US Federal Reserve chairman Ben Bernanke said further gains in the US labour market were needed for the central bank to consider reducing its record monetary easing.
"Obviously, there has been an improvement," he said in Washington on Wednesday after the Fed decided to leave the pace of asset purchases unchanged at US$85 billion a month. "One thing we would need is to make sure that this is not a temporary improvement."
The Fed, seeking to boost the pace of growth and heal a job market still scarred by the deepest recession since the Great Depression, also said it would leave its key interest rate near zero as long as unemployment remained above 6.5 per cent and the outlook for inflation was less than 2.5 per cent.
When the central bank began its third round of large-scale asset purchases in September, the most recent Labour Department report showed the unemployment rate was 8.1 per cent.
Joblessness fell to 7.7 per cent last month, and monthly payroll growth has averaged almost 200,000 since October.
Even so, the labour market is far from making up the losses it sustained during the 18-month recession that ended in June 2009. The economy lost 8.8 million jobs as a result of the recession, and it has since regained 5.7 million.
Bernanke and Fed vice-chairman Janet Yellen needed to see stronger labour market data before they would support winding down the asset-purchase programme, said Michael Hanson, a senior US economist at Bank of America. "At the end, it's going to come down to Bernanke and Yellen convinced the economy has improved enough, and I'm not sure we're going to get to that quickly," he said.
Bernanke said the pace of asset purchases might be altered if the economy continued to heal.
"As we make progress towards our objective, we may adjust the flow rate of purchases from month to month to appropriately calibrate the amount of accommodation," he said. "We think it makes more sense to have our policy variable, which is the rate of flow of purchases responds in a more continuous or sensitive way to changes in the outlook."
The Fed's monthly purchases would remain divided between US$40 billion of mortgage-backed securities and US$45 billion of Treasury securities, the Federal Open Market Committee said in a statement.
The purchases are aimed at spurring the economy by lowering interest rates on everything from mortgages to car loans.
Echoing earlier language, the committee said the purchases would continue until "the outlook for the labour market has improved substantially in a context of price stability" and that it would continue to reinvest maturing securities.