign that tighter credit for consumers and businesses is imminent.

"Getting people back to work socially, most of all, but also for the overall economy is critical," saidcommittee chairman Barney Frank, a Democrat from Massachusetts.

Voters arereeling from record home foreclosures and major job losses and many small businesses are still saying it's tough to get a loan.At the same time,bailed-out Wall Street banks, which the Fed supervises, are again reportingprofits.