Federal Reserve Chairman Ben Bernanke signaled on Wednesday the central bank may consider further monetary easing, after the central bank announced interest rates would remain near zero until late 2014.

Bernanke also suggested the Fed might be willing to tolerate inflation above its newly unveiled official target of 2 percent if it means putting a dent in high unemployment.

Speaking at a press conference, Bernanke was cautious about recent improvement in the U.S. economy.

I don't think we're ready to declare that we've entered a new, stronger phase at this point, Bernanke told reporters.

He left the door open to further monetary easing through bond purchases if the economy deteriorates in 2012.

We are prepared to take further steps in that direction if we see that the recovery is faltering or if inflation is not moving towards target, Bernanke said. It's an option that's certainly on the table.

In a historic step that it has touted as an effort toward greater transparency, the Fed for the first time published individual policymakers' forecasts for the federal funds rate, the benchmark overnight lending rate.

These showed quite a wide range of views, including three of 17 policymakers who expect rates will need to rise this year and two others who do not see any increase until 2016.

Still, the biggest concentration of estimates - five of 17 - was around 2014. The assurance that rates would remain near zero for at least some 18 months longer than previously believed was enough to spark a rally in U.S. government bonds and push stocks into positive territory.

The dollar lost ground against the euro, while gold prices surged over 2 percent.

The Fed, after a two-day policy meeting, repeated its view that the economy faces significant downside risks - an expression that has become code for the threat of Europe's banking crisis hurting the United States - but it offered little to suggest it was close to launching another round of bond-buying to prop up growth.

Its forecasts pointed to somewhat weaker economic growth this year and next, compared with Fed estimates published in November.

It did say, however, that it would maintain a highly accommodative monetary policy stance. Economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014, the Fed said in a statement.

Many investors had expected the Fed to push its expectations for the first rate hike into 2014, but few had thought it would be late in the year. After every previous policy meeting dating back to August, the Fed had said rates were not likely to rise until mid-2013.

The central bank also appeared more sanguine on the inflation outlook, suggesting prices were now rising at a pace consistent with policymakers' goals. The statement also dropped a reference saying the Fed was monitoring inflation and inflation expectations.

Aside from the 2014 rate pledge, the Fed's statement hewed closely to its last policy pronouncement in mid-December.

It described the unemployment rate as still elevated and said it expects inflation to remain at levels consistent with stable prices. In a slight shift, it acknowledged signs that business investment has slowed.

I think what they are seeing is that the rate of growth is not sufficient to bring down the unemployment rate, said Brian Dolan, chief strategist at FOREX.com in Bedminster, New Jersey.

Richmond Federal Reserve Bank President Jeffrey Lacker, an inflation hawk who rotated into a voting seat this year, dissented against the decision. He preferred to omit the description of the time period for ultra-low rates.

In response to the deepest recession in generations, the Fed slashed the overnight federal funds rate to near zero in December 2008. It has also more than tripled the size of its balance sheet to around $2.9 trillion through two separate bond purchase programs.

The policy is credited with having prevented an even more devastating downturn, but it has been insufficient to bring unemployment down to levels considered normal during good economic times.

In December, the U.S. jobless rate stood at 8.5 percent, and some 13 million Americans were still actively looking for work but could not find it.

While forecasters expect the U.S. economy grew at a 3 percent annual rate in the last three months of 2011, they look for growth of just around 2 percent this year.

Fed officials appear likely to bide their time in determining whether more monetary stimulus is needed. Many economists expect they will eventually decide on another spurt of Fed bond buying - probably one focused on mortgage debt.

(Editing by Tim Ahmann and Andrea Ricci)

Ben Bernanke Federal reserve Quantitative easing