By Mark Felsenthal
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said Monday the shell-shocked U.S. economy has improved, but cautioned that the recovery remains fragile and the jobless rate may remain elevated for some time.
"We still have some ways to go before we can be assured that the recovery will be self-sustaining," he told the Economic Club of Washington.
"Also at issue is whether the recovery will create the large number of jobs that will be needed to materially bring down the unemployment rate," he said.
Bernanke said tight credit and the weak labor market would be "formidable headwinds" that would hold back growth.
The Fed chairman's comments suggest the central bank is in no hurry to reverse its extensive monetary stimulus any time soon. The dollar fell against the euro on Bernanke's dovish remarks, while U.S. stock indexes edged higher.
The Fed cut benchmark U.S. interest rates close to zero a year ago and it renewed a pledge at its last meeting on November 3-4 to keep them exceptionally low for a "extended period."
Most analysts expect no move until well into next year, at the earliest, although some observers have wondered whether a surprising report Friday that showed the U.S. labor market was beginning to heal may sway the central bank to move more quickly to raise rates than had been expected.
Financial markets will parse the Fed's policy announcement next week very closely for any signs it is inching toward raising rates or withdrawing the flood of money it pumped into financial markets to combat the worst banking crisis since the Great Depression.
(Reporting by Mark Felsenthal, Glenn Somerville and Pedro Nicolaci da Costa; editing by Neil Stempleman)
