Federal Reserve chief Ben Bernanke signaled Thursday he was in no hurry to tighten monetary policy, saying action will be taken when the US economic outlook has “improved sufficiently”. He said that the central bank had a wide range of tools for tightening monetary policy, which was eased as the country scrambled to contain the worst financial crisis in decades.

“When the economic outlook has improved sufficiently, we will be prepared to tighten the stance of monetary policy and eventually return our balance sheet to a more normal configuration,” Bernanke said at a Federal Reserve board conference on “key developments in monetary economics” in Washington.

The Fed has cut interest rates to virtually zero percent to jolt the world's largest economy from recession and moved to flood the system with money to prime the economy, which has contracted since December 2007.

Among the unconventional steps taken to heal the economy was a so-called “quantitative easing” policy that included buying up long-term US Treasury securities totaling 1.75 trillion dollars to inject liquidity into the financial system. The last meeting of the Fed's policy makers decided to continue the purchase programme up to March 2010. “The principal goals of our recent security purchases are to lower the cost and improve the availability of credit for households and businesses,” Bernanke said. “As best we can tell, the programs appear to be having their intended effect.”

Investors have been looking for any signs of the Fed tightening policy after Australia this week became the first major economy to raise rates in a sign that the global economy was recovering from the worst recession in decades.

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