Bernanke’s speech sparks enthusiasm but also neutralizes expectations

However, in a speech that suggested the Fed chief is taking seriously concerns about the possible effects of unconventional monetary policy, Bernanke did not explicitly signal any monetary easing was imminent.

“It is important to achieve further progress, particularly in the labour market,” Bernanke said at the Kansas City Fed's annual Jackson Hole symposium. “Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labour market conditions in a context of price stability.”

Bernanke downplayed the potential risks from the Fed's unconventional policies and argued that the asset purchases had been quite effective at boosting economic growth and fostering job creation. But he also stressed that the Fed was well aware of the risks of operating in uncharted territory.

In response to the financial crisis and recession of 2007-2009, the Fed cut official rates to zero and bought some 2.3 trillion in government and mortgage securities.

Markets reactions to Bernanke’s speech were uneven. US stocks rose with the Dow Jones industrial average up 90.13 points, or 0.69 percent, at 13,090.84. The Standard & Poor's 500 Index was up 7.10 points, or 0.51 percent, at 1,406.58. The Nasdaq Composite Index was up 18.25 points, or 0.60 percent, at 3,066.96.

European shares also ended higher. The FTSEurofirst closed up 5.00 points, 0.5 percent, at 1,082.93, paring the previous session's losses and ending the month up 1.9 percent. Volumes spiked in the closing auction as traders closed positions for the month-end.

But in Asia, Nikkei average fell to a four-week closing low as resources-related shares remained under pressure on concern over slowing China growth, while Sharp Corp sank on uncertainty over a tie-up with Taiwan's Hon Hai Precision Industry.

Expectations of further stimulus steps from the US Federal Reserve also faded, helping the Nikkei fall 1.6 percent to 8,839.91, breaking below its 25-day moving average at 8,927.11. The broader Topix fell 1.6 percent to 731.64