Chairman Ben Bernanke said the central bank will need to tighten monetary policy at some point to prevent the emergence of inflation but it's in no hurry.
In prepared remarks that Bernanke delivered at a Fed conference Thursday, he said "accommodative policies will likely be warranted for an extended period," but as the economic recovery takes root, "we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road."
The Fed's key lending rate is now at a record low near zero.
Bernanke's comments follow a surprise move to raise rates earlier this week from Australia's central bank. The move raised questions about what country might be next.
On Thursday, the Bank of England left its benchmark interest rate unchanged at a record low 0.5%, and the European Central Bank followed suit by keeping rates steady at 1%, also a record low.
Bernanke laid out some more details about how the central bank could reel in the loads of money it has pumped into the economy to avoid unleashing inflation.
Besides boosting its key bank lending rate, the Fed can raise the rate it pays banks on reserve balances held at the Fed, Bernanke said. That would give banks an incentive to keep their money parked there, rather than having it flow back into the economy, where it can stoke inflationary pressures.
-- Reported by Joseph Woelfel in New York
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