By Steven K. Beckner

(MNI) - To Wall Street's delight, Federal Reserve Chairman Ben Bernanke signalled once more that the Fed will keep interest rates at very low levels for some time to come in Congressional testimony Thursday.

Bernanke said there will come a time when the Fed will need to tighten its unprecedentedly easy money policies and said the Fed has the tools to do so. But he made clear he is no hurry to raise rates.

Last Tuesday, the Fed's policymaking Federal Open Market Committee left the key federal funds rate near zero and repeated its expectation that the benchmark short-term rate will stay "exceptionally low ... for an extended period." Bernanke echoed that sentiment as he testified to the House Financial Services Committee.

In prepared testimony, he said "the economy continues to require the support of accommodative monetary policies." And in response to questions, he reaffirmed that the high level of unemployment and low rate of inflation will continue to justify very low rates "for an extended period."

Bernanke said that "extended period" is an indefinite time frame that is contingent on economic and financial conditions. While the Fed will not wait until the economy is fully recovered, he said it will wait until the economy is on "a sustainable growth path" and payrolls are growing.

While the Fed is monitoring both inflation and inflation expectations, it is high unemployment that is the Fed's main focus, Bernanke strongly suggested. He also put a good deal of emphasis on the need to spur bank lending, especially to small business.

Bernanke also made clear the Fed will go slow in selling assets to reduce its balance sheet, although he said the Fed is not rolling over maturing securities.

He repeated his warnings about the need to reduce federal budget deficits, calling the U.S. fiscal outlook "somewhat dark."

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