In testimony before Congress on Wednesday, Federal Reserve Chairman Ben Bernanke again emphasized that the bank's plan to phase out its stimulus program has no set schedule and depends on the economy.
The markets took a dip in recent months when Bernanke suggested that the agency may start scaling back its $85 billion in monthly bond purchases as early as the fall. But the chairman emphasized on Wednesday that because the plan depends on fluctuations in the economy, it is not set to a date on the calendar.
"I emphasize that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course," Bernanke said in his testimony.
The markets made a positive turn with Wednesday's news that the stimulus plan may stay in place slightly longer than expected, according to The Associated Press.
Bernanke said that if the economy improved at a faster pace than anticipated, the Fed could move forward with its plan to reduce asset purchases more quickly. Similarly, if the outlook were to become "less favorable," the agency would maintain its current rate of purchases.
And although the economy has continued "at a moderate pace" recently, Bernanke said the nation's employment situation is "far from satisfactory." He noted the recovery in housing, as home sales and construction have increased, along withthe addition of an average of 200,000 jobs a month. However, the unemployment rate remains unchanged at 7.6 percent in June.
But Bernanke said that the improvements are overshadowed by the fact that underemployment and long-term unemployment are "still much too high."
Though the central bank has made some progress boosting the near-term momentum of the economy, the Fed still plans to continue purchasing assets "until a substantial improvement in the labor market outlook has been realized," Bernanke said.
The agency suggested in June that unemployment may be as low as 6.5 percent in 2014, and that it may begin increasing interest rates at that point, as long as the outlook for inflation remains subdued. But Bernanke said again on Wednesday, as he did in June, that the 6.5 percent rate is not an automatic trigger, but a threshold.
Although Jim O'Sullivan, chief U.S. economist of High Frequency Economics, said in a research note that Bernanke sent "a clear message" that a policy change is not forthcoming, Barclays Capital said it still expects the agency to reduce its bond purchases to $70 billion in September, according to USA Today.